<SUBMISSION>
<ACCESSION-NUMBER>0000950153-01-500735
<TYPE>S-4
<PUBLIC-DOCUMENT-COUNT>35
<FILING-DATE>20010703
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>MERITAGE CORP
<CIK>0000833079
<ASSIGNED-SIC>6798
<IRS-NUMBER>860611231
<STATE-OF-INCORPORATION>MD
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>S-4
<ACT>33
<FILE-NUMBER>333-64538
<FILM-NUMBER>1674808
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>6613 N SCOTTSDALE RD
<STREET2>STE 200
<CITY>SCOTTSDALE
<STATE>AZ
<ZIP>85250
<PHONE>6029988700
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>6613 NORTH SCOTTSDALE ROAD
<STREET2>SUITE200
<CITY>SCOTTSDALE
<STATE>AZ
<ZIP>85250
</MAIL-ADDRESS>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>MONTEREY HOMES CORP
<DATE-CHANGED>19970113
</FORMER-COMPANY>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>HOMEPLEX MORTGAGE INVESTMENTS CORP
<DATE-CHANGED>19920703
</FORMER-COMPANY>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>EMERALD MORTGAGE INVESTMENTS CORP
<DATE-CHANGED>19900502
</FORMER-COMPANY>
</FILER>
<DOCUMENT>
<TYPE>S-4
<SEQUENCE>1
<FILENAME>p65173s-4.htm
<DESCRIPTION>S-4
<TEXT>

<HTML>
<HEAD>
<TITLE>s-4</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>


<DIV align="left">
 <B>As filed with Securities and Exchange Commission on
July&nbsp;3, 2001</B>
</DIV>

<DIV align="right">
<B>REGISTRATION STATEMENT NO.
333-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</B>
</DIV>

<DIV align="center">
<HR size="1" width="100%" align="center" noshade>
</DIV>

<DIV align="center">
<HR size="1" width="100%" align="center" noshade>
</DIV>

<P align="center">
<B><FONT size="5">SECURITIES AND EXCHANGE COMMISSION
</FONT></B>

<DIV align="center">
<B>Washington, D.C. 20549</B>
</DIV>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="center">
<B><FONT size="5">FORM S-4
</FONT></B>

<DIV align="center">
<B>REGISTRATION STATEMENT</B>
</DIV>

<DIV align="center">
<B>UNDER</B>
</DIV>

<DIV align="center">
<B>THE SECURITIES ACT OF 1933</B>
</DIV>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="center">
<B><FONT size="5">MERITAGE CORPORATION
</FONT></B>

<DIV align="center">
Co-registrants are listed on the following page
</DIV>

<DIV align="center">
<B><FONT size="2">(Exact Name of Registrant as specified in Its
Charter)
</FONT></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
        <TD width="33%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="32%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="29%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
        <TD align="center" valign="top">
        <B><FONT size="2">Maryland
        </FONT></B></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" valign="top">
        <B><FONT size="2">1521
        </FONT></B></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" valign="top">
        <B><FONT size="2">86-0611231
        </FONT></B></TD>
</TR>

<TR>
        <TD align="center" valign="top">
        <B><FONT size="2">(State or Other Jurisdiction of<BR>
        Incorporation or Organization)
        </FONT></B></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" valign="top">
        <B><FONT size="2">(Primary Standard Industrial<BR>
        Classification Code Number)
        </FONT></B></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" valign="top">
        <B><FONT size="2">(I.R.S. Employer<BR>
        Identification Number)
        </FONT></B></TD>
</TR>

<TR>
        <TD colspan="5" align="center" valign="top">
        <B><FONT size="2">6613 North Scottsdale Road, Suite&nbsp;200<BR>
        Scottsdale, Arizona<BR>
        (480)&nbsp;998-8700<BR>
        (Address, Including Zip Code, and Telephone Number, Including<BR>
        Area Code, of Registrant&#146;s Principal Executive Offices)
        </FONT></B></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="center">
<B>Larry W. Seay</B>

<DIV align="center">
<B>Chief Financial Officer and</B>
</DIV>

<DIV align="center">
<B>Vice President-Finance</B>
</DIV>

<DIV align="center">
<B>6613 North Scottsdale Road, Suite&nbsp;200</B>
</DIV>

<DIV align="center">
<B>Scottsdale, Arizona</B>
</DIV>

<DIV align="center">
<B>(480) 998-8700</B>
</DIV>

<DIV align="center">
<B><FONT size="2">(Name, Address, Including Zip Code, and
Telephone Number,
</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">Including Area Code, of Agent for Service)
</FONT></B>
</DIV>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="center">
<B><I>Copies to:</I></B>

<DIV align="center">
<B>Steven D. Pidgeon</B>
</DIV>

<DIV align="center">
<B>J. Michael Christopher</B>
</DIV>

<DIV align="center">
<B>Jeffrey E. Beck</B>
</DIV>

<DIV align="center">
<B>Snell &#38; Wilmer L.L.P.</B>
</DIV>

<DIV align="center">
<B>One Arizona Center</B>
</DIV>

<DIV align="center">
<B>400 E. Van Buren Street</B>
</DIV>

<DIV align="center">
<B>Phoenix, Arizona 85004</B>
</DIV>

<DIV align="center">
<B>(602)&nbsp;382-6000</B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Approximate date of commencement of proposed sale to the
public:</B> As soon as practicable after this registration
statement becomes effective and all other conditions to the
exchange offer pursuant to the registration rights agreement
described in the enclosed prospectus have been satisfied or
waived.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If the securities being registered on this form are being
offered in connection with the formation of a holding company
and there is compliance with General Instruction&nbsp;G, check
the following box.&nbsp;&nbsp;<IMG src="p65173pi5-110.gif">

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If this form is filed to register additional securities for an
offering pursuant to Rule&nbsp;462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering.&nbsp;&nbsp;<IMG src="p65173pi5-110.gif">

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If this form is a post-effective amendment filed pursuant to
Rule&nbsp;462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.&nbsp;&nbsp;<IMG src="p65173pi5-110.gif">

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="center">
<B>CALCULATION OF REGISTRATION FEE</B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
        <TD width="38%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
        <TD colspan="17"></TD>
</TR>

<TR>
        <TD colspan="17" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
        <TD colspan="17" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
        <TD colspan="5"></TD>
        <TD></TD>
        <TD colspan="3" align="center" nowrap><B><FONT size="2">Proposed</FONT></B></TD>
        <TD></TD>
        <TD colspan="3" align="center" nowrap><B><FONT size="2">Proposed</FONT></B></TD>
        <TD></TD>
        <TD colspan="3"></TD>
</TR>

<TR>
        <TD colspan="5"></TD>
        <TD></TD>
        <TD colspan="3" align="center" nowrap><B><FONT size="2">Maximum</FONT></B></TD>
        <TD></TD>
        <TD colspan="3" align="center" nowrap><B><FONT size="2">Maximum</FONT></B></TD>
        <TD></TD>
        <TD colspan="3" align="center" nowrap><B><FONT size="2">Amount of</FONT></B></TD>
</TR>

<TR>
        <TD align="center" nowrap><B><FONT size="2">Title of Each Class of</FONT></B></TD>
        <TD></TD>
        <TD colspan="3" align="center" nowrap><B><FONT size="2">Amount to be</FONT></B></TD>
        <TD></TD>
        <TD colspan="3" align="center" nowrap><B><FONT size="2">Offering Price Per</FONT></B></TD>
        <TD></TD>
        <TD colspan="3" align="center" nowrap><B><FONT size="2">Aggregate Offering</FONT></B></TD>
        <TD></TD>
        <TD colspan="3" align="center" nowrap><B><FONT size="2">Registration</FONT></B></TD>
</TR>

<TR>
        <TD align="center" nowrap><B><FONT size="2">Securities to be Registered</FONT></B></TD>
        <TD></TD>
        <TD colspan="3" align="center" nowrap><B><FONT size="2">Registered</FONT></B></TD>
        <TD></TD>
        <TD colspan="3" align="center" nowrap><B><FONT size="2">Note(1)</FONT></B></TD>
        <TD></TD>
        <TD colspan="3" align="center" nowrap><B><FONT size="2">Price(1)</FONT></B></TD>
        <TD></TD>
        <TD colspan="3" align="center" nowrap><B><FONT size="2">Fee(2)</FONT></B></TD>
</TR>

<TR>
        <TD colspan="17"></TD>
</TR>

<TR>
        <TD colspan="17" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
        <TD align="left" valign="top">
        <DIV style="margin-left:10px; text-indent:-10px">
        <FONT size="2">9.75% Senior Notes due 2011
        </FONT></DIV>
        </TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">165,000,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">100%</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">165,000,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">41,250.00</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
________________________________________________________________________________
 <HR size="1" width="100%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
        <TD width="4%"></TD>
        <TD width="96%"></TD>
</TR>

<TR valign="top">
        <TD>(1)&nbsp;</TD>
        <TD align="left">
        Estimated solely for purposes of calculating the registration
        fee under the Securities Act of 1933.</TD>
</TR>

<TR>
        <TD>&nbsp;</TD>
</TR>

<TR valign="top">
        <TD>(2)&nbsp;</TD>
        <TD align="left">
        Calculated pursuant to Rule&nbsp;457(f)(2).</TD>
</TR>

</TABLE>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.</B>

<P align="center">
<HR size="1" width="100%" align="center" noshade>

<DIV align="center">
<HR size="1" width="100%" align="center" noshade>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>Table of Co-Registrants</B>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="59%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Jurisdiction of</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Incorporation or</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">I.R.S. Employer</FONT></B></TD>
</TR>

<TR>
	<TD align="center" nowrap><B><FONT size="2">Name of Co-Registrant</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Organization</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Identification No.</FONT></B></TD>
</TR>

<TR>
	<TD align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Monterey Homes Arizona, Inc.&nbsp;
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">Arizona</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">86-0844800</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Meritage Paseo Crossing, LLC
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">Arizona</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">86-1006497</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Monterey Homes Construction, Inc.&nbsp;
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">Arizona</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">86-0844802</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Meritage Paseo Construction, LLC
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">Arizona</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">86-0863537</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Meritage Homes of Arizona, Inc.&nbsp;
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">Arizona</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">86-1013006</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Meritage Homes Construction, Inc.&nbsp;
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">Arizona</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">86-1021464</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">MTH-Texas GP, Inc.&nbsp;
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">Arizona</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">86-0875148</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">MTH-Texas LP, Inc.&nbsp;
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">Arizona</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">86-0875147</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Legacy/ Monterey Homes L.P.&nbsp;
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">Arizona</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">91-1832213</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Meritage Homes of Northern California, Inc.&nbsp;
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">California</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">86-0917765</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Hancock-MTH Builders, Inc.&nbsp;
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">Arizona</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">86-1028847</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Hancock-MTH Communities, Inc.&nbsp;
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">Arizona</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">86-1028848</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Legacy Operating Company, L.P.&nbsp;
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">Texas</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">75-2929259</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR
AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES
HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE
ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY
SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL, PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

<P align="center">
SUBJECT TO COMPLETION DATED JULY&nbsp;3, 2001

<DIV align="center">
<B>PROSPECTUS</B>
</DIV>

<P align="center">
<B>OFFER TO EXCHANGE ITS 9.75% SENIOR NOTES</B>

<DIV align="center">
<B>DUE 2011 WHICH HAVE BEEN REGISTERED</B>
</DIV>

<DIV align="center">
<B>UNDER THE SECURITIES ACT</B>
</DIV>

<DIV align="center">
<B>FOR ANY AND ALL OF ITS</B>
</DIV>

<DIV align="center">
<B>OUTSTANDING 9.75% SENIOR NOTES DUE 2011</B>
</DIV>

<P align="center">
<B>($165,000,000 PRINCIPAL AMOUNT OUTSTANDING AT MATURITY)</B>

<DIV align="center">
<B>OF</B>
</DIV>

<DIV align="center">
<B><FONT size="4">MERITAGE CORPORATION
</FONT></B>
</DIV>

<P align="center">
<B>THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE</B>

<DIV align="center">
<B>AT 5:00 P.M., NEW YORK CITY TIME, ON
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
 2001, UNLESS EXTENDED.</B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are offering to exchange our 9.75% senior notes due 2011 (the
&#147;exchange notes&#148;), which have been registered under
the Securities Act of 1933, as amended, for the identical
principal amount of our outstanding 9.75% senior notes due 2011
(the &#147;outstanding notes&#148;). The aggregate principal
amount at maturity of the outstanding notes, and therefore the
principal amount at maturity of exchange notes which would be
issued if all the outstanding notes were exchanged, is
$165,000,000. The terms of the exchange notes will be identical
with the terms of the outstanding notes, except that the
issuance of the exchange notes is being registered under the
Securities Act of 1933, as amended, and therefore the exchange
notes will not be subject to restrictions on transfer which
apply to the outstanding notes.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The outstanding notes were issued in transactions which were
exempt from the registration requirements of the Securities Act
solely to qualified institutional buyers, as that term is
defined in Rule&nbsp;144A under the Securities Act, or outside
the United States in compliance with Regulation&nbsp;S under the
Securities Act. The exchange offer is being made in accordance
with a registration rights agreement dated May&nbsp;30, 2001
among us, the guarantors named in the agreement, UBS Warburg LLC
and Deutsche Banc Alex. Brown Inc. Based on interpretations by
the staff of the Securities and Exchange Commission, we believe
a holder (other than a broker-dealer who acquired outstanding
notes directly from us for resale or an affiliate of ours) may
offer and sell exchange notes issued in exchange for outstanding
notes without registration under the Securities Act and without
the need to deliver a prospectus, if the holder acquired the
exchange notes in the ordinary course of its business and the
holder has no arrangement to participate, and is not otherwise
engaged, in a distribution of the exchange notes.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to the exchange offer, there has been no public market for
the exchange notes. We do not currently intend to list the
exchange notes on a securities exchange or seek approval for
quotation of the exchange notes on an automated quotation
system. Therefore, it is unlikely that an active trading market
for the exchange notes will develop.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The exchange agent for the exchange offer is Wells Fargo Bank,
National Association.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>See &#147;Risk Factors,&#148; which begin on page&nbsp;13,
for a discussion of certain factors that should be considered in
evaluating the exchange offer.</B>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION APPROVED OR DISAPPROVED OF THESE
SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.</B>

<P align="center">
The date of this prospectus is July&nbsp;&nbsp;&nbsp;, 2001.

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>ADDITIONAL INFORMATION</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have filed with the Securities and Exchange Commission a
registration statement on Form&nbsp;S-4 under the Securities Act
with respect to the securities offered by this prospectus. This
prospectus, which constitutes a part of the registration
statement, does not contain all the information set forth in the
registration statement and the exhibits and schedules to it. We
are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance with it we
file periodic reports and other information with the Commission
relating to our business, financial statements and other
matters. The registration statement, its schedules and exhibits
and the periodic reports and other information filed by us with
the Commission are available for inspection and copying at the
public reference facilities maintained by the Commission at
Room&nbsp;1024, Judiciary Plaza, 450 Fifth Street,&nbsp;N.W.,
Washington,&nbsp;D.C. 20549, and at the Commission&#146;s
regional offices located at Citicorp Center, 500 W.&nbsp;Madison
Street, Suite&nbsp;1400, Chicago, Illinois 60661, and
7&nbsp;World Trade Center, Suite&nbsp;1300, New York, New York
10048. Copies of such materials can be obtained at prescribed
rates by addressing written requests for such copies to the
Public Reference Section of the Commission at its principal
office at Judiciary Plaza, 450 Fifth Street,&nbsp;N.W.,
Room&nbsp;1024, Washington,&nbsp;D.C. 20549. The Commission also
maintains a Web site that contains reports, proxy and
information statements and other information regarding
registrants. The Commission&#146;s Web site can be accessed on
the Internet at http://www.sec.gov. <B>If you would like to
request any documents, please do so five days before you make
your investment decision.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our obligations under the Exchange Act to file periodic reports
and other information with the Commission may be suspended,
under certain circumstances, if our common stock and exchange
notes are each held of record by fewer than 300 holders at the
beginning of any fiscal year and are not listed on a national
securities exchange. We have agreed that, whether or not we are
required to do so by the rules and regulations of the
Commission, for so long as any of the exchange notes remain
outstanding we will furnish to the holders of the exchange
notes, and if required by the Exchange Act, file with the
Commission, all annual, quarterly and current reports that we
are or would be required to file with the Commission pursuant to
Section&nbsp;13(a) or 15(d) of the Exchange Act. In addition, we
have agreed that, as long as any the outstanding notes remain
outstanding, we will make the information required by
Rule&nbsp;144A(d)(4) under the Securities Act available to any
prospective purchaser of outstanding notes or beneficial owner
of outstanding notes in connection with a sale of them.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS. IF GIVEN OR MADE, THAT INFORMATION OR THOSE
REPRESENTATIONS MAY NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY US. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO OR
SOLICITATION OF ANY PERSON IN ANY JURISDICTION IN WHICH SUCH AN
OFFER OR SOLICITATION WOULD BE UNLAWFUL.</B>

<P align="center">
<B>FORWARD-LOOKING STATEMENTS</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain of the matters discussed in this prospectus may
constitute forward-looking statements. In general,
&#147;forward-looking statements&#148; can be identified by use
of words such as &#147;expect,&#148; &#147;believe,&#148;
&#147;estimate,&#148; &#147;project,&#148; &#147;forecast,&#148;
&#147;anticipate,&#148; &#147;plan&#148; and similar
expressions. In this prospectus, forward-looking statements
address such matters as, but are not limited to, projections of
revenues, income or loss, anticipated benefits of the Hancock
acquisition, capital expenditures, plans for future operations,
financing needs, the impact of changes in interest rates,
projected job growth and economic conditions in our housing
markets, plans relating to our new products or services,
potential real property acquisitions and new or planned
development projects, as well as assumptions related to the
foregoing. Important factors currently known to management that
could cause actual results to differ materially from those in
forward-looking statements include those factors described under
the caption &#147;Risk Factors&#148; and other statements in
this prospectus, including the notes to our financial statements
and in &#147;Management&#146;s Discussion and Analysis of
Financial Condition and Results of Operations.&#148;

<P align="center">i

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Forward-looking statements express expectations of future
events. All forward-looking statements are inherently uncertain
as they are based on various expectations and assumptions
concerning future events and they are subject to numerous known
and unknown risks and uncertainties which could cause actual
events or results to differ materially from those projected. Our
past performance or past or present economic conditions in our
housing markets are not indicative of future performance or
conditions. Due to these inherent uncertainties, current or
potential investors in our securities are urged not to place
undue reliance on forward-looking statements. In addition, we
undertake no obligation to update or revise forward-looking
statements to reflect changed assumptions, the occurrence of
anticipated or unanticipated events or changes to projections
over time.

<P align="center">
<B>MARKET DATA</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Market data and other statistical information used throughout
this prospectus are based on independent industry publications,
government publications, reports by market research firms or
other published independent sources. Some data are also based on
our good faith estimates, which are derived from our review of
internal surveys, as well as the independent sources listed
above. Although we believe these sources are reliable, we have
not independently verified the information and cannot guarantee
its accuracy and completeness.

<P align="center">ii

<!-- PAGEBREAK -->
<P><HR noshade><P>

<!-- TOC -->
<A name="toc"><DIV align="CENTER"><U><B>TABLE OF CONTENTS</B></U></DIV></A>

<P><CENTER>
<TABLE border="0" width="90%" cellpadding="0" cellspacing="0">
<TR>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="76%"></TD>
</TR>
<TR><TD colspan="9"><A HREF="#000">PROSPECTUS SUMMARY</A></TD></TR>
<TR><TD colspan="9"><A HREF="#001">RISK FACTORS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#002">The Hancock Acquisition</A></TD></TR>
<TR><TD colspan="9"><A HREF="#003">Use of Proceeds</A></TD></TR>
<TR><TD colspan="9"><A HREF="#004">Capitalization</A></TD></TR>
<TR><TD colspan="9"><A HREF="#005">Unaudited Pro Forma Combined Financial Statements</A></TD></TR>
<TR><TD colspan="9"><A HREF="#006">Selected Historical Financial Data</A></TD></TR>
<TR><TD colspan="9"><A HREF="#007">MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#008">MARKET OVERVIEW</A></TD></TR>
<TR><TD colspan="9"><A HREF="#009">Business</A></TD></TR>
<TR><TD colspan="9"><A HREF="#010">Management</A></TD></TR>
<TR><TD colspan="9"><A HREF="#011">Certain Relationships and Related Transactions</A></TD></TR>
<TR><TD colspan="9"><A HREF="#012">Principal Stockholders</A></TD></TR>
<TR><TD colspan="9"><A HREF="#013">Description of Certain Existing Indebtedness</A></TD></TR>
<TR><TD colspan="9"><A HREF="#014">Description of the Exchange Notes</A></TD></TR>
<TR><TD colspan="9"><A HREF="#015">THE EXCHANGE OFFER</A></TD></TR>
<TR><TD colspan="9"><A HREF="#016">Certain United States Federal Income Tax Considerations</A></TD></TR>
<TR><TD colspan="9"><A HREF="#017">PLAN OF DISTRIBUTION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#018">LEGAL MATTERS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#019">EXPERTS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#020">AVAILABLE INFORMATION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#021">INCORPORATION OF CERTAIN INFORMATION BY REFERENCE</A></TD></TR>
<TR><TD colspan="9"><A HREF="#022">SUBSIDIARY GUARANTORS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#023">INDEX TO FINANCIAL STATEMENTS</A></TD></TR>
<TR><TD colspan="9"><A HREF="p65173ex3-4.txt">EX-3.4</A></TD></TR>
<TR><TD colspan="9"><A HREF="p65173ex3-5.txt">EX-3.5</A></TD></TR>
<TR><TD colspan="9"><A HREF="p65173ex3-6.txt">EX-3.6</A></TD></TR>
<TR><TD colspan="9"><A HREF="p65173ex3-7.txt">EX-3.7</A></TD></TR>
<TR><TD colspan="9"><A HREF="p65173ex3-8.txt">EX-3.8</A></TD></TR>
<TR><TD colspan="9"><A HREF="p65173ex3-9.txt">EX-3.9</A></TD></TR>
<TR><TD colspan="9"><A HREF="p65173ex3-9_1.txt">EX-3.9.1</A></TD></TR>
<TR><TD colspan="9"><A HREF="p65173ex3-10.txt">EX-3.10</A></TD></TR>
<TR><TD colspan="9"><A HREF="p65173ex3-11.txt">EX-3.11</A></TD></TR>
<TR><TD colspan="9"><A HREF="p65173ex3-12.txt">EX-3.12</A></TD></TR>
<TR><TD colspan="9"><A HREF="p65173ex3-13.txt">EX-3.13</A></TD></TR>
<TR><TD colspan="9"><A HREF="p65173ex3-14.txt">EX-3.14</A></TD></TR>
<TR><TD colspan="9"><A HREF="p65173ex3-15.txt">EX-3.15</A></TD></TR>
<TR><TD colspan="9"><A HREF="p65173ex3-16.txt">EX-3.16</A></TD></TR>
<TR><TD colspan="9"><A HREF="p65173ex3-16_1.txt">EX-3.16.1</A></TD></TR>
<TR><TD colspan="9"><A HREF="p65173ex3-17.txt">EX-3.17</A></TD></TR>
<TR><TD colspan="9"><A HREF="p65173ex3-18.txt">EX-3.18</A></TD></TR>
<TR><TD colspan="9"><A HREF="p65173ex3-19.txt">EX-3.19</A></TD></TR>
<TR><TD colspan="9"><A HREF="p65173ex3-20.txt">EX-3.20</A></TD></TR>
<TR><TD colspan="9"><A HREF="p65173ex3-21.txt">EX-3.21</A></TD></TR>
<TR><TD colspan="9"><A HREF="p65173ex3-22.txt">EX-3.22</A></TD></TR>
<TR><TD colspan="9"><A HREF="p65173ex3-23.txt">EX-3.23</A></TD></TR>
<TR><TD colspan="9"><A HREF="p65173ex3-24.txt">EX-3.24</A></TD></TR>
<TR><TD colspan="9"><A HREF="p65173ex3-25.txt">EX-3.25</A></TD></TR>
<TR><TD colspan="9"><A HREF="p65173ex5-1.txt">EX-5.1</A></TD></TR>
<TR><TD colspan="9"><A HREF="p65173ex10-1_2.txt">EX-10.1.2</A></TD></TR>
<TR><TD colspan="9"><A HREF="p65173ex10-2_5.txt">EX-10.2.5</A></TD></TR>
<TR><TD colspan="9"><A HREF="p65173ex12-1.txt">EX-12.1</A></TD></TR>
<TR><TD colspan="9"><A HREF="p65173ex21-1.txt">EX-21.1</A></TD></TR>
<TR><TD colspan="9"><A HREF="p65173ex23-1.txt">EX-23.1</A></TD></TR>
<TR><TD colspan="9"><A HREF="p65173ex23-2.txt">EX-23.2</A></TD></TR>
<TR><TD colspan="9"><A HREF="p65173ex25-1.txt">EX-25.1</A></TD></TR>
<TR><TD colspan="9"><A HREF="p65173ex99-1.txt">EX-99.1</A></TD></TR>
</TABLE>
</CENTER>
<!-- /TOC -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "PROSPECTUS SUMMARY" -->
<DIV align="left"><A NAME="000"></A></DIV>

<P align="center">
<B>PROSPECTUS SUMMARY</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>This summary highlights information contained elsewhere in
this prospectus. This summary is not complete and does not
contain all of the information that you should consider before
investing in the notes. You should read the entire prospectus
carefully, especially the risks of investing in the notes
discussed under the &#147;Risk Factors&#148; section beginning
on page&nbsp;13. Unless the context otherwise requires, all
references to &#147;Meritage,&#148; &#147;we,&#148;
&#147;us&#148; or &#147;our&#148; include Meritage Corporation
and its subsidiaries and predecessors as a combined entity. All
references to &#147;Hancock&#148; or &#147;Hancock
Communities&#148; mean the operating entities comprising the
homebuilding and related assets of HC&nbsp;Builders, Inc. and
Hancock Communities, L.L.C. All references to the
&#147;notes&#148; include both the outstanding notes and the
exchange notes. Unless otherwise indicated or the context
otherwise requires, all information or data presented on a pro
forma basis takes into account the combined operations or
results of Meritage and Hancock.</I>

<P align="center">
<B>THE COMPANY</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are a leading designer and builder of single-family homes in
the rapidly growing Sunbelt states of Texas, Arizona and
California. We focus on providing a broad range of entry-level,
move-up and luxury homes to our targeted customer base. We and
our predecessors have operated in Arizona since 1985, in Texas
since 1987 and in Northern California since 1989. To expand our
presence in Arizona we acquired Hancock Communities, another
well-established homebuilder that serves the entry-level and
move-up markets in the Phoenix area, on May&nbsp;30, 2001.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that the strong population, job and income growth as
well as the favorable migration characteristics of our markets
will continue to provide significant growth opportunities for
us. According to U.S. Housing Markets, a leading real estate and
homebuilding publication of the Meyers Group, four of our seven
markets, Dallas/ Ft.&nbsp;Worth, Texas, Houston, Texas, Phoenix/
Scottsdale, Arizona and East San&nbsp;Francisco Bay (East Bay),
California, are among or part of the top 15&nbsp;national
housing markets based on annual housing permits issued in 2000,
with Dallas/ Ft.&nbsp;Worth and Phoenix/ Scottsdale comprising
two of the top three markets. In addition, two of our other
markets, Austin, Texas and Sacramento, California, are among the
top&nbsp;25.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At March&nbsp;31, 2001, we were actively selling homes in
57&nbsp;communities, with base prices ranging from $100,000 to
$790,000. We develop a design and marketing concept tailored to
each community, which includes determination of size, style and
price range of homes, street layout, size and layout of
individual lots and overall community design. The home designs
offered in a particular community depend upon many factors,
including the housing generally available in the area, the needs
of a particular market and our lot costs for the project.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We focus on minimizing land risk by typically purchasing
property only after full entitlements have been obtained and
typically begin development or construction immediately after
close. We acquire land primarily through rolling option
contracts, allowing us to purchase individual lots typically on
a non-recourse basis from third parties as our building needs
dictate. These arrangements allow us to control lot inventory
without incurring the risks of land ownership or financial
commitments other than relatively small non-refundable deposits.
At March&nbsp;31, 2001, we controlled 8,042 housing lots, of
which approximately two-thirds were controlled through rolling
options, and which we believe represent approximately a three
and one-half year supply.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have consistently achieved strong financial results while
maintaining conservative fiscal policies. From 1997 to 2000, we
achieved compounded annual growth rates in revenues and EBITDA
of 51.5% and 58.2%, respectively. For the twelve months ended
March&nbsp;31, 2001, our revenues were $544.8 million and our
EBITDA was $74.5 million. On a pro forma basis, for the twelve
months ended March&nbsp;31, 2001, our revenues were $712.7
million and our EBITDA was $93.1 million. At March&nbsp;31,
2001, on a pro forma basis, our ratio of total debt to EBITDA
was 2.07 to 1 and our ratio of EBITDA to interest incurred was
5.01 to 1.

<P align="center">1

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that we are well positioned for future growth. Our
backlog increased to 1,470 homes with a value of $370.7 million
at March&nbsp;31, 2001, up from 1,074 homes with a value of
$256.7 million at March&nbsp;31, 2000, a 44% increase in
dollars, and up from 1,246 homes with a value of $309.9 million
at December&nbsp;31, 2000. On a pro forma basis, our backlog was
2,057 homes with a value of $472.9 million as of March&nbsp;31,
2001. New home orders increased to 2,480 homes with a value of
$604.4 million in 2000, up from 1,840 homes with a value of
$388.2 million in 1999, a 56% increase in dollars. New home
orders were 740 homes with a value of $176.9 million in the
quarter ended March&nbsp;31, 2001, up from 629 homes with a
value of $148.9 million in the comparable 2000 period, a 19%
increase in dollars. On a pro forma basis, new home orders were
1,117 homes with a value of $244.3 million in the first three
months of 2001 and 3,447 homes with a value of $769.9 million in
the year ended December&nbsp;31, 2000.

<P align="center">
<B>RATIO OF EARNINGS TO FIXED CHARGES</B>

<CENTER>
<TABLE width="50%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="19"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">Three Months</FONT></B></TD>
</TR>

<TR>
	<TD colspan="19" align="center" nowrap><B><FONT size="2">Years Ended December 31,</FONT></B></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">Ended March 31,</FONT></B></TD>
</TR>

<TR>
	<TD colspan="19" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1999</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1998</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1997</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1996</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">5.00x</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4.28x</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6.65x</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.60x</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.18x</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">(1)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.54x</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.70x</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
For the purpose of computing the ratio of earnings to fixed
charges &#147;earnings&#148; consist of earnings before income
taxes and extraordinary item plus fixed charges less capitalized
interest. &#147;Fixed charges&#148; consist of interest expense
including amortization of deferred debt costs, one-half of rent
expense, which is deemed to be representative of an interest
factor, and capitalized interest.

<DIV align="left">
<HR size="1" width="18%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="4%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>(1)&nbsp;</TD>
	<TD align="left">
	For the year ended December&nbsp;31, 1996, earnings were
	inadequate to cover fixed charges by approximately $3.4 million,
	since the 1996 results are those of our predecessor company
	(Homeplex Mortgage Investment Co.) and our operations were
	substantially different than our current homebuilding
	operations. See Exhibit&nbsp;12.1 for calculation of ratio of
	earnings to fixed charges for all periods presented.</TD>
</TR>

</TABLE>

<P align="center">
<B>MARKET OVERVIEW</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following is a brief overview of the favorable economic and
demographic trends in the states in which we operate, the three
rapidly growing Sunbelt states of Texas, Arizona and California.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
These states have experienced compound annual growth rates
(CAGR) in population, employment and single-family housing
starts that generally exceed the overall rate in the U.S. We
believe the growth characteristics of the markets in which we
operate represent a significant opportunity for us. The
following table, which was derived from data compiled by
Standard &#38; Poor&#146;s Data Resources, Inc. (DRI) from U.S.
Census Bureau statistics, presents the historical and projected
CAGR for these three metrics for the U.S., Texas, Arizona and
California for the periods indicated:

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="23%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">Single-Family</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">Population</FONT></B></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">Employment</FONT></B></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">Housing Starts</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1996-2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001-2005</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1996-2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001-2005</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1996-2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001-2005</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">CAGR (%)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">CAGR (%)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">CAGR (%)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">CAGR (%)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">CAGR (%)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">CAGR (%)</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">U.S.&nbsp;
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.9</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.9</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.0</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Texas
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.7</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Arizona
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1.8</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">California
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.0</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8.8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">2

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>COMPETITIVE STRENGTHS</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe we possess the following competitive strengths:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	&#149;&nbsp; <I>Conservative inventory management. </I>We seek
	to minimize land and inventory risk in order to optimize our use
	of capital and maintain low leverage ratios. We tend to purchase
	land subject to complete entitlements and develop smaller
	parcels, generally projects that can be completed within a
	three-year period. Approximately two-thirds of our land
	inventory is controlled through rolling options with relatively
	minimal deposit commitments. In addition, we actively manage our
	housing inventory by pre-selling substantially all of our homes
	prior to starting construction, limiting speculative home
	construction and minimizing our construction cycles. We also
	obtain customer deposits on pre-sold homes prior to beginning
	construction to limit cancellations prior to closing.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	&#149;&nbsp; <I>Disciplined financial management. </I>We believe
	that our disciplined financial management policies enable us to
	achieve above-average returns on assets and maintain low
	leverage ratios. Our EBITDA to average book capital ratio was
	36.2%, 27.8% and 40.5% in 2000, 1999 and 1998, respectively,
	exceeding the average of 26.4%, 25.1% and 21.6% for the top
	15&nbsp;publicly traded homebuilders during those periods, based
	on market capitalization. At March&nbsp;31, 2001, on a pro forma
	basis, our ratio of total debt to EBITDA was 2.07 to&nbsp;1,
	which we believe is relatively low for our industry. Our
	rigorous investment requirements for land acquisition enable us
	to deploy capital more efficiently and to preserve more cash
	flow for debt service.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	&#149;&nbsp; <I>Superior margins. </I>Our focus on achieving
	high margins results in greater profitability during strong
	economic periods and also enables us to realize lower break-even
	points and higher pricing flexibility during slower economic
	periods. Along with maintaining low overhead costs, we actively
	manage construction costs and our pricing and marketing
	strategies in order to maximize margins. We seek to optimize our
	mix of available housing upgrades and customization features to
	offer the highest value to customers at the lowest cost. We also
	provide our sales and marketing professionals with the autonomy
	and flexibility needed within our pricing structure to respond
	rapidly to competitive offerings in our markets by customizing
	our marketing programs and incentives. Our EBITDA margin in 2000
	was 13.3%, exceeding the average of 11.5% for the top 15
	publicly traded homebuilders.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	&#149;&nbsp; <I>Experienced management team with significant
	equity ownership.</I> Our senior management team has extensive
	experience in the homebuilding industry as well as in each of
	the local markets that we serve. Our co-chief executive officers
	and senior executives average over 15&nbsp;years of homebuilding
	experience and each has a successful track record of delivering
	superior results in varying homebuilding cycles. In addition,
	our co-chief executive officers together beneficially own over
	30% of our outstanding common stock.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	&#149;&nbsp; <I>Product breadth. </I>We believe that our product
	breadth and geographical diversity enhance our growth potential
	and help to reduce exposure to economic cycles. In Arizona, we
	are a leader in the luxury market, which is characterized by
	unique communities and distinctive luxury homes, and also serve
	the first and second-time move-up markets. With the acquisition
	of Hancock Communities, we will expand our presence in Arizona
	in the move-up markets and enter the entry-level market. In
	addition, beginning in 2002, we plan to introduce affordable
	age-restricted adult communities, through Hancock, to further
	expand our housing offerings in Arizona. In Texas, we target the
	entry-level and first and second-time move-up markets, and in
	Northern California we focus on the first and second-time
	move-up markets.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	&#149;&nbsp; <I>Strong brand recognition. </I>We have operated
	in Arizona as Monterey Homes since 1985 and also, more recently,
	as Meritage Homes in our move-up markets, in Texas as Legacy
	Homes since 1987 and, through an acquisition in Northern
	California, as Meritage Homes since 1998. In each of these
	markets, we are widely recognized for providing quality homes in
	desirable locations and are well regarded both by our target
	customer base and by the real estate brokerage community.
	Hancock is also a widely recognized name in the homebuilding
	market in Phoenix. We believe that our strong</TD>
</TR>

</TABLE>

<P align="center">3

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
        <TD width="3%"></TD>
        <TD width="97%"></TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD align="left">
        brand recognition and superior reputation enable us to maintain
        strong sales growth and demand for our homes.</TD>
</TR>

</TABLE>

<P align="center">
<B>BUSINESS STRATEGY</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We seek to distinguish ourselves from other production
homebuilders and to respond rapidly to changing market
conditions through a business strategy focused on the following:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
        <TD width="3%"></TD>
        <TD width="97%"></TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
        &#149;&nbsp; <I>Focus on high growth markets. </I>Our seven
        housing markets are located in three rapidly growing Sunbelt
        states. These markets are characterized by high job growth and
        in-migration trends, creating strong demand for new housing. For
        example, our Phoenix/Scottsdale, Arizona, Dallas/Ft.&nbsp;Worth,
        Houston and Austin, Texas markets have been among the
        nation&#146;s leaders in the past several years in job growth
        and net population increases, resulting in strong housing demand
        in those areas. Our East Bay and Sacramento, California markets
        have participated in and are poised to lead future growth in the
        strong Northern California market.</TD>
</TR>

<TR>
        <TD>&nbsp;</TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
        &#149;&nbsp; <I>Maintain low cost structure. </I>Throughout our
        history, we have focused on minimizing construction costs and
        overhead, and we believe this focus is a key factor in
        maintaining high cash flow margins and profitability. We seek to
        reduce costs by:</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
        <TD width="10%"></TD>
        <TD width="1%"></TD>
        <TD width="89%"></TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>&#151;&nbsp;</TD>
        <TD align="left">
        using subcontractors to carry out home construction and site
        improvement on a fixed-price basis;</TD>
</TR>

<TR>
        <TD>&nbsp;</TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>&#151;&nbsp;</TD>
        <TD align="left">
        obtaining favorable pricing from subcontractors through
        long-term relationships and high volume;</TD>
</TR>

<TR>
        <TD>&nbsp;</TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>&#151;&nbsp;</TD>
        <TD align="left">
        reducing interest carry by minimizing our inventory of unsold or
        speculative homes and shortening the home construction cycle;</TD>
</TR>

<TR>
        <TD>&nbsp;</TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>&#151;&nbsp;</TD>
        <TD align="left">
        generally beginning construction on a home only after a
        satisfactory earnest money deposit is received and mortgage
        approval has been obtained by the buyer;</TD>
</TR>

<TR>
        <TD>&nbsp;</TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>&#151;&nbsp;</TD>
        <TD align="left">
        minimizing overhead by centralizing certain administrative
        activities; and</TD>
</TR>

<TR>
        <TD>&nbsp;</TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>&#151;&nbsp;</TD>
        <TD align="left">
        monitoring homebuilding production, scheduling and budgeting
        through management information systems.</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
        <TD width="3%"></TD>
        <TD width="97%"></TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
        &#149;&nbsp; <I>Superior design, quality and customer service.
        </I>We believe we maximize customer satisfaction by offering
        homes that are built with quality materials and craftsmanship,
        exhibit distinctive design features and are situated in premium
        locations. We believe that we generally offer higher caliber
        homes in their defined price range or category compared to those
        built by our competitors. In addition, we are committed to
        achieving the highest level of customer satisfaction as an
        integral part of our competitive strategy. As part of the sales
        process, our experienced sales personnel assist customers with
        upgrade and customization options. During the sales process our
        sales personnel keep customers informed of their home&#146;s
        construction progress. After delivery, our customer care
        departments respond to any questions or follow-up matters a
        customer may have.</TD>
</TR>

<TR>
        <TD>&nbsp;</TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
        &#149;&nbsp; <I>Expansion in new and existing markets.
        </I>Depending on market conditions, we may explore expansion
        opportunities in new or existing markets where we see an ability
        to exploit a competitive advantage. Expansion may occur through
        internal growth, start-up operations or strategic acquisitions
        of existing homebuilders. In pursuing expansion, we will look
        for markets with demographic and other growth characteristics
        similar to our current markets and will pursue the acquisition
        of entities with operating policies and cash flow-and
        earnings-focused philosophies similar to ours. As described
        below, through our acquisition of Hancock Communities, we are
        increasing our presence in the Arizona move-up markets, entering
        the entry-level market and, in 2002, plan to enter the
        affordable age-restricted adult community market. We are not
        currently in negotiations or material discussions with any other
        acquisition candidates.</TD>
</TR>

</TABLE>

<P align="center">4

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>HANCOCK ACQUISITION</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On May&nbsp;30, 2001 we acquired substantially all of the
homebuilding and related assets of HC&nbsp;Builders, Inc. and
Hancock Communities, L.L.C. The purchase price was $65.4 million
in cash, plus the assumption of trade payables, accrued
liabilities, customer deposit liabilities and a note, which at
closing were $11.3 million in the aggregate. In addition, we
granted to Greg Hancock, the founder of Hancock Communities, an
earn-out, payable over three years, equal to 20% of
Hancock&#146;s pre-tax net income after a 10.5% charge on
capital. Hancock designs, builds and markets a wide range of
high-quality homes in the Phoenix, Arizona area with a focus on
serving the entry-level and move-up single-family housing
markets and is currently developing affordable age-restricted
adult communities. We believe that Hancock complements our
existing operations and offers significant opportunities for us
to realize market and product synergies. Among other benefits,
the Hancock acquisition will increase the breadth of our
demographic market and increase our revenues, earnings and cash
flow streams while also providing us with an efficient entry
into the entry-level and affordable age-restricted adult
community markets in Arizona. During 2000, Hancock closed 1,143
homes at an average selling price of $160,700, resulting in
total revenues of $183.7 million and EBITDA of $16.9 million.
See &#147;The Hancock Acquisition.&#148;

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
 Our principal executive office in Arizona is located at 6613
North Scottsdale Road, Suite&nbsp;200, Scottsdale, Arizona
85250, and our telephone number there is (877)&nbsp;400-7888.
Our principal executive office in Texas is located at
4050&nbsp;West Park Boulevard, Plano, Texas 75093, and our
telephone number there is (800)&nbsp;210-6004.

<P align="center">
<B>ISSUANCE OF THE OUTSTANDING NOTES</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The outstanding $165 million principal amount senior notes due
2011 were sold by us to UBS Warburg LLC and Deutsche Banc Alex.
Brown Inc., as initial purchasers, on May&nbsp;30, 2001 pursuant
to a purchase agreement, dated May&nbsp;22, 2001, between the
initial purchasers and us. The initial purchasers subsequently
resold the outstanding notes in reliance on Rule&nbsp;144A and
Regulation&nbsp;S under the Securities Act. We and the initial
purchasers also entered into a registration rights agreement
pursuant to which we agreed to offer to exchange the exchange
notes registered under the Securities Act for the outstanding
notes and also granted holders of outstanding notes rights under
some circumstances to have resales of outstanding notes
registered under the Securities Act. The exchange offer is
intended to satisfy certain of our obligations under the
registration rights agreement. See &#147;The Exchange
Offer&nbsp;&#151; Purposes and Effects.&#148;

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The outstanding notes were issued under an indenture dated as of
May&nbsp;30, 2001, between Meritage Corporation, its subsidiary
guarantors and Wells Fargo Bank, National Association, as
trustee. The exchange notes also are being issued under the
indenture and are entitled to the benefits of the indenture. The
form and terms of the exchange notes will be identical in all
material respects with the form and terms of the outstanding
notes, except that (1)&nbsp;the exchange notes will have been
registered under the Securities Act and, therefore, will not
bear legends describing restrictions on transferring them, and
(2)&nbsp;holders of exchange notes will not be, and upon the
completion of the exchange offer, holders of outstanding notes
will no longer be, entitled to certain rights under the
registration rights agreement intended for the holders of
unregistered securities. The exchange offer will be deemed
completed upon the delivery by us to the exchange agent under
the indenture of exchange notes in the same aggregate principal
amount as the aggregate principal amount of outstanding notes
that are validly tendered and not withdrawn by holders of them
in response to the exchange offer. See &#147;The Exchange
Offer&nbsp;&#151; Termination of Certain Rights&#148; and
&#147;&#151;&nbsp;Procedures for Tendering&#148; and
&#147;Description of the Exchange Notes.&#148;

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The proceeds we received from the issuance of the outstanding
notes were used to (1)&nbsp;effect our acquisition of Hancock,
(2)&nbsp;repay a portion of our outstanding debt and
(3)&nbsp;pay related fees, commissions and expenses. We will
receive no proceeds from completion of the exchange notes for
the outstanding notes pursuant to the exchange offer.

<P align="center">5

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>THE EXCHANGE OFFER</B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="28%"></TD>
	<TD width="1%"></TD>
	<TD width="71%"></TD>
</TR>

<TR>
	<TD valign="top">
	<B>The Exchange Offer</B></TD>
	<TD></TD>
	<TD valign="top">
	We are offering to exchange our 9.75% senior notes due 2011 for
	identical principal amounts of our outstanding 9.75% senior
	notes due 2011. At the date of this prospectus, $165 million
	principal amount at maturity of outstanding notes are
	outstanding. See &#147;The Exchange Offer&nbsp;&#151; Terms of
	the Exchange Offer.&#148;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
	<B>Expiration of the Exchange Offer</B></TD>
	<TD></TD>
	<TD valign="top">
	5:00&nbsp;p.m., New York time, on
	&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
	 2001, unless the exchange offer is extended (the day on which
	the exchange offer expires being the expiration date). See
	&#147;The Exchange Offer&nbsp;&#151; Expiration Date; Extension;
	Termination; Amendments.&#148;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
	<B>Conditions of the Exchange Offer</B></TD>
	<TD></TD>
	<TD valign="top">
	The exchange offer is not conditioned upon any minimum principal
	amount of outstanding notes being tendered for exchange.
	However, the exchange offer is subject to certain customary
	conditions, which we may waive. See &#147;The Exchange
	Offer&nbsp;&#151; Conditions of the Exchange Offer.&#148;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
	<B>Accrued Interest on the Outstanding Notes</B></TD>
	<TD></TD>
	<TD valign="top">
	The exchange notes will bear interest at the rate of 9.75% per
	annum from and including their date of issuance. When the first
	interest payment is made with regard to the exchange notes, we
	will also pay interest on the outstanding notes which are
	exchanged, from the date they were issued or the most recent
	interest date on which interest had been paid (if applicable)
	to, but not including, the day the exchange notes are issued.
	Interest on the outstanding notes which are exchanged will cease
	to accrue on the day prior to the day on which the exchange
	notes are issued. The interest rate on the outstanding notes may
	increase under certain circumstances if we are not in compliance
	with our obligations under the registration rights agreement.
	See &#147;Description of the Exchange Notes.&#148;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
	<B>Procedures for Tendering the Outstanding Notes</B></TD>
	<TD></TD>
	<TD valign="top">
	A holder of outstanding notes who wishes to accept the exchange
	offer must complete, sign and date a letter of transmittal, or a
	facsimile of one, in accordance with the instructions contained
	under &#147;The Exchange Offer&nbsp;&#151; Procedures for
	Tendering&#148; and in the letter of transmittal, and deliver
	the letter of transmittal, or facsimile, together with the
	outstanding notes and any other required documentation to the
	exchange agent at the address set forth in &#147;The Exchange
	Offer&nbsp;&#151; Exchange Agent.&#148; Outstanding notes may be
	delivered physically or by confirmation of book-entry delivery
	of the outstanding notes to the exchange agent&#146;s account at
	The Depository Trust Company (&#147;DTC&#148;). By executing a
	letter of transmittal, a holder will represent to us that, among
	other things, the person acquiring the outstanding notes will be
	doing so in the ordinary course of the person&#146;s business,
	whether or not the person is the holder, that neither the holder
	nor any other person is engaged in, or intends to engage in, or
	has an arrangement or understanding with any person to
	participate in, the distribution of the exchange notes and that
	neither the holder nor any such other person is an
	&#147;affiliate,&#148; as defined under Rule&nbsp;405 of the
	Securities Act, of</TD>
</TR>

</TABLE>

<P align="center">6

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="28%"></TD>
	<TD width="1%"></TD>
	<TD width="71%"></TD>
</TR>

<TR>
	<TD valign="top">
</TD>
	<TD></TD>
	<TD valign="top">
	ours. Each broker or dealer that receives exchange notes for its
	own account in exchange for outstanding notes which were
	acquired by the broker or dealer as a result of market-making
	activities or other trading activities, must acknowledge that it
	will deliver a prospectus in connection with any resale of the
	exchange notes. See &#147;The Exchange Offer&nbsp;&#151;
	Procedures for Tendering.&#148;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
	<B>Guaranteed Delivery Procedures</B></TD>
	<TD></TD>
	<TD valign="top">
	Eligible holders of outstanding notes who wish to tender their
	outstanding notes and (1)&nbsp; whose outstanding notes are not
	immediately available or (2)&nbsp;who cannot deliver their
	outstanding notes or any other documents required by the letter
	of transmittal to the exchange agent prior to the expiration
	date (or complete the procedure for book-entry transfer on a
	timely basis), may tender their outstanding notes according to
	the guaranteed delivery procedures described in the letter of
	transmittal. See &#147;The Exchange Offer&nbsp;&#151; Guaranteed
	Delivery Procedures.&#148;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
	<B>Acceptance of the Outstanding Notes and Delivery of the
	Exchange Notes</B></TD>
	<TD></TD>
	<TD valign="top">
	Upon satisfaction or waiver of all conditions to the exchange
	offer, we will accept any and all outstanding notes that are
	properly tendered in response to the exchange offer prior to
	5:00&nbsp;p.m., New York City time, on the expiration date. The
	exchange notes issued pursuant to the exchange offer will be
	delivered promptly after acceptance of the outstanding notes.
	See &#147;The Exchange Offer&nbsp;&#151; Procedures for
	Tendering.&#148;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
	<B>Withdrawal Rights</B></TD>
	<TD></TD>
	<TD valign="top">
	Tenders of outstanding notes may be withdrawn at any time prior
	to 5:00&nbsp;p.m., New York City time, on the expiration date.
	See &#147;The Exchange Offer&nbsp;&#151; Withdrawal of
	Tenders.&#148;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
	<B>The Exchange Agent</B></TD>
	<TD></TD>
	<TD valign="top">
	Wells Fargo Bank, National Association is the exchange agent.
	The address and telephone number of the exchange agent are set
	forth in &#147;The Exchange Offer&nbsp;&#151; Exchange
	Agent.&#148;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
	<B>Fees and Expenses</B></TD>
	<TD></TD>
	<TD valign="top">
	We will bear all expenses incident to our consummation of the
	exchange offer and compliance with the registration rights
	agreement. We will also pay any transfer taxes which are
	applicable to the exchange offer (but not transfer taxes due to
	transfers of outstanding notes or exchange notes by the holder).
	See &#147;The Exchange Offer&nbsp;&#151; Fees and Expenses.&#148;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
	<B>Resales of the Exchange Notes</B></TD>
	<TD></TD>
	<TD valign="top">
	Based on interpretations by the staff of the Commission set
	forth in no-action letters issued to third parties, we believe
	exchange notes issued pursuant to the exchange offer in exchange
	for outstanding notes may be offered for resale, resold and
	otherwise transferred by the holder (other than (1)&nbsp;a
	broker-dealer who purchased the outstanding notes directly from
	us for resale pursuant to Rule&nbsp;144A under the Securities
	Act or another exemption under the Securities Act or (2)&nbsp;a
	person that is an affiliate of ours, as that term is defined in
	Rule&nbsp;405 under the Securities Act), without registration or
	the need to deliver a prospectus under the Securities Act,
	provided that the holder is acquiring the exchange notes in the
	ordinary course of business</TD>
</TR>

</TABLE>

<P align="center">7

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="28%"></TD>
	<TD width="1%"></TD>
	<TD width="71%"></TD>
</TR>

<TR>
	<TD valign="top">
</TD>
	<TD></TD>
	<TD valign="top">
	and is not participating, and has no arrangement or
	understanding with any person to participate, in a distribution
	of the exchange notes. Each broker-dealer that receives exchange
	notes for its own account in exchange for outstanding notes
	which outstanding notes were acquired by the broker as a result
	of market-making or other trading activities, must acknowledge
	that it will deliver a prospectus in connection with any resale
	of the exchange notes. See &#147;The Exchange Offer&nbsp;&#151;
	Purposes and Effects.&#148;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
	<B>Federal Income Tax Consequences</B></TD>
	<TD></TD>
	<TD valign="top">
	The exchange offer is not expected to be treated as a taxable
	event for United States federal income tax purposes. See
	&#147;Certain United States Federal Income Tax
	Considerations.&#148;</TD>
</TR>

</TABLE>

<P align="center">8

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>THE EXCHANGE NOTES</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The exchange offer applies to $165 million aggregate principal
amount of outstanding senior notes due 2011. The exchange notes
will evidence the same debt as the outstanding notes and will be
entitled to the benefits of the indenture under which both the
outstanding notes were, and the exchange notes will be, issued.
See &#147;Description of the Exchange Notes.&#148;

<DIV>&nbsp;</DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="24%"></TD>
	<TD width="1%"></TD>
	<TD width="75%"></TD>
</TR>

<TR>
	<TD valign="top">
	<B>Issuer</B></TD>
	<TD></TD>
	<TD valign="top">
	Meritage Corporation.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
	<B>Securities Offered</B></TD>
	<TD></TD>
	<TD valign="top">
	$165,000,000 aggregate principal amount of 9.75% senior notes
	due 2011 that have been registered under the Securities Act. The
	form and term of the exchange notes are identical in all
	material respects to the form and terms of the outstanding notes
	for which they may be exchanged pursuant to the exchange offer,
	except for certain transfer restrictions and registration rights
	relating to the outstanding notes and except for certain
	provisions providing for an increase in the interest rate on the
	outstanding notes under circumstances relating to the exchange
	offer. Unless the context otherwise requires, the outstanding
	notes and the exchange notes are sometimes referred to in this
	prospectus as the &#147;notes.&#148; See &#147;Description of
	the Exchange Notes.&#148;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
	<B>Maturity Date</B></TD>
	<TD></TD>
	<TD valign="top">
	June&nbsp;1, 2011.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
	<B>Interest</B></TD>
	<TD></TD>
	<TD valign="top">
	The exchange notes will accrue interest from the date of their
	issuance at the rate of 9.75% per year. Interest on the exchange
	notes will be payable semi-annually in arrears on each
	June&nbsp;1 and December&nbsp;1, commencing on December&nbsp;1,
	2001.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
	<B>Sinking Fund</B></TD>
	<TD></TD>
	<TD valign="top">
	None.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
	<B>Optional Redemption</B></TD>
	<TD></TD>
	<TD valign="top">
	We may redeem the notes, in whole or in part, at any time on or
	after June&nbsp;1, 2006, at a redemption price equal to 100% of
	the principal amount plus a premium declining ratably to par,
	plus accrued interest.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
</TD>
	<TD></TD>
	<TD valign="top">
	In addition, at any time prior to June&nbsp;1, 2004, we may
	redeem up to 35% of the aggregate principal amount of the notes
	issued under the indenture with the net cash proceeds of one or
	more qualified equity offerings at a redemption price equal to
	109.75% of the principal amount thereof, plus accrued interest,
	<I>provided</I> that:</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
</TD>
	<TD></TD>
	<TD valign="top">
	&nbsp;&nbsp;&#149;&nbsp; at least 65% of the aggregate principal
	amount of the notes issued under the indenture remains
	outstanding immediately after the occurrence of such redemption;
	and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
</TD>
	<TD></TD>
	<TD valign="top">
	&nbsp;&nbsp;&#149;&nbsp; such redemption occurs within
	90&nbsp;days of the date of the closing of any such equity
	offering.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
	<B>Change of Control</B></TD>
	<TD></TD>
	<TD valign="top">
	If we experience a change of control, we may be required to
	offer to purchase the notes at a purchase price equal to 101% of
	the principal amount, plus accrued interest.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
	<B>Ranking and Guarantees</B></TD>
	<TD></TD>
	<TD valign="top">
	The outstanding notes are, and exchange notes will be, senior
	unsecured obligations. All of our existing subsidiaries (other
	than our mortgage broker subsidiary) and certain of our future
	subsidiaries will guarantee the exchange notes on a senior
	unsecured basis.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
</TD>
	<TD></TD>
	<TD valign="top">
	The notes will rank equally with all of our and our
	guarantors&#146; existing and future senior unsecured debt.</TD>
</TR>

</TABLE>

<P align="center">9

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="24%"></TD>
	<TD width="1%"></TD>
	<TD width="75%"></TD>
</TR>

<TR>
	<TD valign="top">
</TD>
	<TD></TD>
	<TD valign="top">
	The exchange notes will rank senior to all of our and our
	guarantors&#146; debt that is expressly subordinated to the
	exchange notes, but will be effectively subordinated to all of
	our and our guarantors&#146; senior secured indebtedness to the
	extent of the value of the assets securing that indebtedness. As
	of March&nbsp;31, 2001, on a pro forma basis, we and the
	guarantors would have had $27.6 million of senior secured
	indebtedness outstanding and approximately $43 million of
	additional senior secured indebtedness available to be borrowed
	under our credit facilities, subject to compliance with our
	financial and other covenants and terms of our loan agreements.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
	<B>Consolidated Tangible Net Worth</B></TD>
	<TD></TD>
	<TD valign="top">
	If our consolidated tangible net worth falls below $60.0 million
	for any two consecutive fiscal quarters, we will be required to
	make an offer to purchase up to 10% of the notes then
	outstanding at a purchase price equal to 100% of the principal
	amount, plus accrued interest.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
	<B>Restrictive Covenants</B></TD>
	<TD></TD>
	<TD valign="top">
	The indenture governing the notes will contain covenants that,
	among other things, will limit our ability and the ability of
	our subsidiaries to:</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
</TD>
	<TD></TD>
	<TD valign="top">
	&nbsp;&nbsp;&#149;&nbsp; incur additional indebtedness or liens;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
</TD>
	<TD></TD>
	<TD valign="top">
	&nbsp;&nbsp;&#149;&nbsp; pay dividends or make other
	distributions or repurchase or redeem our stock;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
</TD>
	<TD></TD>
	<TD valign="top">
	&nbsp;&nbsp;&#149;&nbsp; make investments;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
</TD>
	<TD></TD>
	<TD valign="top">
	&nbsp;&nbsp;&#149;&nbsp; sell assets;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
</TD>
	<TD></TD>
	<TD valign="top">
	&nbsp;&nbsp;&#149;&nbsp; enter into agreements restricting our
	subsidiaries&#146; ability to pay dividends;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
</TD>
	<TD></TD>
	<TD valign="top">
	&nbsp;&nbsp;&#149;&nbsp; enter into transactions with
	affiliates; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
</TD>
	<TD></TD>
	<TD valign="top">
	&nbsp;&nbsp;&#149;&nbsp; consolidate, merge or sell all or
	substantially all of our assets.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
</TD>
	<TD></TD>
	<TD valign="top">
	These covenants are subject to important exceptions and
	qualifications, which are described under the heading
	&#147;Description of the Exchange Notes&#148; in this prospectus.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
	<B>Absence of a Public Market</B></TD>
	<TD></TD>
	<TD valign="top">
	The exchange notes will be a new issue of securities and there
	is currently no established market for them. The exchange notes,
	if issued, will generally be freely transferable (subject to the
	restrictions discussed elsewhere herein) but will be a new issue
	of securities for which there will not initially be a market.
	Accordingly, there can be no assurance as to the development or
	liquidity of any market for the exchange notes. The outstanding
	notes are eligible for trading in The PORTAL Market.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
	<B>Use of Proceeds</B></TD>
	<TD></TD>
	<TD valign="top">
	We will receive no proceeds from the exchange of the exchange
	notes for the outstanding notes pursuant to the exchange offer.
	The net proceeds we received from the outstanding notes were
	used to (1)&nbsp; effect our acquisition of Hancock,
	(2)&nbsp;repay a portion of our outstanding debt and
	(2)&nbsp;pay related fees, commissions and expenses.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
	<B>Trustee</B></TD>
	<TD></TD>
	<TD valign="top">
	Wells Fargo Bank, National Association.</TD>
</TR>

</TABLE>

<P align="center">10

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>RISK FACTORS</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You should consider carefully the information set forth in the
section of this prospectus entitled &#147;Risk Factors&#148;
beginning on page&nbsp;13 and all the other information provided
to you in this prospectus in deciding whether to invest in the
notes.

<P align="center">
<B>SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>The following table sets forth summary unaudited pro forma
combined financial and other data for the year ended
December&nbsp;31, 2000, the three-month period ended
March&nbsp;31, 2001, the twelve-month period ended
March&nbsp;31, 2001 and as of March&nbsp;31, 2001. This data
gives effect to our acquisition of Hancock Communities, the
issuance of the outstanding notes (the &#147;offering&#148;),
the repayment of certain indebtedness and the payment of fees,
commissions and expenses, as described under &#147;Use of
Proceeds,&#148; and other adjustments described under
&#147;Unaudited Pro Forma Combined Financial Statements.&#148;
This data has been derived from Meritage&#146;s audited and
unaudited consolidated financial statements, Hancock&#146;s
audited and unaudited financial statements, and the unaudited
pro forma combined financial statements appearing elsewhere in
this prospectus, and should be read in conjunction with such
financial statements and the related notes, as well as the
section entitled &#147;Management&#146;s Discussion and Analysis
of Financial Condition and Results of Operations.&#148;</I>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="53%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Three Months</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Twelve Months</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Year Ended</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Ended</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Ended</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">December 31,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">March 31,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">March 31,</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="11"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="11" align="center" nowrap><B><FONT size="2">(dollars in thousands)</FONT></B></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Pro Forma Combined Statement of Earnings Data:
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total sales revenue
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">704,118</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">135,187</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">712,667</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total cost of sales
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(558,964</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(106,894</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(562,738</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Selling, general and administrative expenses
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(75,619</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(15,715</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(76,346</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Earnings before income taxes
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">69,535</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">12,578</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">73,583</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Income taxes
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(26,113</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(5,009</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(27,923</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net earnings
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">43,422</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,569</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">45,660</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Diluted earnings per common share
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7.60</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.31</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8.00</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="13"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Other Pro Forma Combined Financial Data:
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">EBITDA(1)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">88,867</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">16,388</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">93,120</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">EBITDA margin(2)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">12.62</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">12.12</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13.07</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Interest amortized to cost of sales and interest
	expense
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14,305</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,610</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14,396</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Depreciation and amortization
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,027</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,200</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,141</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Interest incurred(3)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">18,583</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Ratio of EBITDA to interest incurred
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5.01x</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Ratio of total debt to EBITDA
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.07x</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Ratio of net debt to EBITDA
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.00x</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Ratio of earnings to fixed charges(4)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.40x</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.48x</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="13"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Pro Forma Combined Operating Data:
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Homes closed
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,370</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">585</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,267</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Homes ordered
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,447</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,117</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,551</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Average sales price of homes closed
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">207.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">230.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">216.6</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Average sales price of homes ordered
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">223.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">218.7</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">225.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Backlog at end of period(5)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">363,148</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">472,858</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">472,858</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Backlog at end of period (homes)(5)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,525</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,057</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,057</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">11

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="78%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">At March 31,</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">(in thousands)</FONT></B></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Pro Forma Combined Balance Sheet Data:
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cash and cash equivalents
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,359</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Real estate under development
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">290,620</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total assets
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">379,188</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total debt
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">192,579</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Stockholders&#146; equity
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">128,150</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="18%" align="left" noshade>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="4%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>(1)&nbsp;</TD>
	<TD align="left">
	EBITDA represents earnings before interest expense, interest
	amortized to cost of sales, income taxes, depreciation and
	amortization. EBITDA is presented here because it is a widely
	accepted financial indicator used by investors and analysts to
	analyze and compare companies on the basis of operating
	performance. EBITDA as presented may not be comparable to
	similarly titled measures reported by other companies because
	not all companies necessarily calculate EBITDA in an identical
	manner and, therefore, is not necessarily an accurate means of
	comparison between companies. EBITDA is not intended to
	represent cash flows for the period or funds available for
	management&#146;s discretionary use nor has it been presented as
	an alternative to operating income or as an indicator of
	operating performance and it should not be considered in
	isolation or as a substitute for measures of performance
	prepared in accordance with generally accepted accounting
	principles.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(2)&nbsp;</TD>
	<TD align="left">
	EBITDA margin is calculated by dividing EBITDA by total sales
	revenue.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(3)&nbsp;</TD>
	<TD align="left">
	Interest incurred is the amount of interest paid and accrued
	(whether expensed or capitalized) during such period, including
	debt-related fees and amortization of deferred financing costs.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(4)&nbsp;</TD>
	<TD align="left">
	For the purpose of computing the ratio of earnings to fixed
	charges, &#147;earnings&#148; consist of earnings before income
	taxes and extraordinary item plus fixed charges less capitalized
	interest. &#147;Fixed charges&#148; consist of interest expense
	including amortization of deferred debt costs, one-half of rent
	expense, which is deemed to be representative of an interest
	factor, and capitalized interest.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(5)&nbsp;</TD>
	<TD align="left">
	Represents homes under contract but not yet closed at the end of
	the period.</TD>
</TR>

</TABLE>

<P align="center">12

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "RISK FACTORS" -->
<DIV align="left"><A NAME="001"></A></DIV>

<P align="center">
<B>RISK FACTORS</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>You should consider carefully the information set forth in
this section along with all the other information provided to
you or incorporated by reference in this prospectus in deciding
whether to invest in the notes.</I>

<P align="left">
<B>Risks Relating to Meritage</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>The homebuilding industry is cyclical and downturns in the
industry or the economy could negatively affect our business,
financial operating results and the value of the notes.</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The homebuilding industry is cyclical and is significantly
affected by changes in economic and other conditions, such as
employment levels, migration trends, availability of financing,
interest rates and consumer confidence. These factors can
negatively affect the demand for and pricing of our homes. The
occurrence or continuation of any of the above items and the
items described below could have a negative impact on our
business and adversely affect the value of the notes.
Homebuilders are also subject to various risks, many of which
are outside their control, including delays in construction
schedules, cost overruns, changes in governmental regulations,
increases in real estate taxes and other local government fees,
and availability and cost of land, materials and labor. Although
the principal raw materials used in the homebuilding industry
generally are available from a variety of sources, the materials
are subject to periodic price fluctuations.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The homebuilding industry is also subject to the potential for
significant variability and fluctuations in real estate
availability and values, as evidenced by the changes in real
estate prices in recent years in Texas, Arizona and Northern
California. Write-downs of our land inventories could occur if
market conditions deteriorate and these write-downs could be
material in amount. Write-downs may occur if we purchase land at
higher prices during stronger economic cycles and the value of
that land subsequently declines during slower economic cycles.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Our operating results may fluctuate, which may cause a
decline in the value of the notes.</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We historically have experienced, and expect to continue to
experience, variability in home sales and EBITDA on a quarterly
basis. As a result of such variability, our historical
performance may not be a meaningful indicator of future results.
Fluctuations in our results could cause the value of the notes
to decline. Factors that contribute to this variability include:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	timing of home deliveries and land sales;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	our ability to acquire additional land or options for additional
	land on acceptable terms;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	conditions of the real estate market in areas where we operate
	and of the general economy;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the cyclical nature of the homebuilding industry, changes in
	prevailing interest rates and the availability of mortgage
	financing;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	costs and availability of materials and labor; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	delays in construction schedules due to strikes, adverse
	weather, acts of God, reduced subcontractor availability and
	governmental restrictions.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Increases in interest rates and the reduced availability
of mortgage financing may cause our sales and profitability to
decrease.</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In general, housing demand is adversely affected by increases in
interest rates and housing costs and the unavailability of
mortgage financing. We believe that some of our second-time
move-up and luxury home customers have been less sensitive to
interest rate fluctuations than other homebuyers. However, most
of our buyers finance their home purchase through third-party
lenders providing mortgage financing. If mortgage interest rates
increase and, consequently, the ability of prospective buyers to
finance home purchases is adversely affected, home sales, gross
margins and cash flow may also be adversely impacted and the
impact may be material. Our homebuilding activities depend upon
the availability and costs of

<P align="center">13

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
mortgage financing for buyers of homes owned by our potential
customers as those customers (move-up buyers) often need to sell
their residences before they purchase our homes. Any reduction
of financing availability could adversely affect home sales.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Changes in federal income tax laws may also affect demand for
new homes. Various proposals have been publicly discussed to
limit mortgage interest deductions and to limit the exclusion of
gain from the sale of a principal residence. Enactment of such
proposals may have an adverse effect on the homebuilding
industry in general, and on demand for our products in
particular. No prediction can be made whether any such proposals
will be enacted and, if enacted, the particular form such laws
would take.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>We may not be able to effectively compete in the
homebuilding industry, which may cause the value of the notes to
decline.</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The homebuilding industry is highly competitive. We compete for
sales in each of our markets with national, regional and local
developers and homebuilders, existing home resales and, to a
lesser extent, condominiums and available rental housing. If we
are unable to successfully compete, our financial results and
growth could suffer and the value of, or our ability to service,
the notes could be adversely affected. Some of our competitors
have significantly greater financial resources or lower costs
than we do. Competition among both small and large residential
homebuilders is based on a number of interrelated factors,
including location, reputation, amenities, design, quality and
price. Competition is expected to continue and become more
intense, and there may be new entrants in the markets in which
we currently operate and in markets we may enter in the future.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Lack of greater geographic diversification could expose
our business to increased risks if there are economic downturns
in our markets.</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have operations in Texas, Arizona and Northern California.
Failure to be more geographically diversified could adversely
impact us if the homebuilding business in our current markets
should decline, since there may not be a balancing opportunity
in a stronger market in other geographic regions.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>We are subject to extensive government regulation, which
could give rise to significant liabilities and costs or restrict
our business, any of which could adversely impact the value of
or our ability to service the notes.</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Regulatory requirements could cause us to incur significant
liabilities and costs and could restrict our business
activities. We are subject to local, state, and federal statutes
and rules regulating certain development matters, including
building and site design. We are subject to various fees and
charges of government authorities designed to defray the cost of
providing certain governmental services and improvements. We may
be subject to additional costs and delays or may be precluded
entirely from building projects because of &#147;no growth&#148;
or &#147;slow growth&#148; initiatives, building permit
ordinances, building moratoriums, or similar government
regulations that could be imposed in the future due to health,
safety, welfare, or environmental concerns. We must also obtain
licenses, permits, and approvals from government agencies to
engage in certain activities, the granting or receipt of which
are beyond our control.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are also subject to a variety of local, state, and federal
statutes, ordinances, rules and regulations concerning the
protection of health and the environment. Environmental laws or
permit restrictions may result in project delays, may cause
substantial compliance and other costs and may prohibit or
severely restrict development in certain environmentally
sensitive regions or geographic areas. Environmental regulations
can also have an adverse impact on the availability and price of
certain raw materials, such as lumber.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Our expansion could have a negative effect on our
business.</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We may continue to consider growth or expansion of our
operations in our current markets or in other areas of the
country. There can be no assurance that we will be able to
expand into new or existing markets without a material adverse
effect on our cash flows or profitability. The magnitude, timing
and nature of any future expansion will depend on a number of
factors, including suitable acquisition candidates, the
negotiation of acceptable terms, our financial capabilities and
general economic and

<P align="center">14

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
business conditions. New acquisitions may result in the
incurrence of additional debt. Acquisitions also involve
numerous risks, including difficulties in the assimilation of
the acquired company&#146;s operations, the incurrence of
unanticipated liabilities or expenses, the diversion of
management&#146;s attention from other business concerns, risks
of entering markets in which we have limited or no direct
experience and the potential loss of key employees of the
acquired company.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>The loss of our key personnel could harm our
business.</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our success largely depends on the continuing services of
certain key employees and our continued favorable development
depends on our ability to attract new personnel. Although we
have entered into employment agreements with various key
officers, loss of their services could harm our business.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>The unavailability or underperformance of subcontractors
or suppliers could cause our operating results to
decline.</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We conduct our construction operations only as a general
contractor. Virtually all architectural and construction work is
performed by unaffiliated third-party subcontractors. As a
consequence, we are dependent upon the continued availability of
and satisfactory performance by these subcontractors for the
design and construction of our homes. There is no assurance that
there will be sufficient availability of and satisfactory
performance by these unaffiliated third-party subcontractors. In
addition, inadequate subcontractor resources could have a
material adverse affect on our business.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Increases in inflation could have a negative effect on our
business.</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We, like other homebuilders, may be adversely affected during
periods of high inflation, mainly because of higher land and
construction costs. Also, higher mortgage interest rates may
significantly affect the affordability of mortgage financing to
prospective buyers. Inflation also increases our cost of
financing, materials and labor and could cause our financial
results or growth to decline, which could impact the value of
the notes and the cash flow available to service the notes. We
attempt to pass cost increases on to our customers through
higher sales prices. To date, inflation has not had a material
adverse effect on our results of operations; however, inflation
could impact our future operating results.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Utility shortages or pricing increases could harm our
business.</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
California, one of our homebuilding markets, has experienced
widespread shortages and outages of electric utility service in
recent periods, in addition to significantly increased utility
costs. Similar shortages or pricing increases may occur in any
of our other markets. Continued shortages or outages and
increased pricing of electric utilities could cause us to incur
significant additional costs or slow our planned growth, or
could adversely affect regional economic factors such as job and
population growth and new housing demand. Any of these factors
could have a negative effect on our growth and cash flow.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Our business could be adversely affected by natural
disasters.</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have significant homebuilding operations in Texas and
Northern California. Some of our markets in Texas occasionally
experience severe weather conditions such as tornadoes or
hurricanes. Northern California has been heavily impacted at
times by earthquakes, flooding, landslides and other natural
disasters. We do not insure some of these risks. These
conditions could cause us to incur damage to or losses of our
homes under construction or our building lots that exceed our
insurance and could cause significant construction delays or
substantial fluctuations in the pricing or availability of
building materials. Any of these events could cause a decrease
in our revenues, cash flow and earnings, which could adversely
affect the value of the notes or our ability to service the
notes.

<P align="left">
<B>Risks Relating to the Acquisition of Hancock</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>The integration of Hancock with our operations may present
challenges.</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The integration of Hancock into our operations will involve a
number of risks. In particular, the combined companies may
experience attrition among management and personnel. The
integration process could also disrupt the activities of our
respective businesses. The combination of the two companies will

<P align="center">15

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
require, among other things, coordination of management,
administrative and other functions. Failure to overcome these
challenges or any other problems encountered in connection with
the acquisition of Hancock could cause our financial condition,
results of operations and competitive position to decline.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>We may not achieve the anticipated benefits from the
acquisition.</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that the acquisition will enhance our market position
in Arizona and expand our housing offerings. Our integration
plan for the Hancock acquisition assumes certain synergies and
other benefits. We cannot assure you that unforeseen factors
will not offset the intended benefits of the acquisition in
whole or in part.

<P align="left">
<B>Risks Associated with the Notes</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Our substantial level of indebtedness could adversely
affect our financial condition and prevent us from fulfilling
our obligations on the notes.</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have substantial indebtedness. As of May&nbsp;31, 2001, we
had $200.7 million of indebtedness. In addition, subject to
restrictions in the indenture for the notes we are offering and
our credit facilities, we may incur additional indebtedness. The
high level of our indebtedness could have important consequences
to you, including the following:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	our ability to obtain additional financing for working capital,
	capital expenditures, acquisitions or general corporate purposes
	may be impaired;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	we must use a substantial portion of our cash flow from
	operations to pay interest and principal on the notes and other
	indebtedness, which will reduce the funds available to us for
	other purposes such as capital expenditures;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	we have a higher level of indebtedness than some of our
	competitors, which may put us at a competitive disadvantage and
	reduce our flexibility in planning for, or responding to,
	changing conditions in our industry, including increased
	competition; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	we are more vulnerable to economic downturns and adverse
	developments in our business.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We expect to obtain the money to pay our expenses and to pay the
principal and interest on the notes, our credit facilities and
other debt from cash flow from our operations. Our ability to
meet our expenses thus depends on our future performance, which
will be affected by financial, business, economic and other
factors. We will not be able to control many of these factors,
such as economic conditions in the markets where we operate and
pressure from competitors. We cannot be certain that our cash
flow will be sufficient to allow us to pay principal and
interest on our debt, including the notes, and meet our other
obligations. If we do not have enough money, we may be required
to refinance all or part of our existing debt, including the
notes, sell assets or borrow more money. We cannot guarantee
that we will be able to do so on terms acceptable to us, if at
all. In addition, the terms of existing or future debt
agreements, including our credit facilities and the indenture,
may restrict us from pursuing any of these alternatives.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>The notes are unsecured and effectively subordinated to
our secured indebtedness.</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The notes are not and will not be secured. Our credit facilities
are secured primarily by substantially all of our real estate
under development. If we become insolvent or are liquidated, or
if payment under any of these facilities or any of our other
secured debt obligations is accelerated, our lenders would be
entitled to exercise the remedies available to a secured lender
under applicable law and will have a claim on those assets
before the holders of the notes. As a result, the notes are
effectively subordinated to our secured indebtedness to the
extent of the value of the assets securing that indebtedness and
the holders of the notes may recover ratably less than the
lenders of our secured debt in the event of our bankruptcy or
liquidation. At March&nbsp;31, 2001, on a pro forma basis, we
had $27.6 million of senior secured indebtedness outstanding,
including $22.7 million under our credit facilities, and
approximately $43 million of additional unborrowed funds
available to be borrowed under our credit facilities, subject to
compliance with our financial and other covenants and terms of
our loan agreements.

<P align="center">16

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>The indenture for the notes and our credit facilities
impose significant operating and financial restrictions, which
may prevent us from capitalizing on business opportunities and
taking some corporate actions.</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The indenture for the notes and our credit facilities impose
significant operating and financial restrictions on us. These
restrictions will limit the ability of us and our subsidiaries,
among other things, to:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	incur additional indebtedness or liens;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	pay dividends or make other distributions;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	repurchase our stock;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	make investments;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	sell assets;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	enter into agreements restricting our subsidiaries&#146; ability
	to pay dividends;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	enter into transactions with affiliates; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	consolidate, merge or sell all or substantially all of our
	assets.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, the indenture requires us to maintain a minimum
consolidated tangible net worth and our credit facilities
require us to maintain other specified financial ratios. We
cannot assure you that these covenants will not adversely affect
our ability to finance our future operations or capital needs or
to pursue available business opportunities. A breach of any of
these covenants or our inability to maintain the required
financial ratios could result in a default in respect of the
related indebtedness. If a default occurs, the relevant lenders
could elect to declare the indebtedness, together with accrued
interest and other fees, to be immediately due and payable and
proceed against any collateral securing that indebtedness.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>We may not be able to satisfy our obligations to holders
of the notes upon a change of control or a decline in our
consolidated tangible net worth.</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon the occurrence of a &#147;change of control,&#148; as
defined in the indenture, each holder of the notes will have the
right to require us to purchase the notes at a price equal to
101% of the principal amount, together with any accrued interest
and liquidated damages, if any, to the date of purchase. Our
failure to purchase, or give notice of purchase of, the notes
would be a default under the indenture, which would in turn be a
default under our credit facilities. In addition, a change of
control may constitute an event of default under our credit
facilities. A default under our credit facilities could result
in an event of default under the indenture if the lenders
accelerate the debt under our credit facilities.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, if our consolidated tangible net worth falls below
$60.0 million for any two consecutive fiscal quarters, we are
required to make an offer to purchase up to 10% of the notes
then outstanding at a price equal to 100% of the principal
amount, together with any accrued interest and liquidated
damages, if any, to the date of purchase. As of March&nbsp;31,
2001, on a pro forma basis, our consolidated tangible net worth
was $99.7 million.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If either event occurs, we may not have enough assets to satisfy
all obligations under our credit facilities and the indenture.
In order to satisfy our obligations we could seek to refinance
the indebtedness under our credit facilities and the notes or
obtain a waiver from the lenders or you as a holder of the
notes. We cannot assure you that we would be able to obtain a
waiver or refinance our indebtedness on terms acceptable to us,
if at all.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>The guarantees may be voided under specific legal
circumstances.</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The outstanding notes are, and the exchange notes will be,
guaranteed by all of our existing subsidiaries (other than our
mortgage broker subsidiary) and certain future subsidiaries. The
guarantees may be subject to review under U.S. federal
bankruptcy law and comparable provisions of state fraudulent
conveyance laws if a bankruptcy or reorganization case or
lawsuit is commenced by or on behalf of our or

<P align="center">17

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
one of a guarantor&#146;s unpaid creditors. Under these laws, if
a court were to find in such a bankruptcy or reorganization case
or lawsuit that, at the time any guarantor issued a guarantee of
the notes:
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
        <TD width="3%"></TD>
        <TD width="1%"></TD>
        <TD width="96%"></TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>&#149;&nbsp;</TD>
        <TD align="left">
        it issued the guarantee to delay, hinder or defraud present or
        future creditors; or</TD>
</TR>

<TR>
        <TD>&nbsp;</TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>&#149;&nbsp;</TD>
        <TD align="left">
        it received less than reasonably equivalent value or fair
        consideration for issuing the guarantee at the time it issued
        the guarantee and:</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
        <TD width="6%"></TD>
        <TD width="1%"></TD>
        <TD width="93%"></TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>&#151;&nbsp;</TD>
        <TD align="left">
        it was insolvent or rendered insolvent by reason of issuing the
        guarantee; or</TD>
</TR>

<TR>
        <TD>&nbsp;</TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>&#151;&nbsp;</TD>
        <TD align="left">
        it was engaged, or about to engage, in a business or transaction
        for which its remaining unencumbered assets constituted
        unreasonably small capital to carry on its business; or</TD>
</TR>

<TR>
        <TD>&nbsp;</TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>&#151;&nbsp;</TD>
        <TD align="left">
        it intended to incur, or believed that it would incur, debts
        beyond its ability to pay as they mature;</TD>
</TR>

</TABLE>

<P align="left">
then the court could void the obligations under the guarantee,
subordinate the guarantee of the notes to that guarantor&#146;s
other debt or take other action detrimental to holders of the
notes and the guarantees of the notes.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The measures of insolvency for purposes of fraudulent transfer
laws vary depending upon the law of the jurisdiction that is
being applied in any proceeding to determine whether a
fraudulent transfer had occurred. Generally, however, a person
would be considered insolvent if, at the time it incurred the
debt:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
        <TD width="3%"></TD>
        <TD width="1%"></TD>
        <TD width="96%"></TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>&#149;&nbsp;</TD>
        <TD align="left">
        the present fair saleable value of its assets was less than the
        amount that would be required to pay its probable liability on
        its existing debts, including contingent liabilities, as they
        become absolute and mature; or</TD>
</TR>

<TR>
        <TD>&nbsp;</TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>&#149;&nbsp;</TD>
        <TD align="left">
        it could not pay its debts as they become due.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We cannot be sure as to the standard that a court would use to
determine whether or not a guarantor was solvent at the relevant
time, or, regardless of the standard that the court uses, that
the issuance of the guarantees would not be voided or the
guarantees would not be subordinated to the guarantors&#146;
other debt. If such a case were to occur, the guarantee could
also be subject to the claim that, since the guarantee was
incurred for our benefit, and only indirectly for the benefit of
the guarantor, the obligations of the applicable guarantor were
incurred for less than fair consideration.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Based upon financial and other information currently available
to us, we believe that the debt evidenced by the guarantees is
being incurred for proper purposes and in good faith. We believe
that the guarantors:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
        <TD width="3%"></TD>
        <TD width="1%"></TD>
        <TD width="96%"></TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>&#149;&nbsp;</TD>
        <TD align="left">
        are solvent and will continue to be solvent after issuing the
        guarantees;</TD>
</TR>

<TR>
        <TD>&nbsp;</TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>&#149;&nbsp;</TD>
        <TD align="left">
        will have sufficient capital for carrying on the business we
        intend to conduct after this offering is completed; and</TD>
</TR>

<TR>
        <TD>&nbsp;</TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>&#149;&nbsp;</TD>
        <TD align="left">
        will be able to service their debts as they come due.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>There is no established trading market for the exchange
notes, and you may not be able to sell them quickly or at the
price that you paid.</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The exchange notes will be a new issue of securities for which
there is no established trading market. We do not intend to
apply for the exchange notes to be listed on any securities
exchange or to arrange for quotation on any automated dealer
quotation systems. The initial purchasers have advised us that
they intend to make a market in the outstanding notes and the
exchange notes, but they are not obligated to do so. Each
initial purchaser may discontinue any market making in the
outstanding notes or exchange notes at any time, in its sole
discretion. As a result, we cannot assure you as to the
liquidity of any trading market for the notes.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We also cannot assure you that you will be able to sell your
exchange notes at a particular time or that the prices that you
receive when you sell will be favorable. We also cannot assure
you as to the level

<P align="center">18

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
of liquidity of the trading market for the exchange notes or, in
the case of any holders of outstanding notes that do not
exchange them, the trading market for the notes following the
offer to exchange the outstanding notes for exchange notes.
Future trading prices of the notes will depend on many factors,
including:
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	our operating performance and financial condition;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the interest of securities dealers in making a market; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the market for similar securities.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Historically, the market for non-investment grade debt has been
subject to disruptions that have caused volatility in prices. It
is possible that the market for the notes will be subject to
disruptions. Any disruptions may have a negative effect on
noteholders, regardless of our prospects and financial
performance.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>There may be adverse consequences to holders of
outstanding notes that do not tender their outstanding notes
pursuant to the exchange offer.</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The holders of outstanding notes that do not exchange them
pursuant to this exchange offer will continue to be subject to
restrictions on the transfer of the outstanding notes because
the issuance of the outstanding notes was not registered under
the Securities Act or registered or qualified under any state
securities laws. We do not currently anticipate that, except in
certain limited circumstances, we will register the outstanding
notes under the Securities Act. To the extent that we exchange
outstanding notes as a result of this exchange offer, the
ability to trade untendered outstanding notes may be adversely
affected.

<P align="center">19

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "The Hancock Acquisition" -->
<DIV align="left"><A NAME="002"></A></DIV>

<P align="center">
<B>THE HANCOCK ACQUISITION</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On May&nbsp;30, 2001 we acquired substantially all of the
homebuilding and related assets of HC&nbsp;Builders, Inc. and
Hancock Communities, L.L.C. The purchase price was $65.4 million
in cash, the assumption of trade payables, accrued liabilities,
customer deposits and a note, totaling $11.3 million in the
aggregate, and an earn-out payable over three years.

<P align="left">
<B>Hancock&#146;s Business</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Hancock designs, manufactures and markets a wide range of
high-quality homes in the Phoenix, Arizona area with a focus on
serving the entry-level and move-up single-family housing
markets, and is currently developing affordable age-restricted
adult communities.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Although Hancock Communities was formed in 1997, Greg Hancock,
its founder, has been active in the Phoenix, Arizona
homebuilding market since the 1970s, both in owning his own
companies and in working for other homebuilders, including a
publicly-held homebuilder. Hancock&#146;s home closings grew
rapidly from 153 homes in 1997 to 1,354 homes in 1999. In 2000,
home closings totaled 1,143 homes. For the quarter ended
March&nbsp;31, 2001, home closings were 69 compared to 248 for
the quarter ended March&nbsp;31, 2000. Hancock&#146;s 1999
closings reflected rapid sales in the initial phases at certain
of its subdivisions, particularly for its entry-level homes,
which depleted lot inventories available for sale in 2000 and
the first half of 2001. At March&nbsp;31, 2001, Hancock had 15
communities with 4,647 lots under its control on which homes
could be built as compared to 1,049 lots at March&nbsp;31, 2000.
At March&nbsp;31, 2001, backlog was 587 homes compared to 581
homes at March&nbsp;31, 2000. Hancock&#146;s homes are low- to
medium-priced, with base prices ranging from $72,000 to
$324,000. For the twelve months ended December&nbsp;31, 2000,
Hancock had revenue and EBITDA of $183.7 million and $16.9
million, respectively. The revenue and EBITDA for Hancock
declined in 2000 compared to 1999, we believe, as a result of
insufficient lot inventory. For the quarter ended March&nbsp;31,
2001, Hancock had revenue and EBITDA of $18.5 million and $1.4
million, respectively.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The tables below contain operating and financial data for
Hancock&#146;s homebuilding activities for the year ended
December&nbsp;31, 2000 and the three month period ended
March&nbsp;31, 2001.

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="63%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Three Months</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Year Ended</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Ended</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">December 31,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">March 31,</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">(dollars in thousands)</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">HOME SALES REVENUE
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Dollars
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">183,651</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">18,481</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Homes closed
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,143</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">69</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Average sales price
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">160.7</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">267.8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Move-up
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Dollars
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">100,417</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14,895</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Homes closed
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">328</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">46</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Average sales price
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">306.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">323.8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Entry-level
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Dollars
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">83,234</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,586</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Homes closed
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">815</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">23</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Average sales price
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">102.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">155.9</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">20

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="63%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Three Months</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Year Ended</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Ended</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">December 31,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">March 31,</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">(dollars in thousands)</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">SALES CONTRACTS
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Dollars
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">165,459</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">67,410</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Homes ordered
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">967</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">377</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Average sales price
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">171.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">178.8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Move-up
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Dollars
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">91,537</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">35,645</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Homes ordered
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">281</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">113</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Average sales price
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">325.8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">315.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Entry-level
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Dollars
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">73,922</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">31,765</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Homes ordered
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">686</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">264</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Average sales price
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">107.8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">120.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="63%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">At</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">At</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">December&nbsp;31,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">March 31,</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">NET SALES BACKLOG
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Dollars
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">53,247</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">102,177</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Homes in backlog
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">279</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">587</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Average sales price
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">190.8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">174.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Move-up
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Dollars
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">33,125</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">53,876</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Homes in backlog
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">103</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">170</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Average sales price
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">321.6</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">316.9</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Entry-level
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Dollars
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">20,122</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">48,301</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Homes in backlog
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">176</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">417</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Average sales price
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">114.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">115.8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table presents information regarding
Hancock&#146;s land owned or land under contract or option by
home type as of March&nbsp;31, 2001:

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="26%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="11"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="11"></TD>
	<TD></TD>
	<TD colspan="11" align="center" nowrap><B><FONT size="2">Land Under Contract</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="11" align="center" nowrap><B><FONT size="2">Land Owned(1)</FONT></B></TD>
	<TD></TD>
	<TD colspan="11" align="center" nowrap><B><FONT size="2">or Option(1)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Lots Under</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Lots Held For</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Lots Under</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Lots Held For</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Finished</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Development</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Development</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Finished</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Development</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Development</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Lots</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">(estimated)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">(estimated)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Lots</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">(estimated)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">(estimated)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Total</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Move-up
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">108</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">859</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">150</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">213</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,330</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Entry-level
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">55</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">362</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">417</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Age-restricted
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">900</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,900</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">163</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">859</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">512</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,113</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,647</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="18%" align="left" noshade>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="4%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>(1)&nbsp;</TD>
	<TD align="left">
	Excludes lots with finished homes or homes under construction.</TD>
</TR>

</TABLE>

<P align="center">21

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">
<B>Reasons for the Acquisition</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that Hancock complements our existing operations in
Arizona and offers the following strategic and operating
benefits:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp; </TD>
	<TD align="left">
	<I>Expand demographic reach and product offerings. </I>The
	acquisition provides us with an operating platform to expand our
	operations in the move-up single-family housing markets, and to
	gain entry into the entry-level and affordable age-restricted
	adult markets in Arizona. Diversification of our demographic
	focus should also increase our resilience to economic downturns
	and other adverse conditions.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp; </TD>
	<TD align="left">
	<I>Acquire an additional revenue and cash flow stream.
	</I>Hancock enjoys a reputation in the Phoenix homebuilding
	market for providing a well designed home at a good value.
	Hancock&#146;s revenues were $183.7 million for the year ended
	December&nbsp;31, 2000 and $167.9 million for the twelve months
	ended March&nbsp;31, 2001. Hancock achieved EBITDA of $16.9
	million for the year ended December&nbsp; 31, 2000 and $16.1
	million for the twelve months ended March&nbsp; 31, 2001.
	Hancock management, like our management, has maintained a strong
	focus on earnings growth and conservative inventory management.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp; </TD>
	<TD align="left">
	<I>Acquire experienced management team. </I>Hancock has an
	experienced management team with an average of 21&nbsp;years of
	experience in the homebuilding industry for its top five
	managers. We anticipate that Hancock&#146;s management will work
	together with our managers to share expertise in our respective
	entry-level and move-up homebuilding operations, as well as
	Hancock&#146;s new affordable age-restricted adult community
	development operations.</TD>
</TR>

</TABLE>

<P align="left">
<B>Terms of the Acquisition</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We paid $65.4 million cash toward the purchase price, and we
assumed $11.3 million in various trade payables, accrued
liabilities, customer deposits and a note at closing. In
addition, we granted to Greg Hancock an earn-out payable over a
three-year period to create an incentive for Mr.&nbsp;Hancock to
remain with us during that period. The earn-out payment will
equal 20% of the pre-tax net income of Hancock after a 10.5%
charge on capital during that period. Concurrently with the
closing, Mr.&nbsp;Hancock signed an employment agreement, which
included a covenant not to compete.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The acquisition agreement contained customary representations,
warranties and covenants. We may seek indemnification only up to
$3 million, and then only for claims in excess of $100,000, in
each case excluding claims with respect to retained liabilities
and certain other matters.

<!-- link1 "Use of Proceeds" -->
<DIV align="left"><A NAME="003"></A></DIV>

<P align="center">
<B>USE OF PROCEEDS</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We will receive no proceeds from the exchange of the exchange
notes for the outstanding notes pursuant to the exchange offer.
We used the gross proceeds of $165 million from the sale of the
notes to fund the purchase price of the Hancock acquisition, to
repay certain outstanding indebtedness and to pay fees,
commissions and expenses relating to the sale of the outstanding
notes and the Hancock acquisition. Of the gross proceeds,
approximately $65.4 million was used to fund the cash
requirements of the Hancock acquisition, $77.9 million was used
to pay down our senior bank credit facilities, $15.9 million was
used to repay our existing senior notes, including prepayment
costs and accrued interest, and $5.8 million was used to pay
fees, commissions and other costs of the foregoing. See
&#147;Description of Certain Existing Indebtedness&#148; for
information regarding our existing debt.

<P align="center">22

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "Capitalization" -->
<DIV align="left"><A NAME="004"></A></DIV>

<P align="center">
<B>CAPITALIZATION</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth our capitalization on an actual
and pro forma basis as of March&nbsp;31, 2001. Pro forma data
takes into account the issuance of the outstanding notes, the
Hancock acquisition, the repayment of certain existing
indebtedness and the payment of fees, commissions and other
costs. See &#147;Use of Proceeds.&#148; You should read this
table together with the other financial information and related
notes appearing elsewhere in this prospectus.

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="66%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">At March 31, 2001</FONT></B></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Actual</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Pro Forma</FONT></B></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">(dollars in thousands)</FONT></B></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total debt:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Revolving credit facilities
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">98,911</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">22,672</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Outstanding notes due 2011.
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">165,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Existing senior notes
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">15,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Other debt
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,017</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,907</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total debt
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">116,928</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">192,579</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Stockholders&#146; equity:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Common stock, par value $.01 per share,
	50,000,000 shares authorized, 5,941,202 shares issued and
	outstanding
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">59</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">59</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Additional paid-in capital
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">102,745</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">102,745</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Retained earnings
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">36,919</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">36,362</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Treasury stock at cost, 811,963 shares
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(11,016</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(11,016</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total stockholders&#146; equity
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">128,707</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">128,150</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total capitalization
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">245,635</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">320,729</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">23

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "Unaudited Pro Forma Combined Financial Statements" -->
<DIV align="left"><A NAME="005"></A></DIV>

<P align="center">
<B>UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following unaudited pro forma combined financial statements
give effect to the following transactions as if they were
consummated as of March&nbsp;31, 2001 with respect to the
unaudited pro forma combined balance sheet and on
January&nbsp;1, 2000 with respect to the unaudited pro forma
combined statements of earnings:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the Hancock acquisition;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the issuance of the outstanding notes and the application of the
	net proceeds of $160.0 million there from; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	repayment of an aggregate of $91.2 million of outstanding
	indebtedness.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The unaudited pro forma combined financial statements reflect
the purchase method of accounting for the Hancock acquisition.
The Hancock acquisition was accounted for as a purchase. Under
the purchase method of accounting, the purchase price is
allocated to assets acquired and liabilities assumed based on
their estimated fair value at the time of the acquisition.
Income of the combined company will not include income or loss
of Hancock prior to the acquisition. The unaudited pro forma
combined financial statements reflect preliminary adjustments
made to combine Hancock with Meritage using the purchase method
of accounting. Actual adjustments may continue to be made and
may differ from those reflected in the unaudited pro forma
combined financial statements; however, we do not currently have
reason to believe that they will materially differ from the
final purchase price allocation. The unaudited pro forma
combined financial statements are based upon available
information and assumptions that we believe are reasonable.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The unaudited pro forma combined financial statements are for
informational purposes only and are not necessarily indicative
of the results of our future operations or the actual results
that would have been achieved had the Hancock acquisition and
related transactions been consummated during the periods
indicated. You should read the unaudited pro forma combined
financial statements in conjunction with the consolidated
historical financial statements of Meritage and Hancock,
including the related notes, which are included in this
prospectus.

<P align="center">24

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>MERITAGE CORPORATION</B>

<P align="center">
<B>UNAUDITED PRO FORMA COMBINED BALANCE SHEET</B>

<DIV align="center">
<B>at March&nbsp;31, 2001</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="27%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">Historical</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Total</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Offering</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Acquisition</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Pro</FONT></B></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Meritage</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Hancock</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Historical</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Adjustments</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Adjustments</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Forma</FONT></B></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="23"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="23" align="center" nowrap><B><FONT size="2">(dollars in thousands)</FONT></B></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Assets
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cash and cash equivalents
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,359</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,053</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,412</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">68,047</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">(a)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(72,100</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)(e)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,359</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Real estate under development
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">233,446</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">60,583</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">294,029</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(3,409</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)(f)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">290,620</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Deposits on real estate under option or contract
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">28,776</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,799</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">37,575</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">37,575</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Other receivables
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,673</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">171</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,844</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,844</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Deferred tax assets
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">526</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">865</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,391</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(865</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)(f)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">526</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Goodwill
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">17,408</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">17,408</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,000</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">(f)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">28,408</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Property and equipment, net
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,016</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,357</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,373</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,373</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Other assets
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,244</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">537</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,781</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,702</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">(b)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,483</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total assets
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">295,448</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">76,365</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">371,813</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">72,749</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(65,374</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">379,188</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Liabilities
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Accounts payable and accrued expenses
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">36,692</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,857</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">44,549</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(455</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)(c)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,331</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)(f)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">42,763</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Home sale deposits
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13,121</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,575</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">15,696</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">15,696</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Notes payable:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Revolving credit facilities
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">98,911</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">36,057</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">134,968</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">76,239</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">(a)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(36,057</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)(f)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">22,672</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Existing senior notes
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">15,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">15,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(15,000</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)(a)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Outstanding notes due 2011
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">165,000</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">(a)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">165,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Other debt
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,017</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,643</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,660</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,753</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)(f)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,907</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total liabilities
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">166,741</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">51,132</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">217,873</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">73,306</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(40,141</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">251,038</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Stockholders&#146; equity
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Common stock
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">59</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">59</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">59</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Additional paid-in capital
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">102,745</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">102,745</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">102,745</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Retained earnings
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">36,919</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">25,233</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">62,152</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(557</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)(d)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(25,233</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)(g)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">36,362</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Treasury stock
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(11,016</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(11,016</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(11,016</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total stockholders&#146; equity
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">128,707</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">25,233</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">153,940</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(557</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(25,233</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">128,150</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total liabilities and stockholders&#146; equity
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">295,448</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">76,365</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">371,813</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">72,749</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(65,374</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">379,188</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">25

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>MERITAGE CORPORATION</B>

<P align="center">
<B>NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET</B>

<DIV align="center">
<B>(dollars in thousands)</B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Unaudited Pro Forma Combined Balance Sheet reflects the
transactions as if they had occurred on March&nbsp;31, 2001.

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="83%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">(a)&nbsp;Reflects the issuance of the outstanding
	notes and application of proceeds therefrom:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Issuance of the outstanding notes
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">165,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Expenses for the issuance of the outstanding notes
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(5,000</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Payoff of existing senior notes, including
	prepayment premium and accrued interest
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(15,714</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Paydown of other Meritage debt
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(76,239</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net cash proceeds
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">68,047</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the normal course of business we repay our credit facilities
when we have excess cash available. Certain covenants existing
under our credit facilities and loan agreements required that a
portion of the cash proceeds from the issuance of the
outstanding notes be used to repay certain outstanding
borrowings. In addition, we repaid certain outstanding
borrowings over and above these required payment amounts because
if we did not otherwise make such additional payments, a
violation of certain debt covenants under our credit facilities
would have occurred.

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="70%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">(b)&nbsp;Reflects the following:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Expenses for issuance of the outstanding notes
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Write-off of deferred bond costs relating to
	existing senior notes to be retired
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(298</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,702</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="10"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">(c)&nbsp;Reflects the following:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Payoff of accrued interest on existing senior
	notes
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(114</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Tax benefit described in footnote&nbsp;(d) below
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(341</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(455</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="10"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">(d)&nbsp;Reflects the following:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Write-off of deferred bond costs relating to
	existing senior notes to be retired
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(298</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Prepayment premium of existing senior notes to be
	retired
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(600</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Tax benefit from the above
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">341</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(557</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="10"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">(e)&nbsp;Reflects the following:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Hancock purchase price
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(68,047</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Hancock cash excluded from purchase price
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,053</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(72,100</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="10"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">(f)&nbsp;The acquisition was accounted for as a
	purchase in accordance with Accounting Principles Board Opinion
	No&nbsp;16 &#147;Business Combinations.&#148; The purchase price
	was first allocated to the tangible and identifiable intangible
	assets and liabilities based upon preliminary estimates of their
	fair market value, with the remainder allocated to goodwill:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Payment to Hancock
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">68,047</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Book value of net assets acquired
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(25,233</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net assets/liabilities of Hancock excluded or
	eliminated at acquisition:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Revolving credit facilities
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(36,057</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Other debt
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,753</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Income tax payable
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(106</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cash
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,053</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Accrued interest payable
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,225</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Deferred tax assets
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">865</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Real estate under development sold or land banked
	prior to close
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,009</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">26

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>MERITAGE CORPORATION</B>
</DIV>

<P align="center">
<B>NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE
SHEET&nbsp;&#151; (Continued)</B>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="71%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Adjusted book value of net assets acquired
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(53,447</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Increase in basis
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14,600</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Allocation of increase in basis:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Goodwill
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Increase in fair value of inventory
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,600</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14,600</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Adjustment to real estate under development:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Decrease in real estate under development sold or
	land banked prior to close
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(7,009</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Increase in fair value of inventory
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,600</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(3,409</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="10"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">(g)&nbsp;Reflects the elimination of Hancock
	equity balances pursuant to purchase accounting
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">27

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>MERITAGE CORPORATION</B>

<P align="center">
<B>UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS</B>

<DIV align="center">
<B>Year Ended December&nbsp;31, 2000</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="37%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">Historical</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Total</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Pro Forma</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Meritage</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Hancock</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Historical</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Adjustments</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Pro Forma</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="19"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="19" align="center" nowrap><B><FONT size="2">(dollars in thousands, except per share data)</FONT></B></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total sales revenue
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">520,467</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">183,651</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">704,118</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">704,118</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total cost of sales
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(415,649</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(142,015</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(557,664</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,300</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)(a)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(558,964</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Gross profit
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">104,818</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">41,636</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">146,454</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,300</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">145,154</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Selling, general and administrative expenses
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(48,056</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(29,738</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(77,794</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,175</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">(b)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(75,619</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Earnings before income taxes
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">56,762</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,898</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">68,660</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">875</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">69,535</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Income taxes
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(21,000</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">44</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(20,956</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(5,157</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)(c)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(26,113</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net earnings
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">35,762</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,942</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">47,704</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,282</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">43,422</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Pro forma basic earnings per share
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8.40</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">(d)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Pro forma diluted earnings per share
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7.60</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">(d)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Other pro forma combined financial data:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">EBITDA(e)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">88,867</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">EBITDA margin(f)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">12.62</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Interest amortized to cost of sales and interest
	expense
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14,305</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Depreciation and amortization
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,027</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">28

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>MERITAGE CORPORATION</B>

<P align="center">
<B>UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS</B>

<DIV align="center">
<B>Three Month Period Ended March&nbsp;31, 2001</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="38%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">Historical</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Total</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Pro Forma</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Meritage</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Hancock</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Historical</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Adjustments</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Pro Forma</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="19"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="19" align="center" nowrap><B><FONT size="2">(dollars in thousands, except per share data)</FONT></B></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total sales revenue
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">116,706</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">18,481</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">135,187</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">135,187</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total cost of sales
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(93,110</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(13,548</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(106,658</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(236</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)(a)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(106,894</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Gross profit
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">23,596</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,933</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">28,529</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(236</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">28,293</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Selling, general and administrative expenses
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(11,415</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,418</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(15,833</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">118</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">(b)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(15,715</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Earnings before income taxes
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">12,181</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">515</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">12,696</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(118</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">12,578</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Income taxes
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,792</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">387</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,405</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(604</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)(c)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(5,009</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net earnings
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,389</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">902</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,291</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(722</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,569</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Pro forma basic earnings per share
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.48</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">(d)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Pro forma diluted earnings per share
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.31</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">(d)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Other pro forma combined financial data:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">EBITDA(e)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">16,388</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">EBITDA margin(f)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">12.12</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Interest amortized to cost of sales and interest
	expense
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,610</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Depreciation and amortization
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,200</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">29

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>MERITAGE CORPORATION</B>

<P align="center">
<B>UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS</B>

<DIV align="center">
<B>Twelve Month Period Ended March&nbsp;31, 2001</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="37%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">Historical</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Total</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Pro Forma</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Meritage</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Hancock</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Historical</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Adjustments</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Pro Forma</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="19"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="19" align="center" nowrap><B><FONT size="2">(dollars in thousands, except per share data)</FONT></B></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total sales revenue
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">544,763</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">167,904</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">712,667</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">712,667</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total cost of sales
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(433,122</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(128,309</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(561,431</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,307</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)(a)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(562,738</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Gross profit
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">111,641</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">39,595</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(151,236</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,307</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">149,929</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Selling, general and administrative expenses
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(50,221</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(28,451</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(78,672</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,326</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">(b)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(76,346</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Earnings before income taxes
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">61,420</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,144</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">72,564</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,019</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">73,583</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Income taxes
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(23,040</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(458</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(23,498</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,425</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)(c)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(27,923</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net earnings
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">38,380</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,686</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">49,066</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(3,406</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">45,660</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Pro forma basic earnings per share
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8.90</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">(d)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Pro forma diluted earnings per share
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8.00</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">(d)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Other pro forma combined financial data:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">EBITDA(e)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">93,120</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">EBITDA margin(f)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13.07</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Interest amortized to cost of sales and interest
	expense
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14,396</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Depreciation and amortization
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,141</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Interest incurred(g)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">18,583</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Ratio of EBITDA to interest incurred
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5.01x</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Ratio of total debt to EBITDA
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.07x</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Ratio of net debt to EBITDA
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.00x</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">30

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>MERITAGE CORPORATION</B>

<P align="center">
<B>NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF
EARNINGS</B>

<DIV align="center">
<B>(dollars in thousands)</B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Unaudited Pro Forma Combined Statements of Earnings for the
twelve month periods ended December&nbsp;31, 2000 and
March&nbsp;31, 2001 and for the three month period ended
March&nbsp;31, 2001 reflect the transactions as if they had
occurred on January&nbsp;1, 2000.

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="53%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Three Months</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Twelve Months</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Year Ended</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Ended</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Ended</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">December 31,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">March 31,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">March 31,</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">(a)&nbsp;Reflects the following:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Incremental amortization of capitalized
	interest&nbsp;&#151; &nbsp;&nbsp;Meritage
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(917</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(196</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(957</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Incremental amortization of capitalized
	interest&nbsp;&#151; &nbsp;&nbsp;Hancock
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(383</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(40</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(350</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,300</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(236</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,307</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">(b)&nbsp;Reflects the following:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Reversal of distributions treated as bonuses paid
	to key &nbsp;&nbsp;employees of Hancock that will not be paid
	after &nbsp;&nbsp;acquisition
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,639</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">107</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,639</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Reversal of interest on retired debt&nbsp;&#151;
	Meritage
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Reversal of interest expense on retired
	debt&nbsp;&#151; Hancock
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">621</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">285</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">775</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Reversal of amortization of bond costs relating
	to &nbsp;&nbsp;existing senior notes retired
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">90</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">23</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">90</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Amortization of goodwill on purchase of Hancock
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(683</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(173</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(685</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Amortization of financing costs relating to the
	issuance &nbsp;&nbsp;of the outstanding notes
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(500</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(125</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(500</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,175</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">118</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,326</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">(c)&nbsp;Reflects the following:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net additional income tax provision as a result
	of the &nbsp;&nbsp;above adjustments at an effective tax rate of
	38%
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(592</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(21</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(648</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Effect of applying Meritage&#146;s effective tax
	rate of 38% &nbsp;&nbsp;on Hancock&#146;s earnings
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,565</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(583</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(3,777</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(5,157</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(604</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,425</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="4%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>(d)&nbsp;</TD>
	<TD align="left">
	Assumes utilization of weighted average basic and diluted shares
	as reported in Meritage Corporation&#146;s Annual Report on
	Form&nbsp;10-K for the year ended December&nbsp;31, 2000,
	Form&nbsp;10-Q for the quarter ended March&nbsp;31, 2001 and
	5,130,000 and 5,704,000 weighted average basic and diluted
	shares, respectively, for the twelve months ended March&nbsp;31,
	2001.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(e)&nbsp;</TD>
	<TD align="left">
	EBITDA represents earnings before interest expense, interest
	amortized to cost of sales, income taxes, depreciation and
	amortization. EBITDA is presented here because it is a widely
	accepted financial indicator used by investors and analysts to
	analyze and compare companies on the basis of operating
	performance. EBITDA as presented may not be comparable to
	similarly titled measures reported by other companies because
	not all companies necessarily calculate EBITDA in an identical
	manner and, therefore, is not necessarily an accurate means of
	comparison between companies. EBITDA is not intended to
	represent cash flows for the period or funds available for
	management&#146;s discretionary use nor has it been presented as
	an alternative to operating income or as an indicator of
	operating performance and it should not be considered in
	isolation or as a substitute for measures of performance
	prepared in accordance with generally accepted accounting
	principles.</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>(f)&nbsp;</TD>
	<TD align="left">
	EBITDA margin is calculated by dividing EBITDA by total sales
	revenue.</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="4%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>(g)&nbsp;</TD>
	<TD align="left">
	Interest incurred is the amount of interest paid and accrued
	(whether expensed or capitalized) during such period, including
	debt-related fees and amortization of deferred financing costs.</TD>
</TR>

</TABLE>

<P align="center">31

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "Selected Historical Financial Data" -->
<DIV align="left"><A NAME="006"></A></DIV>

<P align="center">
<B>SELECTED HISTORICAL FINANCIAL DATA</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth selected historical consolidated
financial and operating data of Meritage for each of the last
five years ending December&nbsp;31 and the three months ended
March&nbsp;31 for each of the last two years. The financial data
has been derived from Meritage&#146;s audited and unaudited
consolidated financial statements and related notes. You should
read this data in conjunction with &#147;Management&#146;s
Discussion and Analysis of Financial Condition and Results of
Operations&#148; and our consolidated financial statements and
the related notes set forth in this prospectus.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We were formed in 1988 as a real estate investment trust and
operated under the name of Homeplex Mortgage Investments
Corporation. Homeplex invested in mortgage-related assets and
selected real estate loans. On December&nbsp;31, 1996, the
homebuilding operations of various entities using the Monterey
Homes name (which began operations in 1985) were merged with
Homeplex. Following the merger we changed our name to Monterey
Homes Corporation, changed our status from a REIT to a C
corporation, focused on our homebuilding operations and began to
diversify our geographic scope and product mix through internal
growth and acquisitions. In this regard, on July&nbsp;1, 1997,
we combined with Legacy Homes, a group of entities with
homebuilding operations in Texas since 1988. In July&nbsp;1998,
we acquired Sterling Communities, a homebuilder operating in
Northern California since 1989. We changed our name to Meritage
Corporation in September&nbsp;1998. The data below includes the
operations of Legacy and Sterling since their respective dates
of combination or acquisition.

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="34%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="19"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">Three Months</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="19" align="center" nowrap><B><FONT size="2">Years Ended December 31,</FONT></B></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">Ended March 31,</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="19" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1999</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1998</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1997</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1996</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="19"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="19" align="center" nowrap><B><FONT size="2">(dollars in thousands)</FONT></B></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">(unaudited)</FONT></B></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Statement of Earnings Data:
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total sales revenue
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">520,467</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">341,786</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">257,113</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">149,630</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">116,706</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">92,410</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total cost of sales
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(415,649</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(277,287</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(205,188</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(124,594</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(93,110</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(75,637</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Other income, net(1)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,847</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,064</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,961</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,435</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,244</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">534</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">532</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Commissions and other sales costs
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(28,680</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(19,243</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(14,292</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(8,295</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(7,013</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(5,779</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">General administrative expenses
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(21,215</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(15,100</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(10,632</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(6,812</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,684</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,935</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,002</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Interest expense
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(8</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(6</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(462</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(165</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(238</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Earnings from operations before income taxes and
	extraordinary loss
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">56,762</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">32,215</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">30,500</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">15,199</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">322</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">12,181</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,523</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Income taxes(2)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(21,000</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(13,269</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(6,497</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(962</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(27</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,792</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,752</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Extraordinary loss(3)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(148</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net earnings
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">35,762</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">18,945</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">24,003</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14,237</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">147</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,389</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,771</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Earnings per diluted share before effect of
	extraordinary loss
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6.26</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.14</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.92</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.68</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">.09</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.28</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">.82</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Extraordinary loss per diluted share
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(.05</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Diluted earnings per share
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6.26</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.14</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.92</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.68</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">.04</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.28</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">.82</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cash dividends per share
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Other Financial Data:
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net cash provided by/(used in) operating
	activities
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,252</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(36,387</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,366</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,676</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,353</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(28,235</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(15,960</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net cash provided by/(used in) investing
	activities
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(8,175</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(9,902</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(3,928</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,073</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">17,978</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(798</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(5,634</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net cash provided by/(used in) financing
	activities
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(7,102</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">47,324</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,436</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(25,072</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(8,110</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">30,995</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13,557</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">EBITDA(4)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">69,348</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">39,785</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">36,218</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">17,530</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">N/A</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14,907</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9,783</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">EBITDA margin(5)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13.32</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11.64</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14.09</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11.72</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">N/A</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">12.77</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10.59</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Interest amortized to cost of sales and interest
	expense
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9,179</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,042</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,081</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,954</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">238</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,960</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,566</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Depreciation and amortization
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,407</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,528</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,637</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">377</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">38</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">766</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">694</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">32

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="34%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="19"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">Three Months</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="19" align="center" nowrap><B><FONT size="2">Years Ended December 31,</FONT></B></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">Ended March 31,</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="19" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1999</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1998</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1997</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1996</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="19"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="19" align="center" nowrap><B><FONT size="2">(dollars in thousands)</FONT></B></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">(unaudited)</FONT></B></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Interest incurred(6)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,634</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,031</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,172</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,844</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">238</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,075</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,870</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Ratio of EBITDA to interest incurred
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6.52x</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5.66x</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8.68x</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4.56x</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">N/A</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">N/A</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">N/A</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Ratio of total debt to EBITDA
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.24x</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.16x</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.03x</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.31x</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">N/A</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">N/A</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">N/A</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Ratio of earnings to fixed charges(7)(9)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5.00x</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4.28x</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6.65x</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.60x</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.18x</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.54x</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.70x</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Operating Data:
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Homes closed
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,227</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,643</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,291</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">644</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">N/A</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">516</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">440</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Homes ordered
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,480</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,840</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,466</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">693</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">N/A</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">740</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">629</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Average sales price of homes closed
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">231</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">203</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">198</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">232</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">N/A</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">225</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">208</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Average sales price of homes ordered
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">244</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">211</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">194</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">227</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">N/A</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">239</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">237</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Backlog at end of period(8)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">309,901</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">199,445</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">145,294</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">98,963</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">71,231</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">370,681</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">256,692</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Backlog at end of period (homes)(8)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,246</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">885</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">688</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">472</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">317</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,470</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,074</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="39%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="19"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="19" align="center" nowrap><B><FONT size="2">At December 31,</FONT></B></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">At March 31,</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="19" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1999</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1998</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1997</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1996</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="19"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="19" align="center" nowrap><B><FONT size="2">(dollars in thousands)</FONT></B></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">(unaudited)</FONT></B></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Balance Sheet Data:
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Real estate under development
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">211,307</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">171,012</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">104,759</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">63,955</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">35,991</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">233,446</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">183,942</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total assets
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">267,075</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">226,559</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">152,250</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">96,633</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">72,821</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">295,448</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">236,024</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total debt
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">86,152</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">85,936</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">37,205</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">22,892</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">30,542</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">116,928</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">100,078</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Stockholders&#146; equity
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">121,099</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">90,411</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">72,279</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">46,365</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">26,945</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">128,707</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">94,655</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="18%" align="left" noshade>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="4%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>(1)&nbsp;</TD>
	<TD align="left">
	Includes income from mortgage assets of $5,231, $5,296 and
	$1,610 for the years 1998, 1997 and 1996, respectively, less
	minority interest in net income of consolidated joint ventures
	of $2,021 for 1998.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(2)&nbsp;</TD>
	<TD align="left">
	Due to the use of the Homeplex net operating loss carryforward
	(NOL), we paid limited income taxes during 1997 and 1998, until
	the NOL was fully utilized. During 1996 we qualified and elected
	to be treated as a REIT under federal tax laws and were not
	subject to federal income tax on that portion of our taxable
	income that was distributed to stockholders in or with respect
	to that year.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(3)&nbsp;</TD>
	<TD align="left">
	Reflects extraordinary loss from early extinguishment of
	long-term debt in 1996.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(4)&nbsp;</TD>
	<TD align="left">
	EBITDA represents earnings before interest expense, interest
	amortized to cost of sales, income taxes, depreciation and
	amortization and extraordinary item. EBITDA is presented here
	because it is a widely accepted financial indicator used by
	investors and analysts to analyze and compare companies on the
	basis of operating performance. EBITDA as presented may not be
	comparable to similarly titled measures reported by other
	companies because not all companies necessarily calculate EBITDA
	in an identical manner and, therefore, is not necessarily an
	accurate means of comparison between companies. EBITDA is not
	intended to represent cash flows for the period or funds
	available for management&#146;s discretionary use nor has it
	been presented as an alternative to operating income or as an
	indicator of operating performance and it should not be
	considered in isolation or as a substitute for measures of
	performance prepared in accordance with generally accepted
	accounting principles.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(5)&nbsp;</TD>
	<TD align="left">
	EBITDA margin is calculated by dividing EBITDA by total sales
	revenue.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(6)&nbsp;</TD>
	<TD align="left">
	Interest incurred is the amount of interest paid and accrued
	(whether expensed or capitalized) during such period, including
	debt related fees and amortization of deferred financing costs.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(7)&nbsp;</TD>
	<TD align="left">
	For the purpose of computing the ratio of earnings to fixed
	charges, &#147;earnings&#148; consist of earnings before income
	taxes and extraordinary item plus fixed charges less capitalized
	interest. &#147;Fixed</TD>
</TR>

</TABLE>

<P align="center">33
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="4%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD></TD>
	<TD align="left">
	charges&#148; consist of interest expense including amortization
	of deferred debt costs, one-half of rent expense, which is
	deemed to be representative of an interest factor, and
	capitalized interest.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(8)&nbsp;</TD>
	<TD align="left">
	Represents homes under contract but not yet closed at the end of
	the period.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(9)&nbsp;</TD>
	<TD align="left">
	For the year ended December&nbsp;31, 1996, earnings were
	inadequate to cover fixed charges by approximately $3.4 million,
	since the 1996 results are those of our predecessor company
	(Homeplex Mortgage Investment Co.) and our operations were
	substantially different than our current homebuilding
	operations. See Exhibit&nbsp;12.1 for calculation of ratio of
	earnings to fixed charges for all periods presented.</TD>
</TR>

</TABLE>

<P align="center">34

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" -->
<DIV align="left"><A NAME="007"></A></DIV>

<P align="center">
<B>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF</B>

<DIV align="center">
<B>FINANCIAL CONDITION AND RESULTS OF OPERATIONS</B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following discussion and analysis provides information
regarding the results of operations of Meritage and its
subsidiaries for the years ended December&nbsp;31, 2000, 1999,
and 1998 and for the three-month periods ended March&nbsp;31,
2001 and 2000. The following discussion should be read in
conjunction with our audited and unaudited historical financial
statements including the notes thereto.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We were formed in 1988 as a real estate investment trust and
operated under the name of Homeplex Mortgage Investments
Corporation. Homeplex invested in mortgage-related assets and
selected real estate loans. On December&nbsp;31, 1996, the
homebuilding operations of various entities using the Monterey
Homes name (which were formed in 1985) were merged with
Homeplex. Following the merger we changed our name to Monterey
Homes Corporation, changed our status from a REIT to a
C&nbsp;corporation, focused on our homebuilding operations and
began to diversify our geographic scope and product mix through
internal growth and acquisitions. In this regard, on
July&nbsp;1, 1997, we combined with Legacy Homes, a group of
entities with homebuilding operations in Texas since 1988. In
July&nbsp;1998, we acquired Sterling Communities, a homebuilder
operating in Northern California since 1989. We changed our name
to Meritage Corporation in September&nbsp;1998. The results
discussed below include the operation of Sterling Communities
since its date of acquisition.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The results set forth below are not necessarily indicative of
those to be expected in the future. The results for the first
quarter of 2001 are not necessarily indicative of the results to
be expected in future periods or for the full year. We repaid
the entire outstanding balance of $15 million of our 9.1% senior
notes due 2005 with the proceeds from the issuance of the
outstanding notes. As a result of this prepayment, we incurred
an extraordinary loss, net of tax, in the second quarter of
fiscal 2001 of approximately $550,000 relating to the early
extinguishment of this debt. In addition, we incurred costs in
connection with the issuance of the outstanding notes and the
Hancock acquisition of approximately $5.8 million which will
impact our operating results beginning in the second quarter of
2001.

<P align="left">
<B>Home Sales Revenue, Sales Contracts and Net Sales Backlog</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The tables provided below show operating and financial data
regarding our homebuilding activities (dollars in thousands).

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="39%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="11"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">Three Months Ended</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="11" align="center" nowrap><B><FONT size="2">Years Ended December&nbsp;31,</FONT></B></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">March&nbsp;31,</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1999</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1998</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">HOME SALES REVENUE
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Dollars
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">515,428</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">334,007</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">255,985</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">116,113</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">91,653</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Homes closed
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,227</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,643</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,291</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">516</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">440</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Average sales price
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">231.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">203.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">198.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">225.0</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">208.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Texas
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Dollars
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">214,472</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">174,850</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">130,860</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">55,576</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">49,430</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Homes closed
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,239</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,135</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">932</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">320</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">302</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Average sales price
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">173.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">154.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">140.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">173.7</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">163.7</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Arizona
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Dollars
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">175,674</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">120,909</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">105,942</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">33,177</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">21,942</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Homes closed
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">623</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">400</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">317</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">126</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">79</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Average sales price
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">282.0</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">302.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">334.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">263.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">277.7</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">California
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Dollars
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">125,282</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">38,248</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">19,183</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">27,360</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">20,281</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Homes closed
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">365</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">108</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">42</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">70</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">59</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Average sales price
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">343.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">354.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">456.7</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">390.9</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">343.7</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">35

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="39%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="11"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">Three Months Ended</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="11" align="center" nowrap><B><FONT size="2">Years Ended December&nbsp;31,</FONT></B></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">March&nbsp;31,</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1999</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1998</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">SALES CONTRACTS
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Dollars
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">604,444</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">388,158</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">283,746</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">176,893</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">48,900</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Homes ordered
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,480</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,840</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,466</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">740</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">629</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Average sales price
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">243.7</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">211.0</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">193.6</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">239.0</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">236.7</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Texas
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Dollars
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">240,054</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">191,655</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">166,020</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">73,508</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">60,920</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Homes ordered
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,368</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,198</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,131</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">437</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">355</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Average sales price
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">175.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">160.0</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">146.8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">168.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">171.6</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Arizona
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Dollars
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">196,567</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">127,408</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">115,375</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">67,315</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">43,937</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Homes ordered
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">643</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">436</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">329</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">213</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">137</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Average sales price
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">305.7</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">292.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">350.7</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">316.0</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">320.7</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">California
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Dollars
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">167,823</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">69,095</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,351</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">36,070</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">44,043</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Homes ordered
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">469</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">206</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">90</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">137</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Average sales price
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">357.8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">335.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">391.8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">400.8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">321.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="38%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="11"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="11" align="center" nowrap><B><FONT size="2">At December&nbsp;31,</FONT></B></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">At March&nbsp;31,</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1999</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1998</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">NET SALES BACKLOG
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Dollars
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">309,901</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">199,445</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">145,294</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">370,681</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">256,692</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Homes in backlog
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,246</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">885</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">688</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,470</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,074</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Average sales price
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">248.7</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">225.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">211.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">252.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">239.0</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Texas
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Dollars
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">119,564</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">93,983</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">77,178</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">137,496</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">105,473</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Homes in backlog
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">695</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">566</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">503</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">812</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">619</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Average sales price
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">172.0</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">166.0</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">153.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">169.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">170.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Arizona
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Dollars
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">115,211</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">72,878</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">66,379</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">149,349</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">94,873</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Homes in backlog
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">344</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">216</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">180</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">431</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">274</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Average sales price
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">334.9</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">337.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">368.8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">346.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">346.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">California
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Dollars
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">75,126</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">32,584</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,737</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">83,836</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">56,346</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Homes in backlog
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">207</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">103</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">227</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">181</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Average sales price
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">362.9</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">316.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">347.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">369.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">311.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<I>&nbsp;&nbsp;Three Months Ended March&nbsp;31, 2001 Compared
to Three Months Ended March&nbsp;31, 2000</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Home Sales Revenue. </I></B>The increase in total home
sales revenue and number of homes closed in the first three
months of 2001 compared to the first three months of 2000
resulted mainly from strong market performance in all of our
divisions, as well as the expansion of our operations in
Northern California and in our mid-priced Meritage Phoenix
division in Arizona. The decreases in average home sales prices
in Arizona for the first quarter of 2001 reflect a change in our
product mix, as we are now selling more mid-priced homes than in
2000.

<P align="center">36

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Sales Contracts. </I></B>Sales contracts for any period
represent the aggregate sales price of all homes ordered by
customers, net of homes canceled. We do not include sales
contingent upon the sale of a customer&#146;s existing home as a
sales contract until the contingency is removed. Historically,
we have experienced a cancellation rate approximating 23% of
gross sales, which we believe is consistent with industry
standards. Total sales contracts increased in the first three
months of 2001 compared to the first three months of 2000 due
mainly to the expansion of our mid-priced Meritage Phoenix
division in Arizona, along with continued economic strength of
our operating markets during the period. The decrease in sales
contracts in our Northern California division for the first
quarter of 2001 is mainly attributable to faster than
anticipated sales rates during 2000 in some of our communities,
which resulted in those communities selling out of available lot
inventory before replacement lot inventory in new communities
could be completed.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Net Sales Backlog. </I></B>Backlog represents net sales
contracts that have not closed. Total dollar backlog at
March&nbsp;31, 2001 increased 44% over the March&nbsp;31, 2000
amount due to an increase in the number of homes in backlog and
increased sales prices in most of our markets. The number of
homes in backlog at March&nbsp;31, 2001 increased 37% over the
same date in the prior year. These increases resulted from
expansion of our operations in Northern California, and in our
mid-priced Meritage Phoenix division in Arizona, along with the
continued strength of the housing markets in which we operated
during the period.

<P align="left">
<B>&nbsp;&nbsp;</B><I>Year Ended December&nbsp;31, 2000 Compared
to Year Ended December&nbsp;31, 1999</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Home Sales Revenue. </I></B>The increase in total home
sales revenue and number of homes closed in 2000 compared to
1999 results mainly from strong market performance in all of our
divisions, as well as the expansion of our operations in
Northern California and in our mid-priced Meritage Phoenix
division in Arizona. The decreases in average home sales prices
in Arizona and Northern California for the year 2000 reflect a
change in our product mix, as we sold more mid-priced homes than
in 1999.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Sales Contracts. </I></B>Total sales contracts increased
in 2000 compared to 1999 due mainly to the expansion of our
operations in Northern California and our mid-priced Meritage
Phoenix division in Arizona, along with continued economic
strength of our operating markets during the year.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Net Sales Backlog. </I></B>Total dollar backlog at
December&nbsp;31, 2000 increased 55% over the 1999 amount due to
an increase in the number of homes in backlog and increased
sales prices in most of our markets. Homes in backlog at
December&nbsp;31, 2000 increased 41% over the same date in the
prior year. These increases resulted from expansion of our
operations in Northern California, and in our mid-priced
Meritage Phoenix division in Arizona, along with the continued
strength of our other housing markets.

<P align="left">
<B>&nbsp;&nbsp;</B><I>Year Ended December&nbsp;31, 1999 Compared
to Year Ended December&nbsp;31, 1998</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Home Sales Revenue. </I></B>The increase in revenue and
number of homes closed in 1999 compared to 1998 resulted mainly
from the inclusion of the Northern California operations for the
full year and continued growth in our Texas and Arizona
operations.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Sales Contracts. </I></B>Total sales contracts increased
in 1999 compared to 1998 due to the expansion into Northern
California and continued growth in our Texas and Arizona
operations.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Net Sales Backlog. </I></B>1999 total dollar backlog
increased 37% over the prior year due to a corresponding
increase in homes in backlog. The number of homes in the 1999
backlog increased 29% over the prior year due mainly to the
increase in net orders resulting from expansion into Northern
California and continued growth in our Texas and Arizona
operations. Our backlog also increased somewhat due to extended
construction times, which caused longer periods between the time
sales contracts were taken and home deliveries were made.

<P align="center">37

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">
<B>Other Operating Information</B>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="45%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">Three Months</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="11"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">Ended</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="11" align="center" nowrap><B><FONT size="2">Years Ended December&nbsp;31,</FONT></B></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">March&nbsp;31,</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1999</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1998</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="19"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="19" align="center" nowrap><B><FONT size="2">(dollars in thousands)</FONT></B></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Home Sales Gross Profit
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Dollars
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">104,225</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">63,810</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">51,576</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">23,534</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">16,697</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Percent of home sales revenue
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">20.2</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">19.1</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">20.1</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">20.3</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">18.2</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
	<TD colspan="21"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Commissions and Other Sales Costs
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Dollars
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">28,680</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">19,243</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14,292</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,013</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,779</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Percent of home sales revenue
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5.6</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5.8</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5.6</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6.0</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6.3</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
	<TD colspan="21"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">General and Administrative Expenses
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Dollars
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">21,215</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">15,100</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,632</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,935</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,002</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Percent of total revenue
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4.1</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4.4</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4.1</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4.2</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4.3</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
	<TD colspan="21"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Income Taxes
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Dollars
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">21,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13,269</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,497</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,792</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,752</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Percent of income before taxes
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">37.0</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">41.2</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">21.3</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">39.3</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">36.6</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<B>&nbsp;&nbsp;</B><I>Three Months Ended March&nbsp;31, 2001
Compared to Three Months Ended March&nbsp;31, 2000</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Home Sales Gross Profit. </I></B>Gross profit equals home
sales revenue, net of housing cost of sales, which include
developed lot costs, home construction costs, amortization of
common community costs (such as the cost of model complex and
architectural, legal and zoning costs), interest, sales tax,
warranty, construction overhead and closing costs. The dollar
increase in gross profit for the quarter ended March&nbsp;31,
2001 is attributable to the increase in the number of homes
closed and continued growth in all of our markets. The gross
profit percentage increase in 2001 resulted from home pricing
increases in many of our communities due to a continued strong
homebuilding market and due to decreases in some of our material
costs.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Commissions and Other Sales Costs. </I></B>Commissions and
other sales costs, such as advertising and sales office
expenses, were approximately $7.0 million, or 6.0% of home sales
revenue, in 2001, as compared to approximately $5.8 million, or
6.3% of home sales revenue, in 2000. The decrease in these
expenses as a percentage of home sales revenue reflects slower
growth in marketing and advertising costs, while revenues
expanded more rapidly.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>General and Administrative Expenses. </I></B>General and
administrative expenses were approximately $4.9 million, or 4.2%
of total revenue, in 2001, as compared to approximately $4.0
million, or 4.3% of total revenue, in 2000. Operating costs in
2001 were slightly lower as a percentage of revenue in
comparison to the prior year due to overhead related to our
Northern California expansion and start-up costs for our new
Meritage division in Phoenix, Arizona during 2000.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Income Taxes. </I></B>The increase in income taxes to $4.8
million for the quarter ended March&nbsp;31, 2001 from $2.8
million in the prior year resulted from an increase in pre-tax
income along with a slightly higher effective tax rate.

<P align="left">
<B>&nbsp;&nbsp;</B><I>Year Ended December&nbsp;31, 2000 Compared
to Year Ended December&nbsp;31, 1999</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Home Sales Gross Profit. </I></B>The dollar increase in
gross profit for the year ended December&nbsp;31, 2000 is
attributable to the increase in number of homes closed and
continued growth in all of our markets. The gross profit
percentage increase in 2000 resulted from home pricing increases
in many of our communities due to a continued strong
homebuilding market and due to decreases in some of our material
costs resulting from purchasing efficiencies.

<P align="center">38

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Commissions and Other Sales Costs. </I></B>Commissions and
other sales costs, such as advertising and sales office
expenses, were approximately $28.7 million, or 5.6% of home
sales revenue, in 2000, as compared to approximately $19.2
million, or 5.8% of home sales revenue, in 1999. The decrease in
these expenses as a percentage of home sales revenue reflects
greater efficiency related to revenue growth.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>General and Administrative Expenses. </I></B>General and
administrative expenses were approximately $21.2 million, or
4.1% of total revenue, in 2000, as compared to approximately
$15.1 million, or 4.4% of total revenue, in 1999. The higher
expense as a percentage of revenue in 1999 includes
approximately $600,000 related to the buyout of an employment
agreement of a former managing director. Operating costs in 1999
were also higher as a percentage of revenue due to overhead
increases incurred related to our Northern California expansion
and the start-up of our new Meritage Phoenix division in Arizona.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Income Taxes. </I></B>The increase in income taxes to
$21.0 million for the year ended December&nbsp;31, 2000 from
$13.3 million in the prior year resulted from an increase in
pre-tax income, partially offset by a slightly lower effective
tax rate. The tax benefit associated with the exercise of
employee stock options reduced taxes currently payable by
approximately $1.9 million for the year ended December&nbsp;31,
2000. This amount was credited to paid-in capital.

<P align="left">
<B>&nbsp;&nbsp;</B><I>Year Ended December&nbsp;31, 1999 Compared
to Year Ended December&nbsp;31, 1998</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Home Sales Gross Profit. </I></B>The dollar increase in
gross profit for the twelve months ended December&nbsp;31, 1999
is attributable to the increase in number of homes closed due to
the inclusion of Northern California operations for the full
year, and continued growth in our Texas and Arizona operations.
The gross profit percentage decreased in 1999 due to somewhat
lower profit margins in our Texas operations and a change in the
Arizona housing mix, reflecting a greater proportion of move-up
home closings, which typically have lower gross profit margins
than our luxury homes.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Commissions and Other Sales Costs. </I></B>Commissions and
other sales costs, such as advertising and sales office
expenses, were approximately $19.2 million, or 5.8% of home
sales revenue, in 1999, as compared to approximately $14.3
million, or 5.6% of home sales revenue, in 1998. The slight
increase in these expenses as a percentage of home sales
revenues was caused to some extent by an increase in the number
of new communities that opened for sales in 1999, which resulted
in greater start-up expenses.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>General and Administrative Expenses. </I></B>General and
administrative expenses were approximately $15.1 million, or
4.4% of total revenue, in 1999, as compared to approximately
$10.6 million, or 4.1% of total revenue, in 1998. Operating
costs associated with our expansions in Northern California
primarily caused this increase.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Income Taxes. </I></B>The increase in income taxes to
$13.3 million for the year ended December&nbsp;31, 1999 from
$6.5 million in the prior year resulted from an increase in
pre-tax income and a higher effective tax rate. The lower 1998
effective tax rate was caused by utilization of our net
operating loss carryforward.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Earnings From Mortgage Assets and Other Income.
</I></B>The overall decline in earnings from mortgage assets and
other income in 1999 reflected the sale of our remaining
mortgage securities in 1998. Other income includes mortgage
company income, which increased in 1999 over 1998.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Minority Interest. </I></B>The minority interest recorded
in 1998 is due to our acquisition of Sterling Communities, which
included two 50% owned limited partnership interests which
Meritage controlled. We recorded the minority interest
partners&#146; share of net income as an expense. The limited
partnerships&#146; operations were concluded in the fourth
quarter of 1998.

<P align="center">39

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">
<B>Liquidity and Capital Resources</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our principal uses of working capital are land purchases, lot
development and home construction. We use a combination of
borrowings and funds generated by operations to meet our working
capital requirements.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cash flow for each of our communities depends on the stage of
the development cycle, and can differ substantially from
reported earnings. Early stages of development or expansion
require significant cash outlays for land acquisitions, plat and
other approvals, and construction of model homes, roads, certain
utilities, general landscaping and other amenities. Because
these costs are capitalized, income reported for financial
statement purposes during those early stages may significantly
exceed cash flow. Later, cash flow can significantly exceed
earnings reported for financial statement purposes, as cost of
sales includes charges for substantial amounts of previously
expended costs.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At March&nbsp;31, 2001, we had short-term secured revolving
construction loans and land acquisition and development
facilities totaling $170.7 million, of which approximately
$101.9 million was outstanding. An additional $47.8 million of
unborrowed funds supported by approved collateral were available
under our credit facilities at that date. Borrowings under the
credit facilities are subject to our inventory collateral
position and compliance with our financial and other covenants
under our loan agreements. On May&nbsp;25, 2001, we extended the
maturity date on our $65 million Texas revolving credit facility
to May&nbsp;31, 2002.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
After giving effect to the issuance of the outstanding notes and
the other transactions described in this prospectus, we had
approximately $43 million available to be borrowed under our
bank credit facilities, subject to compliance with our financial
and other covenants under our loan agreements. We believe that
our current borrowing capacity, cash on hand at March&nbsp;31,
2001 and anticipated cash flows from operations are sufficient
to meet liquidity needs for the foreseeable future. There is no
assurance, however, that future cash flows will be sufficient to
meet future capital needs. The amount and types of indebtedness
that we incur will be limited by the terms of the indenture
governing the notes we are offering hereby and our credit
agreements.

<P align="left">
<B>Disclosures of Certain Market Risks</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We do not enter into financial instruments for trading purposes,
though we do have other financial instruments in the form of
notes payable and senior debt. Our lines of credit and credit
facilities are at variable interest rates and are subject to
market risk in the form of interest rate fluctuations. The
interest rate on our existing senior notes is, and the notes we
are offering hereby will be, at a fixed rate.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For example, based on our average bank borrowings of $81.1
million during 2000, if the interest rate indices on which our
bank borrowing rates are based were to increase 100 basis points
in 2001, interest incurred would increase and cash flows would
decrease in 2001 by $502,820 after taxes. A portion of the
increased interest would be expensed as a period cost in 2001,
while the balance would be capitalized to real estate under
development and be expensed as a cost of sales in 2001 and
future years.

<P align="left">
<B>Seasonality</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We historically have closed more homes in the second half of the
fiscal year than in the first half, due in part to the slightly
seasonal nature of the market for our semi-custom luxury and
move-up products. Hancock has experienced similar seasonality
fluctuations. Management expects this seasonal trend to
continue, though it may vary as operations continue to expand.

<P align="center">40

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">
<B>New Accounting Standards</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In June 1998 the Financial Accounting Standards Board
(&#147;FASB&#148;) issued SFAS No.&nbsp;133, &#147;Accounting
for Derivative Instruments and Hedging Activities,&#148; which
established standards for the accounting and reporting for all
derivative instruments and hedging activities. This statement
requires that all derivatives are recognized as assets or
liabilities in the balance sheet and measured at fair value, and
that recognition of gains and losses are required on hedging
instruments based on changes in fair value or the earnings
effect of forecasted transactions. This new standard, as amended
by SFAS No.&nbsp;137 and No.&nbsp;138, became effective
January&nbsp;1, 2001. This pronouncement has not had and is not
expected to have a material impact on our consolidated financial
statements.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December&nbsp;1999, the Securities and Exchange Commission
(the &#147;Commission&#148;) issued Staff Accounting Bulletin
No.&nbsp;101, &#147;Revenue Recognition in Financial
Statements,&#148; (SAB No.&nbsp;101) which summarizes the
Commission staff&#146;s views in applying accounting principles
generally accepted in the United States of America to revenue
recognition in financial statements. SAB No.&nbsp;101 was
amended by SAB No.&nbsp;101A and No.&nbsp;101B in March and
June, 2000, respectively, to delay the implementation date of
SAB No.&nbsp;101 until no later than the fourth fiscal quarter
of fiscal years beginning after December&nbsp;16, 1999. We have
adopted the provisions of SAB No.&nbsp;101 and the adoption did
not have a material effect on our consolidated financial
statements.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In March&nbsp;2000, the FASB issued Interpretation No.&nbsp;44,
&#147;Accounting for Certain Transactions Involving Stock
Compensation&nbsp;&#151; An Interpretation of APB Opinion
No.&nbsp;25.&#148; The Interpretation clarifies the application
of APB Opinion No.&nbsp;25 in certain situations. The
Interpretation was effective July&nbsp;1, 2000, but covers
certain events having occurred after December&nbsp;15, 1998. We
have adopted this Interpretation and the adoption did not have a
material impact on our consolidated financial statements.

<P align="center">41
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "MARKET OVERVIEW" -->
<DIV align="left"><A NAME="008"></A></DIV>

<P align="center">
<B>MARKET OVERVIEW</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following is a brief overview of the favorable economic and
demographic trends in the three rapidly growing Sunbelt states
in which we operate, Texas, Arizona and California, and the
metropolitan areas within those states in which we operate.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
These markets have experienced growth in population, employment
and single-family housing starts that exceed the overall rate in
the U.S. The following table, which was derived from data
compiled by DRI from U.S. Census Bureau statistics, presents
historical and projected information about these metrics for the
U.S. and each of the states and metropolitan areas in which we
conduct our homebuilding operations:

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="17%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="15"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="15" align="center" nowrap><B><FONT size="2">Single-Family Housing Activity</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">Population</FONT></B></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">Employment</FONT></B></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">Starts</FONT></B></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">Permits</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1996-2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001-2005</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1996-2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001-2005</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1996-2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001-2005</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1996-2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001-2005</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">CAGR(%)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">CAGR(%)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">CAGR(%)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">CAGR(%)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">CAGR(%)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">CAGR(%)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">CAGR(%)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">CAGR(%)</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">U.S.&nbsp;
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.9</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.9</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.0</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Texas
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.7</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Dallas/ Ft.&nbsp;Worth
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.9</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Austin
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.6</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.9</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Houston
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.0</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.6</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10.0</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Arizona
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1.8</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Phoenix/ Scottsdale
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.0</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.9</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.0</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(0.8</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Tucson
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">California
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.0</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8.8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">San Francisco Bay
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.0</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(3.1</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Sacramento
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.9</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<B>TEXAS</B>

<P align="left">
<B>&nbsp;&nbsp;</B><I>Dallas/Ft.&nbsp;Worth</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Dallas/ Ft.&nbsp;Worth is the 9th most populous metropolitan
area, by metropolitan statistical area (MSA), in the U.S., a
ranking it has maintained since 1990. Single-family housing
permit growth should be driven by the influx of young, mobile
households enjoying high per-capita incomes. According to the
Meyers Group, per-capita income in Dallas is nearly 20% higher
than the U.S.&nbsp;average and almost 29% above the Texas
average.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
From 1996 through 2000, the five leading sectors in the Dallas/
Ft.&nbsp;Worth metropolitan area, measured by the number of jobs
added, were services, wholesale and retail trade, construction,
transportation, communications and public utilities, and
finance, insurance and real estate. The industries expected to
employ the most new workers during the 2001 through 2005 period
are services, wholesale and retail trade, transportation,
communications and public utilities, finance, insurance and real
estate and durable manufacturing. Among the largest private
sector employers in Dallas are Raytheon IT Systems, Texas
Instruments, GTE Corp., Lockheed Martin Tactical Aircraft
Systems and Southwestern Bell.

<P align="left">
<B>&nbsp;&nbsp;</B><I>Austin</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Austin is the 38th most populous metropolitan area in the U.S.,
by MSA, up from 53rd in 1990. Among the expected drivers of
Austin&#146;s population growth is continued high levels of
in-migration of businesses, which should continue to provide
employment for a young, well-educated and highly skilled
workforce.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As the capital of Texas, Austin is a leader in government
employment. The other leading sectors in the Austin metropolitan
area over the past five years were services, wholesale and
retail trade, construction and, most recently, technology. Among
the top private employers in Austin are Motorola, Applied

<P align="center">42

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
Materials, Round Rock Hospital and Dell Computer. Over the next
five years, the sectors expected to employ the most new workers
are services, trade, government and manufacturing.
</DIV>

<P align="left">
<B>&nbsp;&nbsp;</B><I>Houston</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Houston has been the 10th most populous metropolitan area in the
U.S., by MSA, since 1990. Population growth should continue to
be bolstered by foreign immigration. Houston&#146;s housing
prices are reasonable, and there continues to be strong demand
for move-up housing.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Houston is outperforming the state and the nation on job growth.
The leading sectors in Houston have been energy exploration,
services, wholesale and retail trade and construction. Over the
next five years, services, trade and transportation,
communications and public utilities are expected to employ the
most new workers. Top employers in Houston&#146;s private sector
include Exxon Mobil, Southwestern Bell, Continental Airlines and
Compaq Computer.

<P align="left">
<B>ARIZONA</B>

<P align="left">
<B>&nbsp;&nbsp;</B><I>Phoenix/ Scottsdale</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Phoenix/ Scottsdale is the 14th most populous metropolitan area
in the U.S., by MSA, up from 20th in 1990. Mild winter weather
and reasonable costs of living and business continue to attract
young professionals, retirees and companies. These factors
should contribute to population growth in the coming years. It
is expected that growth in the transportation, services, trade
and finance industries will lead job growth in Phoenix over the
next several years.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Diversification is a key component of Phoenix&#146;s economy,
with a blend of high-tech, manufacturing, agriculture, trade and
service industries. Motorola and Intel are among the large
corporations with operations in Phoenix. Other regional and
national headquarters in Phoenix include American Express,
America West Airlines, Bank of America, Charles Schwab, Sumitomo
Sitix, Viad and Phelps Dodge. Phoenix&#146;s state-of-the-art
telecommunications infrastructure and direct-link satellite
communications have made the area an appealing location for
telecommunication operations. In addition, as the capital of
Arizona, Phoenix benefits from many government agencies.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Although housing permits in Phoenix are expected to decline
slightly over the next five years from previous record highs,
Phoenix is still expected to remain among the top homebuilding
markets in the U.S.

<P align="left">
<I>&nbsp;&nbsp;Tucson</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Tucson is the 58th most populous metropolitan area in the U.S.,
by MSA, up from 60th in 1990. Single-family housing demand in
Tucson is expected to be driven by consistent employment and
population growth. Retirees and foreign immigrants are major
components of Tucson&#146;s population growth.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Among the largest employers in Tucson are the U.S. Army
Intelligence Center, the University of Arizona and Raytheon
Missile Systems. The biggest contributors to new job growth in
2000 were the government, Phelps Dodge mining, and the Tucson
Unified School District. Future growth is expected to be driven
largely by the optics industry, stimulated by the expanded
University of Arizona Optical Science Center, as well as newly
located Microsoft facilities, military employment on the two
area bases and military-related high-tech firms.

<P align="left">
<B>CALIFORNIA</B>

<P align="left">
<B>&nbsp;&nbsp;</B><I>San Francisco Bay</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The East Bay is a part of the fifth most populous metropolitan
area in the U.S., a ranking it has maintained since 1990.
Although population growth rates are slowing in the Bay Area due
to less in-migration and high living costs, we believe that the
East Bay sub-sectors of this MSA in which we build have more
favorable characteristics and offer more growth opportunities
due to greater land availability and housing affordability than
many neighboring Bay Area communities.

<P align="center">43

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">
<B>&nbsp;&nbsp;</B><I>Sacramento</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Sacramento, the state capital of California, is the 25th most
populous metropolitan area in the U.S., by MSA, up from 27th in
1990. The Sacramento housing market should benefit from strong
job and population growth, generating favorable demand for
housing.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Sacramento&#146;s broad-based economy encompasses the
government, professional, technical, production, transportation
and service sectors. Among Sacramento&#146;s largest employers
are Hewlett-Packard, Intel, Campbell Soup, Bank of America and
Apple Computer.

<!-- link1 "Business" -->
<DIV align="left"><A NAME="009"></A></DIV>

<P align="center">
<B>BUSINESS</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are a leading designer and builder of single-family homes in
the rapidly growing Sunbelt states of Texas, Arizona and
California. We focus on providing a broad range of entry-level,
move-up and luxury homes to our targeted customer base. We and
our predecessors have operated in Arizona since 1985, in Texas
since 1987 and in Northern California since 1989. To expand our
presence in Arizona we recently acquired Hancock Communities,
another well-established homebuilder that serves the entry-level
and move-up markets in the Phoenix area. Hancock has also
started early-stage development of affordable age-restricted
adult communities, which will further diversify our housing
line. Information about our active communities is provided
through our Internet web site at <I>www.meritagehomes.com</I>.
The information on our website is not considered part of this
prospectus.

<P align="left">
<B>Competitive Strengths</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe we possess the following competitive strengths:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	&#149;&nbsp; <I>Conservative inventory management. </I>We seek
	to minimize land and inventory risk in order to optimize our use
	of capital and maintain low leverage ratios. We tend to purchase
	land subject to complete entitlements and develop smaller
	parcels, generally projects that can be completed within a
	three-year period. Approximately two-thirds of our land
	inventory is controlled through rolling options with relatively
	minimal deposit commitments. In addition, we actively manage our
	housing inventory by pre-selling substantially all of our homes
	prior to starting construction, limiting speculative home
	construction and minimizing our construction cycles. We also
	obtain customer deposits on pre-sold homes prior to beginning
	construction to limit cancellations prior to closing.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	&#149;&nbsp; <I>Disciplined financial management. </I>We believe
	that our disciplined financial management policies enable us to
	achieve above-average returns on assets and maintain low
	leverage ratios. Our EBITDA to average book capital ratio was
	36.2%, 27.8% and 40.5% in 2000, 1999 and 1998, respectively,
	exceeding the average of 26.4%, 25.1% and 21.6% for the top 15
	publicly traded homebuilders during those periods, based on
	market capitalization. At March&nbsp;31, 2001, on a pro forma
	basis, our ratio of total debt to EBITDA was 2.07 to 1, which we
	believe is relatively low for our industry. Our rigorous
	investment requirements for land acquisition enable us to deploy
	capital more efficiently and to preserve more cash flow for debt
	service.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	&#149;&nbsp; <I>Superior margins. </I>Our focus on achieving
	high margins results in greater profitability during strong
	economic periods and also enables us to realize lower break-even
	points and higher pricing flexibility during slower economic
	periods. Along with maintaining low overhead costs, we actively
	manage construction costs and our pricing and marketing
	strategies in order to maximize margins. We seek to optimize our
	mix of available housing upgrades and customization features to
	offer the highest value to customers at the lowest cost. We also
	provide our sales and marketing professionals with the autonomy
	and flexibility needed within our pricing structure to respond
	rapidly to competitive offerings in our markets by customizing
	our marketing programs and incentives. Our EBITDA margin in 2000
	was 13.3%, exceeding the average of 11.5% for the top 15
	publicly traded homebuilders.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	&#149;&nbsp; <I>Experienced management team with significant
	equity ownership. </I>Our senior management team has extensive
	experience in the homebuilding industry as well as in each of
	the local markets</TD>
</TR>

</TABLE>

<P align="center">44

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
        <TD width="3%"></TD>
        <TD width="97%"></TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD align="left">
        that we serve. Our co-chief executive officers and senior
        executives average over 15&nbsp;years of homebuilding experience
        and each has a successful track record of delivering superior
        results in varying homebuilding cycles. In addition, our
        co-chief executive officers together beneficially own over 30%
        of our outstanding common stock.</TD>
</TR>

<TR>
        <TD>&nbsp;</TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
        &#149;&nbsp; <I>Product breadth. </I>We believe that our product
        breadth and geographical diversity enhance our growth potential
        and help to reduce exposure to economic cycles. In Arizona, we
        are a leader in the luxury market, which is characterized by
        unique communities and distinctive luxury homes, and also serve
        the first and second-time move-up markets. With the acquisition
        of Hancock Communities, we have expanded our presence in Arizona
        in the move-up markets and entered the entry-level market. In
        addition, beginning in 2002, we plan to introduce affordable
        age-restricted adult communities, through Hancock, to further
        expand our housing offerings in Arizona. In Texas, we target the
        entry-level and first and second-time move-up markets, and in
        Northern California we focus on the first and second-time
        move-up markets.</TD>
</TR>

<TR>
        <TD>&nbsp;</TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
        &#149;&nbsp; <I>Strong brand recognition. </I>We have operated
        in Arizona as Monterey Homes since 1985 and also, more recently,
        as Meritage Homes in our move-up markets, in Texas as Legacy
        Homes since 1987 and, through an acquisition in Northern
        California, as Meritage Homes since 1998. In each of these
        markets, we are widely recognized for providing quality homes in
        desirable locations and are well regarded both by our target
        customer base and by the real estate brokerage community.
        Hancock is also a widely recognized name in the homebuilding
        market in Phoenix. We believe that our strong brand recognition
        and superior reputation enable us to maintain strong sales
        growth and demand for our homes.</TD>
</TR>

</TABLE>

<P align="left">
<B>Business Strategy</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We seek to distinguish ourselves from other production
homebuilders and to respond rapidly to changing market
conditions through a business strategy focused on the following:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
        <TD width="3%"></TD>
        <TD width="97%"></TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
        &#149;&nbsp; <I>Focus on high growth markets. </I>Our seven
        housing markets are located in three rapidly growing Sunbelt
        states. These markets are characterized by high job growth and
        in-migration trends, creating strong demand for new housing. For
        example, our Phoenix/ Scottsdale, Arizona, Dallas/
        Ft.&nbsp;Worth, Houston and Austin, Texas markets have been
        among the nation&#146;s leaders in the past several years in job
        growth and net population increases, resulting in strong housing
        demand in those areas. Our East Bay and Sacramento, California
        markets have participated in and are poised to lead future
        growth in the strong Northern California market.</TD>
</TR>

<TR>
        <TD>&nbsp;</TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
        &#149;&nbsp; <I>Maintain low cost structure. </I>Throughout our
        history, we have focused on minimizing construction costs and
        overhead, and we believe this focus is a key factor in
        maintaining high cash flow margins and profitability. We seek to
        reduce costs by:</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
        <TD width="6%"></TD>
        <TD width="3%"></TD>
        <TD width="91%"></TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>&#151;</TD>
        <TD align="left">
        using subcontractors to carry out home construction and site
        improvement on a fixed-price basis;</TD>
</TR>

<TR>
        <TD>&nbsp;</TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>&#151;</TD>
        <TD align="left">
        obtaining favorable pricing from subcontractors through
        long-term relationships and high volume;</TD>
</TR>

<TR>
        <TD>&nbsp;</TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>&#151;</TD>
        <TD align="left">
        reducing interest carry by minimizing our inventory of unsold or
        speculative homes and shortening the home construction cycle;</TD>
</TR>

<TR>
        <TD>&nbsp;</TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>&#151;</TD>
        <TD align="left">
        generally beginning construction on a home only after a
        satisfactory earnest money deposit is received and mortgage
        approval has been obtained by the buyer;</TD>
</TR>

<TR>
        <TD>&nbsp;</TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>&#151;</TD>
        <TD align="left">
        minimizing overhead by centralizing certain administrative
        activities; and</TD>
</TR>

<TR>
        <TD>&nbsp;</TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>&#151;</TD>
        <TD align="left">
        monitoring homebuilding production, scheduling and budgeting
        through management information systems.</TD>
</TR>

</TABLE>

<P align="center">45

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	&#149;&nbsp; <I>Superior design, quality and customer service.
	</I>We believe we maximize customer satisfaction by offering
	homes that are built with quality materials and craftsmanship,
	exhibit distinctive design features and are situated in premium
	locations. We believe that we generally offer higher caliber
	homes in their defined price range or category compared to those
	built by our competitors. In addition, we are committed to
	achieving the highest level of customer satisfaction as an
	integral part of our competitive strategy. As part of the sales
	process, our experienced sales personnel assist customers with
	upgrade and customization options. During the sales process our
	sales personnel keep customers informed of their home&#146;s
	construction progress. After delivery, our customer care
	departments respond to any questions or follow-up matters a
	customer may have.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	&#149;&nbsp; <I>Expansion in new and existing markets.
	</I>Depending on market conditions, we may explore expansion
	opportunities in new or existing markets where we see an ability
	to exploit a competitive advantage. Expansion may occur through
	internal growth, start-up operations or strategic acquisitions
	of existing homebuilders. In pursuing expansion, we will look
	for markets with demographic and other growth characteristics
	similar to our current markets and will pursue the acquisition
	of entities with operating policies and cash flow-and
	earnings-focused philosophies similar to ours. As described
	below, through our acquisition of Hancock Communities, we have
	increased our presence in the Arizona move-up markets, entered
	the entry-level market and, in 2002, plan to enter the
	affordable age-restricted adult community market. We are not
	currently in negotiations or material discussions with any other
	acquisition candidates.</TD>
</TR>

</TABLE>

<P align="left">
<B>Markets and Products</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We operate in the Dallas/ Fort Worth, Austin and Houston, Texas
markets as Legacy Homes, in the Phoenix/ Scottsdale and Tucson,
Arizona markets as Monterey Homes and Meritage Homes and in the
East Bay and Sacramento, California markets as Meritage Homes.
Hancock has operated under the Hancock Homes brand in Phoenix,
Arizona. We believe that these areas represent attractive
homebuilding markets with opportunities for long-term growth. We
also believe that our operations are well established and that
we have developed a reputation for building distinctive quality
homes within our markets.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our homes range from entry-level to semi-custom luxury, with
base prices ranging from $100,000 to $790,000. A summary of
activity by state and product type follows (dollars in
thousands):

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="21%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Number</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">of Homes</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Dollar</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Number</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Number</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Closed in</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Homes in</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Value of</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Home Sites</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">of Active</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">of Homes</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Average</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">First</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Average</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Backlog at</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Backlog at</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Remaining</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Communities</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Closed</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Closing</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Quarter</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Selling</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">March 31,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">March 31,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">at March 31,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">at March 31,</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">in 2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Price</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">of 2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Price</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001(1)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">TEXAS:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Move-up
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">922</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">184</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">219</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">187</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">472</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">88,205</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,762</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">17</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Entry-level
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">317</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">142</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">101</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">145</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">340</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">49,291</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,041</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">ARIZONA:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Move-up
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">231</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">449</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">31</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">450</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">186</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">97,794</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">333</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Entry-level
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">392</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">183</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">95</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">202</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">245</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">51,555</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,238</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">12</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">CALIFORNIA:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Move-up
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">365</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">343</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">70</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">391</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">227</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">83,836</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,371</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total Company
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,227</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">231</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">516</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">225</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,470</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">370,681</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,745</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">57</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="18%" align="left" noshade>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="4%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>(1)&nbsp;</TD>
	<TD align="left">
	&#147;Home Sites Remaining&#148; is the number of homes that
	could be built as of March&nbsp; 31, 2001 both on the remaining
	lots available for sale and land to be developed into lots, as
	estimated by management.</TD>
</TR>

</TABLE>

<P align="center">46

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">
<B>Land Acquisition and Development</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We typically purchase land only after necessary entitlements
have been obtained so that development or construction may begin
as market conditions dictate. The term &#147;entitlements&#148;
refers to development agreements, tentative maps or recorded
plats, depending on the jurisdiction within which the land is
located. Entitlements generally give the developer the right to
obtain building permits upon compliance with conditions that are
ordinarily within the developer&#146;s control. Even though
entitlements are usually obtained before land is purchased, we
are still required to secure a variety of other governmental
approvals and permits during development. The process of
obtaining such approvals and permits can substantially delay the
development process. For this reason, we may consider, on a
limited basis, purchasing unentitled property in the future when
we can do so in a manner consistent with our business strategy.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We select land for development based upon a variety of factors,
including:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	internal and external demographic and marketing studies;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	project suitability, which generally means developments with
	fewer than 200 lots;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	suitability for development generally within a one to four-year
	time period from the beginning of the development process to the
	delivery of the last home;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	financial review as to the feasibility of the proposed project,
	including projected profit margins, return on capital employed
	and the capital payback period;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	results of environmental and legal due diligence;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	proximity to local traffic corridors and amenities; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	management&#146;s judgment as to the real estate market and
	economic trends, and their experience in a particular market.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We occasionally purchase larger properties consisting of 200 to
500 lots or more if the situation presents an attractive profit
potential and acceptable risk limitations.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We acquire land through purchases and rolling option contracts.
Purchases are financed through traditional bank financing or
working capital. We acquire a majority of our land through
rolling option contracts, which allow us to control lots and
land through a third party who owns or buys the property on
which we plan to build homes. We enter into option contracts
with the third party to purchase finished lots as home
construction begins. These contracts are generally non-recourse
and require non-refundable deposits of 2% to 15% of the sales
price. At March&nbsp;31, 2001, we had approximately $28.8
million in non-refundable deposits on real estate under option
or contract. At March&nbsp;31, 2001, we had 8,042 lots under
control for future development, 2,624 of which are owned by us
and 5,418, or 67%, of which are available to us through rolling
options.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Once we acquire land, we generally initiate development through
contractual agreements with subcontractors. These activities
include site planning and engineering, as well as constructing
road, sewer, water, utilities, drainage, recreation facilities
and other refinements.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We develop a design and marketing concept for each project,
which includes determination of size, style and price range of
homes, street layout, size and layout of individual lots and
overall community design. We often build homes in master planned
communities with home sites that are along or near a major
amenity, such as a golf course. The product line offered in a
particular project depends upon many factors, including the
housing generally available in the area, the needs of the
particular market and our lot costs for the project.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Occasionally we have used partnerships or joint ventures to
purchase and develop land where these arrangements are necessary
to acquire the property or appear to be otherwise economically
advantageous. We currently are not a party to any partnerships
or joint ventures for these purposes, although we may utilize
these in the future on a limited basis.

<P align="center">47

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table presents information regarding land owned or
land under contract or option by market as of March&nbsp;31,
2001:

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="27%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="11"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">Land Under Contract</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="11" align="center" nowrap><B><FONT size="2">Land Owned(1)</FONT></B></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">or Option(1)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Lots Under</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Lots Held for</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Lots Under</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Finished</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Development</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Development</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Finished</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Development</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Lots</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">(estimated)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">(estimated)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Lots</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">(estimated)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Total</FONT></B></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">TEXAS:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Dallas/ Ft. Worth Area
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">560</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,191</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">288</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,452</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,491</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Houston Area
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">158</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">30</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">675</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">863</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Austin Area
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">39</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">46</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">503</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">598</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total Texas
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">728</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,230</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">364</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,630</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,952</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">ARIZONA:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Phoenix/ Scottsdale Area
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">215</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">187</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">340</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">418</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,160</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Tucson Area
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">142</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">116</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">228</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">490</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total Arizona
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">357</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">191</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">456</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">646</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,650</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">CALIFORNIA:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Sacramento Area
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">29</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">189</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">509</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">727</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">East Bay Area
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">12</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">77</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">241</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">383</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">713</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total California
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">41</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">77</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">430</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">892</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,440</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total Company
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,126</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,421</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">77</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,250</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,168</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,042</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="18%" align="left" noshade>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="4%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>(1)&nbsp;</TD>
	<TD align="left">
	Excludes lots with finished homes or homes under construction.</TD>
</TR>

</TABLE>

<P align="left">
<B>Construction Operations</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are the general contractor for our projects and typically
hire subcontractors on a project-by-project or reasonable
geographic proximity basis to complete construction at a fixed
price. We usually enter into agreements with subcontractors and
materials suppliers after receiving competitive bids on an
individual basis. We obtain information from prospective
subcontractors and suppliers with respect to their financial
condition and ability to perform their agreements before formal
bidding begins. Occasionally, we enter into longer-term
contracts with subcontractors and suppliers if management can
obtain more favorable terms. Our project managers and field
superintendents, who coordinate and supervise the activities of
subcontractors and suppliers, subject the work to quality and
cost controls and assure compliance with zoning and building
codes. At March&nbsp;31, 2001, we employed 202 construction
operations personnel.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We specify that quality, durable materials be used in
construction of our homes and we do not maintain significant
inventories of construction materials, except for
work-in-process materials for homes under construction. When
possible, management negotiates price discounts with
manufacturers and suppliers on behalf of its subcontractors to
take advantage of production volume. Usually, access to our
principal subcontracting trades, materials and supplies is
readily available in each of our markets. Prices for these goods
and services may fluctuate due to various factors, including
supply and demand shortages that may be beyond the control of
our vendors. We believe that we have strong relationships with
our suppliers and subcontractors.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We generally build and sell homes in clusters or phases within a
project, which we believe creates efficiencies in land
development and construction and improves customer satisfaction
by reducing the number of vacant lots surrounding a completed
home. Our homes are typically completed within four to ten
months from the start of construction, depending upon home size
and complexity. Construction schedules may vary depending on the
availability of labor, materials and supplies, product type,
location

<P align="center">48

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
and weather. Our homes are usually designed to promote efficient
use of space and materials, and to minimize construction costs
and time.
</DIV>

<P align="left">
<B>Marketing and Sales</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that we have an established reputation for developing
high quality homes, which helps generate interest in each new
project. We also use advertising and other promotional
activities, including magazine and newspaper advertisements,
brochures, direct mail and the placement of strategically
located signs in the immediate areas of our developments.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We use furnished model homes as tools in demonstrating the
competitive advantages of our home designs and various features
to prospective homebuyers. We generally employ or contract with
interior designers who are responsible for creating an
attractive model home for each product line within a project. We
generally build between one and four model homes for each
community, depending upon the number of homes to be built in the
project and the products to be offered. At times we sell our
model homes and lease them back from buyers who purchased the
homes for investment purposes or who do not intend to move in
immediately. A summary of model homes owned or leased at
March&nbsp;31, 2001 follows:

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="31%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Model Homes</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Model Homes</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Monthly Lease</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Models Under</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Owned</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Leased Back</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Amount</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Construction</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Texas
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">35</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Arizona
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">17</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">37</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">104,634</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">California
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">12</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">41,285</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">52</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">49</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">145,919</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our homes generally are sold by full-time, commissioned
employees who typically work from a sales office located in the
model homes for each project. At March&nbsp;31, 2001, we had 82
sales and marketing employees. Our goal is to ensure that the
sales force has extensive knowledge of our operating policies
and housing products. To achieve this goal, we train our sales
personnel and conduct periodic meetings to update them on sales
techniques, competitive products in the area, financing
availability, construction schedules, marketing and advertising
plans, and the available product lines, pricing, options and
warranties offered. Sales personnel are licensed real estate
agents where required by law. Independent brokers also sell our
homes, and are usually paid a sales commission based on the
price of the home. Our sales personnel assist our customers in
selecting upgrades or in adding available customization features
to their homes. We attempt to present our available upgrade and
customization options to appeal to local consumer demands while
at the same time minimizing our costs. Occasionally we offer
various sales incentives, such as landscaping and certain
interior home improvements, to attract buyers. The use and type
of incentives depends largely on economic and competitive market
conditions.

<P align="left">
<B>Backlog</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Most of our home sales are made under standard sales contracts
signed before construction of the home begins. The contracts
require substantial cash deposits and are usually subject to
certain contingencies, such as the buyer&#146;s ability to
qualify for financing. Homes covered by such sales contracts but
not yet closed are considered &#147;backlog.&#148; We do not
include as a new sales contract sales contingent upon the sale
of a customer&#146;s existing home until the contingency is
removed. We do not recognize revenue on homes in backlog until
the home is delivered to a third-party homebuyer and other
criteria for sale and profit recognition are met. We sometimes
build homes before obtaining a sales contract. These homes,
however, are excluded from backlog until a sales contract is
signed. At March&nbsp;31, 2001, only 7% of our homes under
construction were speculative homes. We believe we will deliver
almost all homes in backlog at March&nbsp;31, 2001 to customers
during 2001.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our backlog increased to 1,470 homes with a value of $370.7
million at March&nbsp;31, 2001 from 1,074 homes with a value of
$256.7 million at March&nbsp;31, 2000. These increases are
primarily due to additional communities that opened for sale,
along with strong home sales in all of our markets.

<P align="center">49

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">
<B>Customer Financing</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We attempt to help qualified homebuyers who require financing to
obtain loans from mortgage lenders that offer a variety of
financing options. We provide mortgage-banking services in our
Dallas/ Ft. Worth market through a 100% owned mortgage broker
subsidiary, Texas Home Mortgage Corporation, which brokers loans
on behalf of third party lenders. In Phoenix and Tucson we
provide mortgage services through MTH Mortgage, LLC, a joint
venture with an independent mortgage banking company. In our
other markets we use unaffiliated preferred mortgage lenders. We
may pay a portion of the closing costs and discount mortgage
points to assist homebuyers with financing. Since many customers
use long-term mortgage financing to purchase homes, adverse
economic conditions, unemployment increases and high mortgage
interest rates may deter or reduce the number of potential
homebuyers.

<P align="left">
<B>Customer Relations, Quality Control and Warranty Programs</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that positive customer relations and an adherence to
stringent quality control standards are fundamental to continued
success, and that our commitment to buyer satisfaction and
quality control has significantly contributed to our reputation
as a high quality builder.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A Meritage project manager or project superintendent and a
customer relations representative generally oversee compliance
with quality control standards for each development. These
representatives perform the following tasks:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	oversee home construction;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	oversee subcontractor and supplier performance;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	review the progress of each home and conduct formal inspections
	as specific stages of construction are completed; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	regularly update buyers on the progress of their homes.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We generally provide a one-year limited warranty on workmanship
and building materials with each home. As subcontractors usually
provide an indemnity and a certificate of insurance before
beginning work, claims relating to workmanship and materials are
generally the subcontractors&#146; primary responsibility.
Reserves for future warranty costs are established based on
historical experience within each division or region, and are
recorded when the homes are delivered. Reserves range from 0.30%
to 0.75% of a home&#146;s sale price. To date, these reserves
have been sufficient to cover warranty repairs.

<P align="left">
<B>Competition and Market Factors</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The development and sale of residential property is a highly
competitive industry. We compete for sales in each of our
markets with national, regional, and local developers and
homebuilders, existing home resales and, to a lesser extent,
condominiums and available rental housing. Some competitor
homebuilders have significantly greater financial resources
and/or lower costs than we do. Competition among both small and
large residential homebuilders is based on a number of
interrelated factors, including location, reputation, amenities,
design, quality and price. We believe that we compare favorably
to other homebuilders in the markets in which we operate due to
our:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	experience within our geographic markets which allows us to
	develop and offer new products;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	ability to recognize and adapt to changing market conditions,
	including from a capital and resource perspective;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	ability to capitalize on opportunities to acquire land on
	favorable terms; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	reputation for outstanding service and quality products.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The homebuilding industry is cyclical and is affected by
consumer confidence levels, job availability, general economic
conditions and interest rates. Other factors affecting the
homebuilding industry and demand for new homes are changes in
costs associated with home ownership, such as increases in
property

<P align="center">50

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
taxes and energy costs, changes in consumer preferences,
demographic trends, availability of and changes in mortgage
financing programs and the availability and cost of land and
building materials. Any slowing in new home sales would increase
competition among homebuilders in our market areas. There is no
assurance that we will be able to compete successfully against
other homebuilders in our current markets in a more competitive
business environment or that such increased competition will not
have a material adverse affect on our business and operating
results.
</DIV>

<P align="left">
<B>Government Regulation and Environmental Matters</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We purchase most of our land with entitlements, providing for
zoning and utility services to project sites and giving us the
right to obtain building permits. Construction may begin almost
immediately on such entitled land upon compliance with and
receipt of specified permits, approvals and other conditions,
which generally are within our control. The time needed to
obtain such approvals and permits affects the carrying costs of
unimproved property acquired for development and construction.
The continued effectiveness of permits already granted is
subject to factors such as changes in government policies, rules
and regulations, and their interpretation and application. To
date, the government approval processes discussed above have not
had a material adverse effect on our development activities,
although there is no assurance that these and other restrictions
will not adversely affect future operations.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Local and state governments have broad discretion regarding the
imposition of development fees for projects under their
jurisdictions. These fees are normally established when we
receive recorded maps and building permits. In addition,
occasionally communities impose construction moratoriums.
Because most of our land is entitled, construction moratoriums
generally would affect us if they arose from health, safety or
welfare issues, such as insufficient water, electric or sewage
facilities. We could become subject to delays or may be
precluded entirely from developing communities due to building
moratoriums, &#147;slow growth&#148; or &#147;no growth&#148;
initiatives or building permit allocation ordinances, which
could be implemented in the future.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are also subject to a variety of local, state, and federal
statutes, ordinances, rules and regulations concerning the
protection of health and the environment. In some markets, we
are subject to environmentally sensitive land ordinances that
mandate open space areas with public elements in housing
developments, and prevent development on hillsides, wetlands and
other protected areas. We must also comply with flood plain
restrictions, desert wash areas, native plant regulations,
endangered species acts and view restrictions. These and similar
laws may result in delays, cause substantial compliance and
other costs and prohibit or severely restrict development in
certain environmentally sensitive regions or areas. To date,
compliance with such ordinances has not materially affected our
operations, although it may do so in the future.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We usually condition our obligation to purchase property on,
among other things, an environmental review of the land. To
date, we have not incurred any unanticipated liabilities
relating to the removal of unknown toxic wastes or other
environmental matters. However, there is no assurance that we
will not incur material liabilities in the future relating to
toxic waste removal or other environmental matters affecting
land currently or previously owned.

<P align="left">
<B>Bonds and Other Obligations</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We obtain letters of credit and performance, maintenance and
other bonds in support of our obligations with respect to the
development of our projects. The amount of these obligations
outstanding at any time varies in accordance with pending
development activities. In the event the bonds or letters are
drawn upon, we would be obligated to reimburse the issuer of the
bond or letter of credit. At March&nbsp;31, 2001, there were
approximately $9.3 million in outstanding letters of credit and
$33.3 million in performance bonds for such purposes. We do not
believe that any of these bonds or letters of credit are likely
to be drawn upon.

<P align="center">51

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">
<B>Employees and Subcontractors</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At March&nbsp;31, 2001, we had 369 employees, including
85&nbsp;in management and administration, 82&nbsp;in sales and
marketing, and 202 in construction operations. Our employees are
not unionized, and we believe that employee relations are good.
We act solely as a general contractor and all construction
operations are conducted through project managers and field
superintendents who manage third party subcontractors. We use
independent contractors for construction, architectural and
advertising services, and believe that our relations with our
subcontractors and independent contractors are good.

<P align="left">
<B>Properties</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We lease approximately 14,400 square feet of office space in
Scottsdale, Arizona and a 13,000 square foot office in Plano,
Texas, which serve as our corporate offices. The Scottsdale
lease expires in August&nbsp;2004. The Plano lease expires in
May&nbsp;2002 and the building is leased from a company
beneficially owned by one of our co-chairmen. We believe that
the Plano lease rate is competitive with rates for comparable
space in the area and that the terms of the lease are similar to
those we could obtain in an arm&#146;s length transaction. In
addition, we lease approximately 14,300 square feet of space for
our operating divisions under leases expiring between
October&nbsp;2001 and July 2005.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of March&nbsp;31, 2001, we also had leases for 49 model homes
at a total monthly lease amount of approximately $145,900. The
leases have terms ranging from three months to 36&nbsp;months,
with various renewal options.

<P align="left">
<B>Legal Proceedings</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are involved in various routine legal proceedings incidental
to our business. We believe that none of these matters, some of
which are covered by insurance, will have a material adverse
impact upon our financial condition if decided against us.

<P align="center">52

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "Management" -->
<DIV align="left"><A NAME="010"></A></DIV>

<P align="center">
<B>MANAGEMENT</B>

<P align="left">
<B>Directors and Executive Officers</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The directors and executive officers of Meritage and their
respective ages, as of June&nbsp;15, 2001, and positions are as
follows:

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="25%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="65%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD align="center" nowrap><B><FONT size="2">Name</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Age</FONT></B></TD>
	<TD></TD>
	<TD align="center" nowrap><B><FONT size="2">Position</FONT></B></TD>
</TR>

<TR>
	<TD align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Steven J. Hilton
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">39</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Co-Chairman and Chief Executive Officer
	</FONT></DIV>
	</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">John R. Landon
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">43</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Co-Chairman and Chief Executive Officer
	</FONT></DIV>
	</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Larry W. Seay
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">45</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Chief Financial Officer, Vice President-Finance,
	Secretary and Treasurer
	</FONT></DIV>
	</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Richard T. Morgan
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">45</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Vice President
	</FONT></DIV>
	</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">William W. Cleverly
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">45</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Director
	</FONT></DIV>
	</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Raymond Oppel
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">44</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Director
	</FONT></DIV>
	</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Robert G. Sarver
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">39</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Director
	</FONT></DIV>
	</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">C. Timothy White
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">39</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Director
	</FONT></DIV>
	</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Peter L. Ax
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">42</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Director
	</FONT></DIV>
	</TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Steven J. Hilton </I>has served as co-chairman and co-chief
executive officer (or co-managing director) since
April&nbsp;1998 and served as our president and co-chief
executive officer from December&nbsp;31, 1996 to
April&nbsp;1998. In 1985, Mr.&nbsp;Hilton co-founded Monterey
Homes, which merged with Homeplex Mortgage Investment Co.,
Meritage&#146;s predecessor, and was its treasurer, secretary
and director until December&nbsp;31, 1996. Mr.&nbsp;Hilton is a
member of the Central Arizona Homebuilders&#146; Association and
the National Homebuilders&#146; Association.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>John R. Landon </I>has served as co-chairman and co-chief
executive officer (or co-managing director) since
April&nbsp;1998 and served as our chief operating officer and
co-chief executive officer from the combination of Legacy Homes
and Meritage in July&nbsp;1997 to April&nbsp;1998.
Mr.&nbsp;Landon founded Legacy Homes in 1987 and, as its
president, managed all aspects of the company&#146;s business.
Mr.&nbsp;Landon is a member of the National Association of
Homebuilders and the Dallas Home and Apartment Builders&#146;
Association.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Larry W. Seay </I>has served as chief financial officer and
vice president&nbsp;&#150; finance since December&nbsp;31, 1996,
and has also served as our secretary and treasurer since 1997.
Mr.&nbsp;Seay was chief financial officer and vice
president&nbsp;&#150; finance of Monterey Homes from
April&nbsp;1996 to December&nbsp;31, 1996. From 1990 to 1996,
Mr.&nbsp;Seay served as vice president/ treasurer of UDC Homes,
Inc. Mr.&nbsp;Seay is a certified public accountant and a member
of the American Institute of Certified Public Accountants.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Richard T. Morgan </I>has served as vice president since
April&nbsp;1998 and also served as chief financial officer of
our Texas division since July&nbsp;1997. Mr.&nbsp;Morgan joined
Legacy Homes in 1989 as controller, and was appointed
Legacy&#146;s chief financial officer in 1997.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>William W. Cleverly </I>has served as a director since
December&nbsp;31, 1996. He served as co-chairman and co-chief
executive officer (or co-managing director) from April&nbsp;1998
to March&nbsp;1999, and as chairman of the board and co-chief
executive officer from December&nbsp;31, 1996 to
April&nbsp;1998. Mr.&nbsp;Cleverly co-founded Monterey Homes in
1985, and was its president and director until December&nbsp;31,
1996. Mr.&nbsp;Cleverly is the chief executive officer of Inca
Capital, a real estate finance and investment company, and is a
member of the Central Arizona Homebuilders&#146; Association and
the National Homebuilders&#146; Association.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Raymond Oppel </I>has served as a director since
December&nbsp;1997. In 1982, he co-founded and became chairman
and chief executive officer of the Oppel Jenkins Group, a
regional homebuilder in Texas and New Mexico, which was sold to
the public homebuilder KB&nbsp;Home in 1995. Mr.&nbsp;Oppel has
served as president of the Texas Panhandle Builder&#146;s
Association and is a licensed real estate broker. Mr.&nbsp;Oppel
currently is active as a private investor in real estate
development, banking and a new automobile dealership.

<P align="center">53
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Robert G. Sarver </I>has served as a director since
December&nbsp;1996, and has been the chairman and chief
executive officer of California Bank and Trust since 1998. From
1995 to 1998, he served as chairman of Grossmont Bank.
Mr.&nbsp;Sarver is currently a director of Skywest Airlines and
Zion&#146;s Bancorporation, a publicly held bank holding
company. In 1990, Mr.&nbsp;Sarver co-founded and currently
serves as the executive director of Southwest Value Partners and
Affiliates, a real estate investment company. In 1984,
Mr.&nbsp;Sarver founded National Bank of Arizona, Inc. and was
its president until its acquisition by Zion&#146;s
Bancorporation in 1994.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>C.&nbsp; Timothy White </I>has served as a director since
December&nbsp;1996, and served as a director of Monterey Homes
from February&nbsp;1995 until December&nbsp;1996. Since 1989,
Mr.&nbsp;White has been an attorney with the law firm of Tiffany
&#38; Bosco, P.A. in Phoenix, Arizona, which provides legal
services to Meritage.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Peter L. Ax </I>has served as a director since
September&nbsp;2000 and is the managing partner of Phoenix
Capital Management, a Scottsdale-based financial consulting
firm. Mr.&nbsp;Ax is the former chairman and chief executive
officer of SpinCycle, Inc., the nation&#146;s largest
consolidator and developer of coin-operated laundromats.
Mr.&nbsp;Ax is the exclusive financial advisor to Cleanwave,
LLC, an internet-based provider of laundry services owned by
Shell Chemical, a division of Royal Dutch Shell, and SpinCycle,
Inc. Mr.&nbsp;Ax is also on the Board of Directors of CashX and
of Takos.com. Prior to his involvement in these companies,
Mr.&nbsp;Ax served as head of the private equity division and
senior vice president of Lehman Brothers in New York.
Mr.&nbsp;Ax is a certified public accountant and holds an M.B.A.
from the Wharton School at the University of Pennsylvania.

<!-- link1 "Certain Relationships and Related Transactions" -->
<DIV align="left"><A NAME="011"></A></DIV>

<P align="center">
<B>CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since 1997, we have leased office space in Plano, Texas from
Home Financial Services, a Texas partnership owned by John and
Eleanor Landon. The lease expires May&nbsp;15, 2002. Rents paid
to the partnership were $185,613 in 2000, $176,773 in 1999 and
$169,294 in 1998.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We paid legal fees to Tiffany &#38; Bosco, P.A. of approximately
$311,000 in 2000 and $334,000 in 1999. C.&nbsp;Timothy White,
one of our directors, is a partner of Tiffany &#38;
Bosco,&nbsp;P.A.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 1999, we entered into a $70 million borrowing agreement with
Wells Fargo Bank and California Bank and Trust that was
increased to $100 million in 2000. This line of credit begins to
term out over a 24-month period beginning on January&nbsp;1,
2002, has interest payable monthly at a rate approximating prime
or LIBOR plus 1.75%, and is secured by first deeds of trust on
real estate. Mr.&nbsp;Sarver, one of our directors, is the
chairman and chief executive officer of California Bank and
Trust.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2000, we purchased 42 lots for development in Arizona from a
business controlled by William Cleverly, one of our directors.
The total amount paid for the lots was approximately $2,435,000.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2000, we purchased 223 lots for development in Arizona at an
acquisition price of approximately $10,772,000 from a business
controlled by the spouse of Alan&nbsp;D. Hamberlin. In 1999, we
purchased 92&nbsp;lots for approximately $3,517,000, and in
1998, 35&nbsp;lots for approximately $1,314,000 from that same
business. Mr.&nbsp;Hamberlin is a holder of more than 5% of our
common stock.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We previously leased approximately 11,000 square feet of office
space in a Scottsdale, Arizona office building from a limited
liability company owned by Messrs.&nbsp;Hilton and Cleverly
since 1994. The building was sold to third parties in 2000.
Rents paid to the limited liability company totaled $43,852 in
2000, $238,240 in 1999, and $210,816 in 1998.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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&#146;s length transactions.

<P align="center">54

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "Principal Stockholders" -->
<DIV align="left"><A NAME="012"></A></DIV>

<P align="center">
<B>PRINCIPAL STOCKHOLDERS</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table summarizes, as of June&nbsp;15, 2001, the
number and percentage of outstanding shares of our common stock
beneficially owned by the following:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
        <TD width="3%"></TD>
        <TD width="1%"></TD>
        <TD width="96%"></TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>&#149;&nbsp;</TD>
        <TD align="left">
        each person or group management knows to beneficially own more
        than 5% of such stock;</TD>
</TR>

<TR>
        <TD>&nbsp;</TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>&#149;&nbsp;</TD>
        <TD align="left">
        each Meritage director and executive officer; and</TD>
</TR>

<TR>
        <TD>&nbsp;</TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>&#149;&nbsp;</TD>
        <TD align="left">
        all Meritage directors and executive officers as a group.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The address for our directors and executive officers is c/o
Meritage Corporation, 6613&nbsp;North Scottsdale Road,
Suite&nbsp;200, Scottsdale, Arizona 85250. The number of shares
includes shares of common stock owned of record by such
person&#146;s minor children and spouse and by other related
individuals and entities over whose shares of common stock such
person has custody, voting control or the power of disposition.

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="22%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
        <TD colspan="2"></TD>
        <TD></TD>
        <TD colspan="3"></TD>
        <TD></TD>
        <TD colspan="3"></TD>
        <TD></TD>
        <TD colspan="3" align="center" nowrap><B><FONT size="2">Right to</FONT></B></TD>
        <TD></TD>
        <TD colspan="3"></TD>
        <TD></TD>
        <TD colspan="3"></TD>
</TR>

<TR>
        <TD colspan="2"></TD>
        <TD></TD>
        <TD colspan="3"></TD>
        <TD></TD>
        <TD colspan="3" align="center" nowrap><B><FONT size="2">Number</FONT></B></TD>
        <TD></TD>
        <TD colspan="3" align="center" nowrap><B><FONT size="2">Acquire by</FONT></B></TD>
        <TD></TD>
        <TD colspan="3" align="center" nowrap><B><FONT size="2">Total</FONT></B></TD>
        <TD></TD>
        <TD colspan="3" align="center" nowrap><B><FONT size="2">Percent of</FONT></B></TD>
</TR>

<TR>
        <TD colspan="2"></TD>
        <TD></TD>
        <TD colspan="3"></TD>
        <TD></TD>
        <TD colspan="3" align="center" nowrap><B><FONT size="2">of Shares</FONT></B></TD>
        <TD></TD>
        <TD colspan="3" align="center" nowrap><B><FONT size="2">August 15,</FONT></B></TD>
        <TD></TD>
        <TD colspan="3" align="center" nowrap><B><FONT size="2">Beneficial</FONT></B></TD>
        <TD></TD>
        <TD colspan="3" align="center" nowrap><B><FONT size="2">Outstanding</FONT></B></TD>
</TR>

<TR>
        <TD colspan="2" align="center" nowrap><B><FONT size="2">Name of Beneficial Owner</FONT></B></TD>
        <TD></TD>
        <TD colspan="3" align="center" nowrap><B><FONT size="2">Position with Company</FONT></B></TD>
        <TD></TD>
        <TD colspan="3" align="center" nowrap><B><FONT size="2">Owned</FONT></B></TD>
        <TD></TD>
        <TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
        <TD></TD>
        <TD colspan="3" align="center" nowrap><B><FONT size="2">Shares</FONT></B></TD>
        <TD></TD>
        <TD colspan="3" align="center" nowrap><B><FONT size="2">Shares(1)</FONT></B></TD>
</TR>

<TR>
        <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
        <TD></TD>
        <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
        <TD></TD>
        <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
        <TD></TD>
        <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
        <TD></TD>
        <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
        <TD></TD>
        <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
        <TD colspan="2" align="left" valign="top">
        <DIV style="margin-left:10px; text-indent:-10px">
        <FONT size="2">Steven J. Hilton
        </FONT></DIV>
        </TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top" nowrap><FONT size="2">Class I Director, Co-Chairman</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">642,341</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">177,107</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">819,448</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">14.9</FONT></TD>
        <TD align="left" valign="top" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
        <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top" nowrap><FONT size="2">and Co-Chief Executive</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
        <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top" nowrap><FONT size="2">Officer</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD colspan="2" align="left" valign="top">
        <DIV style="margin-left:10px; text-indent:-10px">
        <FONT size="2">John R. Landon
        </FONT></DIV>
        </TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top" nowrap><FONT size="2">Class II Director,</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">813,934</FONT></TD>
        <TD align="left" valign="top" nowrap><FONT size="2">(2)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">14,240</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">828,174</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">15.5</FONT></TD>
        <TD align="left" valign="top" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
        <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top" nowrap><FONT size="2">Co-Chairman and Co-Chief</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
        <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top" nowrap><FONT size="2">Executive Officer</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD colspan="2" align="left" valign="top">
        <DIV style="margin-left:10px; text-indent:-10px">
        <FONT size="2">William W. Cleverly
        </FONT></DIV>
        </TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top" nowrap><FONT size="2">Class I Director</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">296,341</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">136,667</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">433,008</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">7.9</FONT></TD>
        <TD align="left" valign="top" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD colspan="2" align="left" valign="top">
        <DIV style="margin-left:10px; text-indent:-10px">
        <FONT size="2">Robert G. Sarver
        </FONT></DIV>
        </TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top" nowrap><FONT size="2">Class II Director, Audit and</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">286,300</FONT></TD>
        <TD align="left" valign="top" nowrap><FONT size="2">(3)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">10,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">296,300</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">5.5</FONT></TD>
        <TD align="left" valign="top" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
        <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top" nowrap><FONT size="2">Compensation Committee</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD colspan="2" align="left" valign="top">
        <DIV style="margin-left:10px; text-indent:-10px">
        <FONT size="2">C. Timothy White
        </FONT></DIV>
        </TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top" nowrap><FONT size="2">Class II Director</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">3,316</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">10,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">13,316</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">*</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD colspan="2" align="left" valign="top">
        <DIV style="margin-left:10px; text-indent:-10px">
        <FONT size="2">Ray Oppel
        </FONT></DIV>
        </TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top" nowrap><FONT size="2">Class I Director, Audit and</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">15,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">10,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">25,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">*</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
        <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top" nowrap><FONT size="2">Compensation Committee</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD colspan="2" align="left" valign="top">
        <DIV style="margin-left:10px; text-indent:-10px">
        <FONT size="2">Peter L. Ax
        </FONT></DIV>
        </TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top" nowrap><FONT size="2">Class I Director, Audit and</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
        <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top" nowrap><FONT size="2">Compensation Committee</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD colspan="2" align="left" valign="top">
        <DIV style="margin-left:10px; text-indent:-10px">
        <FONT size="2">Larry W. Seay
        </FONT></DIV>
        </TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top" nowrap><FONT size="2">Chief Financial Officer, Vice</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">10,400</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">8,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">18,400</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">*</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
        <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top" nowrap><FONT size="2">President-Finance, Secretary</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
        <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top" nowrap><FONT size="2">and Treasurer</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD colspan="2" align="left" valign="top">
        <DIV style="margin-left:10px; text-indent:-10px">
        <FONT size="2">Richard T. Morgan
        </FONT></DIV>
        </TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top" nowrap><FONT size="2">Vice President</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">1,500</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">14,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">15,500</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">*</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
        <TD colspan="2" align="left" valign="top">
        <DIV style="margin-left:10px; text-indent:-10px">
        <FONT size="2">All directors and executive officers as a group
        </FONT></DIV>
        </TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top">
        <DIV style="margin-left:10px; text-indent:-10px">
        <FONT size="2">(9&nbsp;persons)
        </FONT></DIV>
        </TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">2,069,132</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">380,014</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">2,449,146</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">45.1</FONT></TD>
        <TD align="left" valign="top" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD colspan="2" align="left" valign="top">
        <DIV style="margin-left:10px; text-indent:-10px">
        <FONT size="2">Alan D. Hamberlin
        </FONT></DIV>
        </TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">320,226</FONT></TD>
        <TD align="left" valign="top" nowrap><FONT size="2">(4)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">320,226</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">6.0</FONT></TD>
        <TD align="left" valign="top" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top">
        <FONT size="2">5333 N. 7th St.,
        </FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top">
        <FONT size="2">Phoenix, AZ
        </FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top">
        <FONT size="2">85014
        </FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
        <TD colspan="2" align="left" valign="top">
        <DIV style="margin-left:10px; text-indent:-10px">
        <FONT size="2">Fidelity Management &#38;
        </FONT></DIV>
        </TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top">
        <FONT size="2">Research Co.
        </FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">270,000</FONT></TD>
        <TD align="left" valign="top" nowrap><FONT size="2">(5)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">270,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top" nowrap><FONT size="2">5.1</FONT></TD>
        <TD align="left" valign="top" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top">
        <FONT size="2">82 Devonshire Street,
        </FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top">
        <FONT size="2">Boston, MA 01109
        </FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="18%" align="left" noshade>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
        <TD width="1%"></TD>
        <TD width="2%"></TD>
        <TD width="97%"></TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>*</TD>
        <TD align="left">
        Represents less than 1%.</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
        <TD width="4%"></TD>
        <TD width="96%"></TD>
</TR>

<TR valign="top">
        <TD>(1)&nbsp;</TD>
        <TD align="left">
        The percentages shown include the shares of common stock
        actually owned as of June&nbsp;15, 2001, and the shares which
        the person or group had the right to acquire within 60&nbsp;days
        of that date. In calculating the percentage of ownership, all
        shares of common stock which the identified person had the right
        to acquire within 60&nbsp;days of June&nbsp;15, 2001 upon
        exercise of options, are considered as outstanding for computing
        the percentage of the shares owned by that person or group, but
        are not</TD>
</TR>

</TABLE>

<P align="center">55

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="4%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD></TD>
	<TD align="left">
	considered as outstanding for computing the percentage of the
	shares of stock owned by any other person.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(2)&nbsp;</TD>
	<TD align="left">
	647,267 shares are owned with Eleanor Landon, spouse, as
	tenants-in-common.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(3)&nbsp;</TD>
	<TD align="left">
	Mr.&nbsp;Sarver beneficially owns 1,500 shares through his
	spouse and 500 shares through a minor child.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(4)&nbsp;</TD>
	<TD align="left">
	Based on a Schedule&nbsp;13G, filed with the Commission on
	January&nbsp;17, 2001, Alan D. Hamberlin has sole voting power
	with respect to 320,226 shares and sole dispositive power with
	respect to those shares. Mr.&nbsp;Hamberlin is a former director
	of Meritage.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(5)&nbsp;</TD>
	<TD align="left">
	Based on a Schedule&nbsp;13G, filed with the Commission on
	February&nbsp;14, 2001, Fidelity Management &#38; Research Co.
	(&#147;Fidelity&#148;) has beneficial ownership with respect to
	270,000 shares and sole dispositive power with respect to those
	shares. The shares as to which the Schedule&nbsp;13G is filed by
	FMR Corporation, in its capacity as the parent holding company
	of Fidelity, an investment advisor to various investment
	companies, are owned by one investment company, Fidelity Low
	Priced Stock Funds. The Schedule&nbsp; 13G also states that
	Fidelity carries out the voting of the shares under written
	guidelines established by the Funds&#146; Board of Trustees.</TD>
</TR>

</TABLE>

<P align="center">56

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "Description of Certain Existing Indebtedness" -->
<DIV align="left"><A NAME="013"></A></DIV>

<P align="center">
<B>DESCRIPTION OF CERTAIN EXISTING INDEBTEDNESS</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to the $165 million aggregate principal amount of
outstanding notes, we had certain other indebtedness. The
following is a summary of our and our subsidiaries&#146; bank
and other indebtedness. The descriptions of the agreements set
forth below are not complete and are qualified in their entirety
by reference to the actual loan documents.

<P align="left">
<B>Revolving Credit Facilities</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have two revolving credit facilities, one of which is used to
fund our operations in Arizona and California and the other of
which is used to fund our operations in Texas.

<P align="left">
<B>&nbsp;&nbsp;</B><I>$100 Million Bank Revolving Construction
Line of Credit</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have a $100 million bank revolving line of credit, which is
secured by first deeds of trust on real estate for specific
subdivision projects in Arizona and California. The facility
converts to a term loan on June&nbsp;1, 2003 and the facility
amount is reduced every three months thereafter by one-eighth.
Interest on this facility is payable monthly at rates
approximating prime or LIBOR plus 1.75% or 2.0%, depending on
the Company&#146;s leverage ratio. The entire unpaid principal
balance is due on June&nbsp;1, 2005. Borrowings under the
facility are limited by the availability of sufficient real
estate collateral, which is determined constantly throughout the
facility period. The composition of the collateral borrowing
base is limited to certain parameters set forth in the facility
agreement and each type of collateral (such as raw land, lots
under development, finished lots and homes) expires as part of
the collateral borrowing base after specified maturity dates for
each collateral type. Repayment of advances is upon the earlier
of close of escrow of individual lots and homes within the
collateral pool, the maturity date of individual parcels, lots
and homes within the collateral pool or over a 24-month period
beginning on June&nbsp;1, 2003. This facility is subject to a
facility fee of 0.25% per annum on the facility commitment
amount, payable quarterly and a non-usage fee of 0.15% of the
unused commitment amount. As of March&nbsp;31, 2001, $79.3
million was outstanding under this credit facility. We used
$62.9 million of the proceeds from the issuance of the
outstanding notes to repay outstanding amounts under this credit
facility.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We may also obtain letters of credit up to a maximum of $20
million, subject to available borrowing capacity and sufficient
collateral. We are subject to a 1% per annum fee on the stated
amount of each letter of credit that we issue.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the credit facility, we are required to comply with a
number of covenants, including:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	not permitting our ratio of total liabilities to adjusted
	tangible net worth to exceed the following:</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="3%"></TD>
	<TD width="91%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>(i)&nbsp;</TD>
	<TD align="left">
	3.0 to 1.0 for the quarter ending June&nbsp;30, 2001;</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="4%"></TD>
	<TD width="90%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>(ii)&nbsp;</TD>
	<TD align="left">
	2.75 to 1.0 for the quarter ending September&nbsp;30, 2001;</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="4%"></TD>
	<TD width="90%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>(iii)&nbsp;</TD>
	<TD align="left">
	2.5 to 1.0 for the quarter ending December&nbsp;31, 2001 and as
	of the end of the first three quarters thereafter; and</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="4%"></TD>
	<TD width="90%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>(iv)&nbsp;</TD>
	<TD align="left">
	2.25 to 1.0 for the quarter ending December&nbsp;31, 2002 and
	each fiscal year ending thereafter.</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	not permitting our ratio of EBITDA (as defined in the credit
	facility) to interest incurred plus any regularly scheduled
	principal payments due on the Company&#146;s debt to be less
	than 2 to 1, based on a four quarter rolling average; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	maintaining a tangible net worth of at least:</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="3%"></TD>
	<TD width="91%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>(i)&nbsp;</TD>
	<TD align="left">
	$85 million as of June&nbsp;30, 2001;</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="32%"></TD>
	<TD width="62%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>(ii)&nbsp; $100 million as of September&nbsp;30, 2001;</TD>
	<TD align="left">
</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="35%"></TD>
	<TD width="59%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>(iii)&nbsp; $120 million as of December&nbsp;31, 2001; and</TD>
	<TD align="left">
</TD>
</TR>

</TABLE>

<P align="center">57

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="4%"></TD>
	<TD width="90%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>(iv)&nbsp;</TD>
	<TD align="left">
	$120 million as of March&nbsp;31, 2002 and continuing thereafter
	plus 50% of net income earned commencing January&nbsp;1, 2002.</TD>
</TR>

</TABLE>

<P align="left">
<B>&nbsp;&nbsp;</B><I>$75 Million Bank Revolving Construction
Line of Credit</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have a $75 million bank revolving line of credit, which is
secured by first deeds of trust on real estate for specific
subdivision projects in Texas. Interest on this facility is
payable monthly at rates approximating prime or LIBOR plus 2.0%.
The entire unpaid principal balance is due May&nbsp;31, 2002.
Borrowings under the facility are limited by the availability of
sufficient real estate collateral, which is determined
constantly throughout the facility period. The composition of
the collateral borrowing base is limited to certain parameters
in the facility agreement and is based upon the lesser of the
direct costs of the real estate collateral (such as land, lots
under development, finished lots and homes) or a percentage of
the appraised value of the collateral, which varies depending
upon the stage of construction. Repayment of advances is upon
the earlier of close of escrow of individual lots and homes
within the collateral pool, the maturity date of individual
parcels, lots and homes within the collateral pool or
May&nbsp;31, 2002. This facility is not subject to a facility
fee. As of March&nbsp;31, 2001, $19.6 million was outstanding
under this credit facility. We used $15&nbsp;million of the
proceeds from the issuance of the outstanding notes to repay
outstanding amounts under this credit facility.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under this credit facility, we are required to comply with a
number of covenants, including:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	not permitting the borrowing subsidiary&#146;s (Legacy/ Monterey
	Homes L.P.) ratio of total liabilities to equity to exceed 3 to
	1; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	not permitting the net worth of the borrowing subsidiary to fall
	below $40 million.</TD>
</TR>

</TABLE>

<P align="left">
<B>Senior Unsecured Notes</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We issued 9.1% senior notes on September&nbsp;1, 1998 in the
original aggregate principal amount of $15 million. We repaid
the entire outstanding balance of $15 million, plus accrued
interest and prepayment premiums of $900,000 with the proceeds
from the issuance of the outstanding notes. As a result of this
prepayment, we incurred an extraordinary loss, net of tax, in
the second quarter of fiscal 2001 of approximately $550,0000
relating to the early extinguishment of this debt.

<P align="left">
<B>Other Debt</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have other land acquisition and development credit facilities
and seller carryback financing totaling $3.0 million at
March&nbsp;31, 2001, which are secured by first deeds of trust
on real estate. Interest on these facilities is payable monthly,
ranging from prime to prime plus 0.25% or at a fixed 10% per
annum rate. Principal payments are due at the earlier of funding
of construction financing or the maturity date of individual
projects.

<P align="center">58
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "Description of the Exchange Notes" -->
<DIV align="left"><A NAME="014"></A></DIV>

<P align="center">
<B>DESCRIPTION OF THE EXCHANGE NOTES</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As used below in this &#147;Description of the Exchange
Notes&#148; section, the <B>&#147;Issuer&#148;</B> means
Meritage Corporation, a Maryland corporation, and its
successors, but not any of its subsidiaries. The outstanding
notes were, and the exchange notes will be, issued under an
indenture, dated as of May&nbsp;30, 2001 (the
&#147;Indenture&#148;) by and among the Issuer, the Guarantors
named therein and Wells Fargo Bank, National Association, as
trustee ( the &#147;Trustee&#148;). The outstanding notes and
the exchange notes will constitute a single series of debt
securities under the Indenture. The notes are subject to the
terms stated in the Trust Indenture Act of 1939. Holders of the
notes are referred to the Indenture and the Trust Indenture Act
for a statement of those terms.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following is a summary of the material terms and provisions
of the notes. The following summary does not purport to be a
complete description of the notes and is subject to the detailed
provisions of, and qualified in its entirety by reference to,
the Indenture. You can find definitions of certain terms used in
this description under the heading &#147;&#151;&nbsp;Certain
Definitions.&#148; References to the &#147;notes&#148; includes
both the outstanding notes and the exchange notes.

<P align="left">
<B>Principal, Maturity and Interest</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The notes will mature on June&nbsp;1, 2011. The notes will bear
interest at the rate shown on the cover page of this offering
memorandum, payable on June&nbsp;1 and December&nbsp;1 of each
year, commencing on December&nbsp;1, 2001, to Holders of record
at the close of business on May&nbsp;15 or November&nbsp;15, as
the case may be, immediately preceding the relevant interest
payment date. Interest on the notes will be computed on the
basis of a 360-day year of twelve 30-day months. The notes will
be issued in registered form, without coupons, and in
denominations of $1,000 and integral multiples of $1,000.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The aggregate principal amount of the notes is $165.0 million.
The Issuer may issue additional notes of up to $125.0 million
aggregate principal amount having identical terms and conditions
to the notes being issued in this offering (the
<B>&#147;additional notes&#148;</B>), subject to compliance with
the &#147;Limitations on Additional Indebtedness&#148; covenant
described below. Any additional notes will be part of the same
issue as the notes being issued in this offering and will vote
on all matters as one class with the notes being issued in this
offering, including, without limitation, waivers, amendments,
redemptions and offers to purchase. For purposes of this
&#147;Description of the Exchange Notes,&#148; except for the
covenant described under &#147;&#151;&nbsp;Certain
Covenants&nbsp;&#151; Limitations on Additional
Indebtedness,&#148; references to the notes include additional
notes, if any.

<P align="left">
<B>Methods of Receiving Payments on the notes</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If a Holder has given wire transfer instructions to the Issuer
at least ten Business Days prior to the applicable payment date,
the Issuer will make all payments on such Holder&#146;s notes in
accordance with those instructions. Otherwise, payments on the
notes will be made at the office or agency of the paying agent
(the <B>&#147;Paying Agent&#148;</B>) and registrar (the
<B>&#147;Registrar&#148;</B>) for the notes within the City and
State of New York unless the Issuer elects to make interest
payments by check mailed to the Holders at their addresses set
forth in the register of Holders.

<P align="left">
<B>Ranking</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The outstanding notes are, and the exchange notes will be,
general unsecured obligations of the Issuer. The notes will rank
senior in right of payment to all future obligations of the
Issuer that are, by their terms, expressly subordinated in right
of payment to the notes and <I>pari passu </I>in right of
payment with all existing and future unsecured obligations of
the Issuer that are not so subordinated. Each Note Guarantee (as
defined below) will be a general unsecured obligation of the
Guarantor thereof and will rank senior in right of payment to
all future obligations of such Guarantor that are, by their
terms, expressly subordinated in right of payment to such Note
Guarantee and <I>pari passu </I>in right of payment with all
existing and future unsecured obligations of such Guarantor that
are not so subordinated.

<P align="center">59

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The notes and each Note Guarantee will be effectively
subordinated to secured Indebtedness of the Issuer and the
applicable Guarantor (including Indebtedness under the Credit
Facilities) to the extent of the value of the assets securing
such Indebtedness.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The notes will also be effectively subordinated to all existing
and future obligations, including Indebtedness, of any
Unrestricted Subsidiaries. Claims of creditors of Unrestricted
Subsidiaries, including trade creditors, will generally have
priority as to the assets of these Subsidiaries over the claims
of the Issuer and the holders of the Issuer&#146;s Indebtedness,
including the notes.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of March&nbsp;31, 2001, on a pro forma basis, the Issuer
would have had approximately $27.6 million aggregate principal
amount of secured Indebtedness and approximately $43 million of
undrawn borrowings available under the Credit Facilities.
Although the Indenture contains limitations on the amount of
additional secured Indebtedness that the Issuer and the
Restricted Subsidiaries may incur, under certain circumstances,
the amount of this Indebtedness could be substantial. See
&#147;&#151;&nbsp;Certain Covenants&nbsp;&#151; Limitations on
Additional Indebtedness&#148; and &#147;&#151;&nbsp;Limitations
on Liens.&#148;

<P align="left">
<B>Note Guarantees</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Issuer&#146;s obligations under the notes and the Indenture
will be jointly and severally guaranteed (the <B>&#147;Note
Guarantees&#148;</B>) by each Restricted Subsidiary.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Not all of our Subsidiaries will guarantee the notes.
Unrestricted Subsidiaries will not be Guarantors. In the event
of a bankruptcy, liquidation or reorganization of any of these
non-guarantor Subsidiaries, these non-guarantor Subsidiaries
will pay the holders of their debts and their trade creditors
before they will be able to distribute any of their assets to us.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of the date of the Indenture, all of our Subsidiaries,
including the Subsidiaries that acquired the assets of Hancock,
but excluding Texas Home Mortgage Corporation, which conducts
our mortgage broker business, will be &#147;Restricted
Subsidiaries,&#148; and all of our Restricted Subsidiaries will
be Guarantors. However, under the circumstances described below
under the subheading &#147;&#151; Certain Covenants&nbsp;&#151;
Designation of Unrestricted Subsidiaries,&#148; the Issuer will
be permitted to designate some of our other Subsidiaries as
&#147;Unrestricted Subsidiaries.&#148; The effect of designating
a Subsidiary as an &#147;Unrestricted Subsidiary&#148; will be:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	an Unrestricted Subsidiary will not be subject to many of the
	restrictive covenants in the Indenture;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	a Subsidiary that has previously been a Guarantor and that is
	designated an Unrestricted Subsidiary will be released from its
	Note Guarantee; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the assets, income, cash flow and other financial results of an
	Unrestricted Subsidiary will not be consolidated with those of
	the Issuer for purposes of calculating compliance with the
	restrictive covenants contained in the Indenture.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The obligations of each Guarantor under its Note Guarantee will
be limited to the maximum amount as will, after giving effect to
all other contingent and fixed liabilities of such Guarantor
(including, without limitation, any guarantees under the Credit
Facilities permitted under clause&nbsp;(1) of
&#147;&#151;&nbsp;Certain Covenants&nbsp;&#151; Limitations on
Additional Indebtedness&#148;) and after giving effect to any
collections from or payments made by or on behalf of any other
Guarantor in respect of the obligations of such other Guarantor
under its Note Guarantee or pursuant to its contribution
obligations under the Indenture, result in the obligations of
such Guarantor under its Note Guarantee not constituting a
fraudulent conveyance or fraudulent transfer under federal or
state law. Each Guarantor that makes a payment for distribution
under its Note Guarantee is entitled to a contribution from each
other Guarantor in a <I>pro rata</I> amount based on adjusted
net assets of each Guarantor.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the event of a sale or other disposition of all of the assets
of any Guarantor, by way of merger, consolidation or otherwise,
or a sale or other disposition of all of the Equity Interests of
any Guarantor then held by the Issuer and the Restricted
Subsidiaries, then that Guarantor will be released and relieved
of any obligations under its Note Guarantee; <I>provided
</I>that the Net Available Proceeds of such sale or

<P align="center">60

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
other disposition shall be applied in accordance with the
applicable provisions of the Indenture, to the extent required
thereby. See &#147;&#151;&nbsp;Certain Covenants&nbsp;&#151;
Limitations on Asset Sales.&#148; In addition, the Indenture
will provide that any Guarantor that is designated as an
Unrestricted Subsidiary or that otherwise ceases to be a
Guarantor, in each case in accordance with the provisions of the
Indenture, will be released from its Note Guarantee upon
effectiveness of such designation or when it first ceases to be
a Restricted Subsidiary, as the case may be.
</DIV>

<P align="left">
<B>Optional Redemption</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Except as set forth below, the notes may not be redeemed prior
to June&nbsp;1, 2006. At any time on or after June&nbsp;1, 2006,
the Issuer, at its option, may redeem the notes, in whole or in
part, at the redemption prices (expressed as percentages of
principal amount) set forth below, together with accrued and
unpaid interest thereon, if any, to the redemption date, if
redeemed during the 12-month period beginning June&nbsp;1 of the
years indicated:

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="77%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Optional</FONT></B></TD>
</TR>

<TR>
	<TD align="center" nowrap><B><FONT size="2">Year</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Redemption Price</FONT></B></TD>
</TR>

<TR>
	<TD align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">2006
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">104.875</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">2007
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">103.250</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">2008
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">101.625</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">2009 and thereafter
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">100.000</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At any time prior to June&nbsp;1, 2004, the Issuer may redeem up
to 35% of the aggregate principal amount of the notes with the
net cash proceeds of one or more Qualified Equity Offerings at a
redemption price equal to 109.750% of the principal amount of
the notes to be redeemed, plus accrued and unpaid interest
thereon, if any, to the date of redemption; <I>provided </I>that
(1)&nbsp;at least 65% of the aggregate principal amount of notes
issued under the Indenture remains outstanding immediately after
the occurrence of such redemption and (2)&nbsp;the redemption
occurs within 90&nbsp;days of the date of the closing of any
such Qualified Equity Offering.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Issuer may acquire notes by means other than a redemption,
whether pursuant to an issuer tender offer, open market purchase
or otherwise, so long as the acquisition does not otherwise
violate the terms of the Indenture.

<P align="left">
<B>Selection and Notice of Redemption</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the event that less than all of the notes are to be redeemed
at any time pursuant to an optional redemption, selection of the
notes for redemption will be made by the Trustee in compliance
with the requirements of the principal national securities
exchange, if any, on which the notes are listed or, if the notes
are not then listed on a national security exchange, on a <I>pro
rata </I>basis, by lot or by such method as the Trustee shall
deem fair and appropriate; <I>provided, however, </I>that no
notes of a principal amount of $1,000 or less shall be redeemed
in part. In addition, if a partial redemption is made pursuant
to the provisions described in the second paragraph under
&#147;&#151;&nbsp;Optional Redemption,&#148; selection of the
notes or portions thereof for redemption shall be made by the
Trustee only on a <I>pro rata </I>basis or on as nearly a <I>pro
rata </I>basis as is practicable (subject to the procedures of
The Depository Trust Company), unless that method is otherwise
prohibited.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Notice of redemption will be mailed by first-class mail at least
30 but not more than 60&nbsp;days before the date of redemption
to each Holder of notes to be redeemed at its registered
address. If any note is to be redeemed in part only, the notice
of redemption that relates to that note will state the portion
of the principal amount of the note to be redeemed. A new note
in a principal amount equal to the unredeemed portion of the
note will be issued in the name of the Holder of the note upon
cancellation of the original note. On and after the date of
redemption, interest will cease to accrue on notes or portions
thereof called for redemption so long as the Issuer has
deposited with the paying agent for the notes funds in
satisfaction

<P align="center">61

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
of the redemption price (including accrued and unpaid interest
on the notes to be redeemed) pursuant to the Indenture.
</DIV>

<P align="left">
<B>Change of Control</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon the occurrence of any Change of Control, each Holder will
have the right to require that the Issuer purchase that
Holder&#146;s notes for a cash price (the <B>&#147;Change of
Control Purchase Price&#148;</B>) equal to 101% of the principal
amount of the notes to be purchased, plus accrued and unpaid
interest thereon, if any, to the date of purchase.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Within 30&nbsp;days following any Change of Control, the Issuer
will mail, or caused to be mailed, to the Holders a notice:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; describing the transaction or transactions that
	constitute the Change of Control;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; offering to purchase, pursuant to the procedures
	required by the Indenture and described in the notice (a
	<B>&#147;Change of Control Offer&#148;</B>), on a date specified
	in the notice (which shall be a Business Day not earlier than
	30&nbsp;days nor later than 60&nbsp;days from the date the
	notice is mailed) and for the Change of Control Purchase Price,
	all notes properly tendered by such Holder pursuant to such
	Change of Control Offer; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(3)&nbsp; describing the procedures that Holders must follow to
	accept the Change of Control Offer. The Change of Control Offer
	is required to remain open for at least 20&nbsp;Business Days or
	for such longer period as is required by law.</TD>
</TR>

</TABLE>

<P align="left">
The Issuer will publicly announce the results of the Change of
Control Offer on or as soon as practicable after the date of
purchase.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If a Change of Control Offer is made, there can be no assurance
that the Issuer will have available funds sufficient to pay for
all or any of the notes that might be delivered by Holders
seeking to accept the Change of Control Offer. In addition, we
cannot assure you that in the event of a Change of Control the
Issuer will be able to obtain the consents necessary to
consummate a Change of Control Offer from the lenders under
agreements governing outstanding Indebtedness which may prohibit
the offer.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The provisions described above that require us to make a Change
of Control Offer following a Change of Control will be
applicable regardless of whether any other provisions of the
Indenture are applicable. Except as described above with respect
to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the notes to require that
the Issuer purchase or redeem the notes in the event of a
takeover, recapitalization or similar transaction.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Issuer&#146;s obligation to make a Change of Control Offer
will be satisfied if a third party makes the Change of Control
Offer in the manner and at the times and otherwise in compliance
with the requirements applicable to a Change of Control Offer
made by the Issuer and purchases all notes properly tendered and
not withdrawn under the Change of Control Offer.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A &#147;Change of Control&#148; includes certain sales of all or
substantially all of the assets of the Issuer and the Restricted
Subsidiaries. The phrase &#147;all or substantially all&#148; as
used in the Indenture (including as set forth under
&#147;&#151;&nbsp;Certain Covenants&nbsp;&#151; Limitations on
Mergers, Consolidations, Etc.&#148; below) varies according to
the facts and circumstances of the subject transaction, has no
clearly established meaning under New York law (which governs
the Indenture) and is subject to judicial interpretation.
Accordingly, in certain circumstances there may be a degree of
uncertainty in ascertaining whether a particular transaction
would involve a disposition of &#147;all or substantially
all&#148; of the assets of the Issuer, and therefore it may be
unclear as to whether a Change of Control has occurred and
whether the Holders have the right to require the Issuer to
purchase notes.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Issuer will comply with applicable tender offer rules,
including the requirements of Rule&nbsp;14e-l under the Exchange
Act and any other applicable laws and regulations in connection
with the purchase of notes pursuant to a Change of Control
Offer. To the extent that the provisions of any securities laws
or

<P align="center">62

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
regulations conflict with the &#147;Change of Control&#148;
provisions of the Indenture, the Issuer shall comply with the
applicable securities laws and regulations and will not be
deemed to have breached its obligations under the &#147;Change
of Control&#148; provisions of the Indenture by virtue of this
compliance.
</DIV>

<P align="left">
<B>Certain Covenants</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Indenture will contain, among others, the following
covenants:

<P align="left">
<B>&nbsp;&nbsp;</B><I>Limitations on Additional Indebtedness</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Issuer will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, incur any Indebtedness;
<I>provided </I>that the Issuer or any Restricted Subsidiary may
incur additional Indebtedness (including Acquired Indebtedness)
if no Default shall have occurred and be continuing at the time
of or as a consequence of the incurrence of the Indebtedness and
if, after giving effect thereto, either (a)&nbsp;the
Consolidated Fixed Charge Coverage Ratio would be at least 2.00
to 1.00 or (b)&nbsp;the ratio of Consolidated Indebtedness to
Consolidated Tangible Net Worth would be less than 3.00 to 1.00
(either (a)&nbsp;or (b), the <B>&#147;Ratio Exception&#148;</B>).

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Notwithstanding the above, so long as no Default shall have
occurred and be continuing at the time of or as a consequence of
the incurrence of the following Indebtedness, each of the
following shall be permitted (the <B>&#147;Permitted
Indebtedness&#148;</B>):
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; Indebtedness of the Issuer and any Restricted
	Subsidiary under the Credit Facilities in an aggregate amount at
	any time outstanding (whether incurred under the Ratio Exception
	or as Permitted Indebtedness) not to exceed the greater of (x)
	$165.0 million and (y)&nbsp;the amount of the Borrowing Base as
	of the date of such incurrence;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp;the notes and the Note Guarantees issued on the Issue
	Date;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(3)&nbsp; Indebtedness of the Issuer and the Restricted
	Subsidiaries to the extent outstanding on the Issue Date (other
	than Indebtedness referred to in clauses&nbsp;(1) and (2) above,
	and after giving effect to the intended use of proceeds of the
	notes);</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(4)&nbsp; Indebtedness of the Issuer and the Restricted
	Subsidiaries under Hedging Obligations; <I>provided </I>that
	(a)&nbsp;such Hedging Obligations relate to payment obligations
	on Indebtedness otherwise permitted to be incurred by this
	covenant, and (b)&nbsp;the notional principal amount of such
	Hedging Obligations at the time incurred does not exceed the
	principal amount of the Indebtedness to which such Hedging
	Obligations relate;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(5)&nbsp; Indebtedness of the Issuer owed to a Restricted
	Subsidiary and Indebtedness of any Restricted Subsidiary owed to
	the Issuer or any other Restricted Subsidiary; <I>provided,
	however, </I>that (a)&nbsp;any Indebtedness of the Issuer owed
	to a Restricted Subsidiary is unsecured and subordinated,
	pursuant to a written agreement, to the Issuer&#146;s
	obligation, under the Indenture and the notes and (b)&nbsp;upon
	any such Restricted Subsidiary ceasing to be a Restricted
	Subsidiary or such Indebtedness being owed to any Person other
	than the Issuer or a Restricted Subsidiary, the Issuer or such
	Restricted Subsidiary, as applicable, shall be deemed to have
	incurred Indebtedness not permitted by this clause&nbsp;(5);</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(6)&nbsp; Indebtedness in respect of bid, performance or surety
	bonds issued for the account of the Issuer or any Restricted
	Subsidiary in the ordinary course of business, including
	guarantees or obligations of the Issuer or any Restricted
	Subsidiary with respect to letters of credit supporting such
	bid, performance or surety obligations (in each case other than
	for an obligation for money borrowed);</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(7)&nbsp; Purchase Money Indebtedness incurred by the Issuer or
	any Restricted Subsidiary, in an aggregate amount not to exceed
	at any time outstanding $15.0 million;</TD>
</TR>

</TABLE>

<P align="center">63

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(8)&nbsp; Non-Recourse Indebtedness of the Issuer or any
	Restricted Subsidiary incurred for the acquisition, development
	and/or improvement of real property and secured by Liens only on
	such real property;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(9)&nbsp; Indebtedness arising from the honoring by a bank or
	other financial institution of a check, draft or similar
	instrument inadvertently (except in the case of daylight
	overdrafts) drawn against insufficient funds in the ordinary
	course of business; <I>provided, however,</I> that such
	Indebtedness is extinguished within five Business Days of
	incurrence;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(10)&nbsp; Indebtedness arising in connection with endorsement
	of instruments for deposit in the ordinary course of business;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(11)&nbsp; Refinancing Indebtedness with respect to Indebtedness
	incurred pursuant to the Ratio Exception or clause&nbsp;(2) or
	(3) above; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(12)&nbsp; Indebtedness of the Issuer or any Restricted
	Subsidiary in an aggregate amount not to exceed $15.0 million at
	any time outstanding.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For purposes of determining compliance with this covenant, in
the event that an item of Indebtedness meets the criteria of
more than one of the categories of Permitted Indebtedness
described in clauses&nbsp;(1) through (12) above or is entitled
to be incurred pursuant to the Ratio Exception, the Issuer
shall, in its sole discretion, classify such item of
Indebtedness and may divide and classify such Indebtedness in
more than one of the types of Indebtedness described, except
that Indebtedness outstanding under the Credit Facilities on the
Issue Date shall be deemed to have been incurred under
clause&nbsp;(1) above.

<P align="left">
<B>&nbsp;&nbsp;</B><I>Limitations on Layering Indebtedness</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Issuer will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, incur any Indebtedness
that is or purports to be by its terms (or by the terms of any
agreement governing such Indebtedness) contractually
subordinated to any other Indebtedness of the Issuer or of such
Restricted Subsidiary, as the case may be, unless such
Indebtedness is also by its terms (or by the terms of any
agreement governing such Indebtedness) contractually made
expressly subordinate to the notes or the Note Guarantee of such
Restricted Subsidiary, to the same extent and in the same manner
as such Indebtedness is contractually subordinated to such other
Indebtedness of the Issuer or such Restricted Subsidiary, as the
case may be.

<P align="left">
<B>&nbsp;&nbsp;</B><I>Limitations on Restricted Payments</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Issuer will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, make any Restricted
Payment if at the time of such Restricted Payment:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; a Default shall have occurred and be continuing or
	shall occur as a consequence thereof;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; the Issuer cannot incur $1.00 of additional
	Indebtedness pursuant to the Ratio Exception; or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(3)&nbsp; the amount of such Restricted Payment, when added to
	the aggregate amount of all other Restricted Payments made after
	the Issue Date (other than Restricted Payments made pursuant to
	clause&nbsp;(2), (3) or (5) of the next paragraph), exceeds the
	sum (the <B>&#147;Restricted Payments Basket&#148;</B>) of
	(without duplication):</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="94%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(a)&nbsp; 50% of Consolidated Net Income for the period (taken
	as one accounting period) commencing on the first day of the
	first full fiscal quarter commencing after the Issue Date to and
	including the last day of the fiscal quarter ended immediately
	prior to the date of such calculation for which consolidated
	financial statements are available (or, if such Consolidated Net
	Income shall be a deficit, minus 100% of such aggregate
	deficit), <I>plus</I></TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(b)&nbsp; 100% of the aggregate net cash proceeds or the Fair
	Market Value of any assets to be used in a Permitted Business
	(other than securities) received by the Issuer either
	(x)&nbsp;as contributions to the common equity of the Issuer
	after the Issue Date or (y)&nbsp;from the issuance</TD>
</TR>

</TABLE>

<P align="center">64

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="94%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	and sale of Qualified Equity Interests after the Issue Date,
	other than to the extent any such proceeds are used to redeem
	notes in accordance with the second paragraph under
	&#147;&#151;&nbsp;Optional Redemption,&#148; plus</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(c)&nbsp; the aggregate amount by which Indebtedness of the
	Issuer or any Restricted Subsidiary is reduced on the
	Issuer&#146;s balance sheet upon the conversion or exchange
	(other than by a Subsidiary of the Issuer) subsequent to the
	Issue Date into Qualified Equity Interests (less the amount of
	any cash, or the fair value of assets, distributed by the Issuer
	or any Restricted Subsidiary upon such conversion or exchange),
	plus</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(d)&nbsp; in the case of the disposition or repayment of or
	return on any Investment that was treated as a Restricted
	Payment made after the Issue Date, an amount (to the extent not
	included in the computation of Consolidated Net Income) equal to
	the lesser of (i)&nbsp;the return of capital with respect to
	such Investment and (ii)&nbsp;the amount of such Investment that
	was treated as a Restricted Payment, in either case, less the
	cost of the disposition of such Investment and net of taxes, plus</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(e)&nbsp; upon a Redesignation of an Unrestricted Subsidiary as
	a Restricted Subsidiary, the lesser of (i)&nbsp;the Fair Market
	Value of the Issuer&#146;s proportionate interest in such
	Subsidiary immediately following such Redesignation, and
	(ii)&nbsp;the aggregate amount of the Issuer&#146;s Investments
	in such Subsidiary to the extent such Investments reduced the
	amount available for subsequent Restricted Payments under this
	clause&nbsp;(3) and were not previously repaid or otherwise
	reduced, plus</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(f)&nbsp; $10.0 million.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The foregoing provisions will not prohibit:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; the payment by the Issuer or any Restricted Subsidiary
	of any dividend within 60&nbsp;days after the date of
	declaration thereof, if on the date of declaration the payment
	would have complied with the provisions of the Indenture;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; so long as no Default shall have occurred and be
	continuing at the time of or as a consequence of such
	redemption, the redemption of any Equity Interests of the Issuer
	or any Restricted Subsidiary in exchange for, or out of the
	proceeds of the substantially concurrent issuance and sale of,
	Qualified Equity Interests;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(3)&nbsp; so long as no Default shall have occurred and be
	continuing at the time of or as a consequence of such
	redemption, the redemption of Subordinated Indebtedness of the
	Issuer or any Restricted Subsidiary (a)&nbsp;in exchange for, or
	out of the proceeds of the substantially concurrent issuance and
	sale of, Qualified Equity Interests or (b)&nbsp;in exchange for,
	or out of the proceeds of the substantially concurrent
	incurrence of, Refinancing Indebtedness permitted to be incurred
	under the &#147;Limitations on Additional Indebtedness&#148;
	covenant and the other terms of the Indenture;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(4)&nbsp; so long as no Default shall have occurred and be
	continuing at the time of or as a consequence of such
	redemption, the redemption of Equity Interests of the Issuer
	held by officers, directors or employees or former officers,
	directors or employees (or their transferees, estates or
	beneficiaries under their estates), upon their death,
	disability, retirement, severance or termination of employment
	or service; <I>provided</I> that the aggregate cash
	consideration paid for all such redemptions shall not exceed
	$2.0 million during any calendar year (with unused amounts in
	any calendar year being carried over to succeeding calendar
	years subject to a maximum of $4.0 million in any calendar
	year); or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(5)&nbsp; repurchases of Equity Interests deemed to occur upon
	the exercise of stock options if the Equity Interests represents
	a portion of the exercise price thereof;</TD>
</TR>

</TABLE>

<P align="center">65

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">
<I>provided</I> that no issuance and sale of Qualified Equity
Interests pursuant to clause&nbsp;(2) or (3) above shall
increase the Restricted Payments Basket, except to the extent
the proceeds thereof exceed the amounts used to effect the
transactions described therein.

<P align="left">
<B>&nbsp;&nbsp;</B><I>Maintenance of Consolidated Tangible Net
Worth</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If the Issuer&#146;s Consolidated Tangible Net Worth declines
below $60.0 million (the <B>&#147;Minimum Tangible Net
Worth&#148;</B>) at the end of any fiscal quarter, the Company
must deliver an Officers&#146; Certificate to the Trustee within
55&nbsp;days after the end of that fiscal quarter (110&nbsp;days
after the end of any fiscal year) to notify the Trustee. If, on
the last day of each of any two consecutive fiscal quarters (the
last day of the second fiscal quarter being referred to as a
<B>&#147;Deficiency Date&#148;</B>), the Issuer&#146;s
Consolidated Tangible Net Worth is less than the Minimum
Tangible Net Worth of the Issuer, then the Issuer must make an
offer (a <B>&#147;Net Worth Offer&#148;</B>) to all Holders of
notes to purchase 10% of the aggregate principal amount of the
notes originally issued (the <B>&#147;Net Worth Offer
Amount&#148;</B>) at a purchase price equal to 100% of the
principal amount of the notes, plus accrued and unpaid interest
thereon, if any, to the date of purchase; <I>provided,
however</I>, that no such Net Worth Offer shall be required if,
after the Deficiency Date but prior to the date the Issuer is
required to make the Net Worth Offer, capital in cash or Cash
Equivalents is contributed for Qualified Equity Interests of the
Issuer sufficient to increase the Issuer&#146;s Consolidated
Tangible Net Worth after giving effect to such contribution to
an amount equal to or above the Minimum Tangible Net Worth.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Issuer must make the Net Worth Offer no later than
65&nbsp;days after each Deficiency Date (120&nbsp;days if such
Deficiency Date is the last day of the Issuer&#146;s fiscal
year). The Net Worth Offer is required to remain open for a
period of 20&nbsp;Business Days following its commencement or
for such longer period as required by law. The Issuer is
required to purchase the Net Worth Offer Amount of the notes on
a designated date no later than five Business Days after the
termination of the Net Worth Offer, or if less than the Net
Worth Offer Amount of notes shall have been tendered, all notes
then tendered.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If the aggregate principal amount of notes tendered exceeds the
Net Worth Offer Amount, the Issuer is required to purchase the
notes tendered to it <I>pro rata</I> among the notes tendered
(with such adjustments as may be appropriate so that only notes
in denominations of $1,000 and integral multiples thereof shall
be purchased).

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In no event will the failure of the Issuer&#146;s Consolidated
Tangible Net Worth to equal or exceed the Minimum Tangible Net
Worth at the end of any fiscal quarter be counted toward the
requirement to make more than one Net Worth Offer. The Issuer
may reduce the principal amount of notes to be purchased
pursuant to the Net Worth Offer by subtracting 100% of the
principal amount (excluding premium) of the notes redeemed by
the Issuer prior to the purchase (otherwise than under this
provision). The Issuer, however, may not credit notes that have
been previously used as a credit against any obligation to
repurchase notes pursuant to this provision.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Issuer will comply with applicable tender offer rules,
including the requirements of Rule&nbsp;14e-1 under the Exchange
Act and any other applicable laws and regulations in connection
with the purchase of notes pursuant to a Net Worth Offer. To the
extent that the provisions of any securities laws or regulations
conflict with the &#147;Net Worth Offer&#148; provisions of the
Indenture, the Issuer shall comply with the applicable
securities laws and regulations and will not be deemed to have
breached its obligations under the &#147;Net Worth Offer&#148;
provisions of the Indenture by virtue of this compliance.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If a Net Worth Offer is made, there can be no assurance that the
Issuer will have available funds sufficient to pay for all or
any of the notes that might be delivered by Holders seeking to
accept the Net Worth Offer. In addition, we cannot assure you
that the Issuer will be able to obtain the consents necessary to
consummate a Net Worth Offer from the lenders under agreements
governing outstanding Indebtedness which may prohibit the offer.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Issuer&#146;s Consolidated Tangible Net Worth, on a pro
forma basis, was approximately $99.7 million as of
March&nbsp;31, 2001.

<P align="center">66

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="1%"></TD>
	<TD width="99%"></TD>
</TR>

<TR valign="top">
	<TD><B>&nbsp;&nbsp;</B></TD>
	<TD>
	<I>Limitations on Dividend and Other Restrictions Affecting
	Restricted Subsidiaries</I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Issuer will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause
or permit to exist or become effective any consensual
encumbrance or consensual restriction on the ability of any
Restricted Subsidiary to:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(a)&nbsp; pay dividends or make any other distributions on or in
	respect of its Equity Interests;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(b)&nbsp; make loans or advances or pay any Indebtedness or
	other obligation owed to the Issuer or any other Restricted
	Subsidiary; or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(c)&nbsp; transfer any of its assets to the Issuer or any other
	Restricted Subsidiary; except for:</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="94%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; encumbrances or restrictions existing under or by
	reason of applicable law;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; encumbrances or restrictions existing under the
	Indenture, the notes and the Note Guarantees;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(3)&nbsp; non-assignment provisions of any contract or any lease
	entered into in the ordinary course of business;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(4)&nbsp; encumbrances or restrictions existing under agreements
	existing on the date of the Indenture (including, without
	limitation, the Credit Facilities) as in effect on that date;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(5)&nbsp; restrictions on the transfer of assets subject to any
	Lien permitted under the Indenture imposed by the holder of such
	Lien;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(6)&nbsp; restrictions on the transfer of assets imposed under
	any agreement to sell such assets permitted under the Indenture
	to any Person pending the closing of such sale;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(7)&nbsp; any instrument governing Acquired Indebtedness, which
	encumbrance or restriction is not applicable to any Person, or
	the assets of any Person, other than the Person or the assets so
	acquired;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(8)&nbsp; encumbrances or restrictions arising in connection
	with Refinancing Indebtedness; provided, however, that any such
	encumbrances and restrictions are not materially more
	restrictive with respect to any Restricted Subsidiary than those
	in effect on the Issue Date with respect to that Restricted
	Subsidiary pursuant to the agreements creating or evidencing the
	Indebtedness being refinanced;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(9)&nbsp; customary provisions in leases, partnership
	agreements, limited liability company organizational governance
	documents, joint venture agreements and other similar agreements
	entered into in the ordinary course of business that restrict
	the transfer of leasehold interests or ownership interests in
	such partnership, limited liability company, joint venture or
	similar Person;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(10)&nbsp; Purchase Money Indebtedness incurred in compliance
	with the covenant described under &#147;&#151;&nbsp;Limitations
	on Additional Indebtedness&#148; that impose restrictions of the
	nature described in clause&nbsp;(c) above on the assets
	acquired; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(11)&nbsp; any encumbrances or restrictions imposed by any
	amendments or refinancings of the contracts, instruments or
	obligations referred to in clauses&nbsp;(1) through (10) above;
	provided that such amendments or refinancings are, in the good
	faith judgment of the Issuer&#146;s Board of Directors, no more
	materially restrictive with respect to such encumbrances and
	restrictions than those prior to such amendment or refinancing.</TD>
</TR>

</TABLE>

<P align="left">
<B>&nbsp;&nbsp;</B><I>Limitations on Transactions with
Affiliates</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Issuer will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, in one transaction or a
series of related transactions, sell, lease, transfer or
otherwise dispose of any of its assets to, or purchase any
assets from, or enter into any contract, agreement,
understanding, loan, advance or

<P align="center">67

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
guarantee with, or for the benefit of, any Affiliate involving
aggregate consideration in excess of $60,000 (an
<B>&#147;Affiliate Transaction&#148;</B>), unless:
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; such Affiliate Transaction is on terms that are no
	less favorable to the Issuer or the relevant Restricted
	Subsidiary than those that may have been obtained in a
	comparable transaction at such time on an arm&#146;s-length
	basis by the Issuer or that Restricted Subsidiary from a Person
	that is not an Affiliate of the Issuer or that Restricted
	Subsidiary; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; the Issuer delivers to the Trustee:</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="94%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(a)&nbsp; with respect to any Affiliate Transaction involving
	aggregate value of $1.0 million or more, an Officers&#146;
	Certificate certifying that such Affiliate Transaction complies
	with clause&nbsp;(1) above;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(b)&nbsp; with respect to any Affiliate Transaction involving
	aggregate value in excess of $2.0 million, an Officers&#146;
	Certificate certifying that such Affiliate Transaction complies
	with clause&nbsp;(1) above and a Secretary&#146;s Certificate
	which sets forth and authenticates a resolution that has been
	adopted by the Independent Directors approving such Affiliate
	Transaction; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(c)&nbsp; with respect to any Affiliate Transaction involving
	aggregate value of $10.0 million or more, the certificates
	described in the preceding clause&nbsp;(b) and (x)&nbsp;a
	written opinion as to the fairness of such Affiliate Transaction
	to the Issuer or such Restricted Subsidiary from a financial
	point of view or (y)&nbsp;a written appraisal supporting the
	value of such Affiliate Transaction, in either case, issued by
	an Independent Financial Advisor.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The foregoing restrictions shall not apply to:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; transactions exclusively between or among (a)&nbsp;the
	Issuer and one or more Restricted Subsidiaries or
	(b)&nbsp;Restricted Subsidiaries; <I>provided</I>, in each case,
	that no Affiliate of the Issuer (other than another Restricted
	Subsidiary) owns Equity Interests of any such Restricted
	Subsidiary;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; reasonable director, officer, employee and consultant
	compensation (including bonuses) and other benefits (including
	retirement, health, stock and other benefit plans) and
	indemnification arrangements;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(3)&nbsp; loans and advances permitted by clause&nbsp;(3) of the
	definition of &#147;Permitted Investments&#148;;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(4)&nbsp; any agreement as in effect as of the Issue Date
	(including the Wells Fargo Credit Agreement) or any extension,
	amendment or modification thereto (so long as any such
	extension, amendment or modification satisfies the requirements
	set forth in clause&nbsp;(1) of the first paragraph of this
	covenant) or any transaction contemplated thereby;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(5)&nbsp; Restricted Payments of the type described in
	clause&nbsp;(1), (2) or (4) of the definition of
	&#147;Restricted Payment&#148; and which are made in accordance
	with the covenant described under &#147;&#151;&nbsp;Limitations
	on Restricted Payments&#148;; or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(6)&nbsp; sales of Qualified Equity Interests for cash by the
	Issuer to an Affiliate.</TD>
</TR>

</TABLE>

<P align="left">
<B>&nbsp;&nbsp;</B><I>Limitations on Liens</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Issuer shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create, incur, assume or
permit or suffer to exist any Lien of any nature whatsoever
against (other than Permitted Liens) any assets of the Issuer or
any Restricted Subsidiary (including Equity Interests of a
Restricted Subsidiary), whether owned at the Issue Date or
thereafter acquired, or any proceeds therefrom, or assign or
otherwise convey any right to receive income or profits
therefrom, which Lien secures Indebtedness or trade payables,
unless contemporaneously therewith:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; in the case of any Lien securing an obligation that
	ranks <I>pari passu</I> with the notes or a Note Guarantee,
	effective provision is made to secure the notes or such Note
	Guarantee, as the case may</TD>
</TR>

</TABLE>

<P align="center">68

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	be, at least equally and ratably with or prior to such
	obligation with a Lien on the same collateral; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; in the case of any Lien securing an obligation that is
	subordinated in right of payment to the notes or a Note
	Guarantee, effective provision is made to secure the notes or
	such Note Guarantee, as the case may be, with a Lien on the same
	collateral that is prior to the Lien securing such subordinated
	obligation, in each case, for so long as such obligation is
	secured by such Lien.</TD>
</TR>

</TABLE>

<P align="left">
<B>&nbsp;&nbsp;</B><I>Limitations on Asset Sales</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Issuer will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, consummate any Asset Sale
unless:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; the Issuer or such Restricted Subsidiary receives
	consideration at the time of such Asset Sale at least equal to
	the Fair Market Value of the assets included in such Asset Sale;
	and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; at least 75% of the total consideration received in
	such Asset Sale or series of related Asset Sales consists of
	cash or Cash Equivalents.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For purposes of clause&nbsp;(2), the following shall be deemed
to be cash:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(a)&nbsp; the amount (without duplication) of any Indebtedness
	(other than Subordinated Indebtedness) of the Issuer or such
	Restricted Subsidiary that is expressly assumed by the
	transferee in such Asset Sale and with respect to which the
	Issuer or such Restricted Subsidiary, as the case may be, is
	unconditionally released by the holder of such Indebtedness,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(b)&nbsp; the amount of any obligations received from such
	transferee that are within 30&nbsp;days converted by the Issuer
	or such Restricted Subsidiary to cash (to the extent of the cash
	actually so received), and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(c)&nbsp; the Fair Market Value of any assets (other than
	securities, unless such securities represent Equity Interests in
	an entity engaged solely in a Permitted Business, such entity
	becomes a Restricted Subsidiary and the Issuer or a Restricted
	Subsidiary acquires voting and management control of such
	entity) received by the Issuer or any Restricted Subsidiary to
	be used by it in the Permitted Business.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If at any time any non-cash consideration received by the Issuer
or any Restricted Subsidiary of the Issuer, as the case may be,
in connection with any Asset Sale is repaid or converted into or
sold or otherwise disposed of for cash (other than interest
received with respect to any such non-cash consideration), then
the date of such repayment, conversion or disposition shall be
deemed to constitute the date of an Asset Sale hereunder and the
Net Available Proceeds thereof shall be applied in accordance
with this covenant.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If the Issuer or any Restricted Subsidiary engages in an Asset
Sale, the Issuer or such Restricted Subsidiary shall, no later
than one year following the consummation thereof, apply all or
any of the Net Available Proceeds therefrom to:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; repay any Indebtedness under the Credit Facilities;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; repay any Indebtedness which was secured by the assets
	sold in such Asset Sale; and/or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(3)&nbsp; invest all or any part of the Net Available Proceeds
	thereof in the purchase of assets (other than securities, unless
	such securities represent Equity Interests in an entity engaged
	solely in a Permitted Business, such entity becomes a Restricted
	Subsidiary and the Issuer or a Restricted Subsidiary acquires
	voting and management control of such entity) to be used by the
	Issuer or any Restricted Subsidiary in the Permitted Business.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The amount of Net Available Proceeds not applied or invested as
provided in this paragraph will constitute <B>&#147;Excess
Proceeds.&#148;</B>

<P align="center">69

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
When the aggregate amount of Excess Proceeds equals or exceeds
$10.0 million, the Issuer will be required to make an offer to
purchase from all Holders and, if applicable, redeem (or make an
offer to do so) any Pari Passu Indebtedness of the Issuer the
provisions of which require the Issuer to redeem such
Indebtedness with the proceeds from any Asset Sales (or offer to
do so), in an aggregate principal amount of notes and such Pari
Passu Indebtedness equal to the amount of such Excess Proceeds
as follows:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; the Issuer will (a)&nbsp;make an offer to purchase (a
	<B>&#147;Net Proceeds Offer&#148;</B>) to all Holders in
	accordance with the procedures set forth in the Indenture, and
	(b)&nbsp;redeem (or make an offer to do so) any such other Pari
	Passu Indebtedness, pro rata in proportion to the respective
	principal amounts of the notes and such other Indebtedness
	required to be redeemed, the maximum principal amount of notes
	and Pari Passu Indebtedness that may be redeemed out of the
	amount (the <B>&#147;Payment Amount&#148;</B>) of such Excess
	Proceeds;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; the offer price for the notes will be payable in cash
	in an amount equal to 100% of the principal amount of the notes
	tendered pursuant to a Net Proceeds Offer, plus accrued and
	unpaid interest thereon, if any, to the date such Net Proceeds
	Offer is consummated (the <B>&#147;Offered Price&#148;</B>), in
	accordance with the procedures set forth in the Indenture and
	the redemption price for such Pari Passu Indebtedness (the
	<B>&#147;Pari Passu Indebtedness Price&#148;</B>) shall be as
	set forth in the related documentation governing such
	Indebtedness;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(3)&nbsp; if the aggregate Offered Price of notes validly
	tendered and not withdrawn by Holders thereof exceeds the <I>pro
	rata </I>portion of the Payment Amount allocable to the notes,
	notes to be purchased will be selected on a <I>pro rata
	</I>basis; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(4)&nbsp; upon completion of such Net Proceeds Offer in
	accordance with the foregoing provisions, the amount of Excess
	Proceeds with respect to which such Net Proceeds Offer was made
	shall be deemed to be zero.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To the extent that the sum of the aggregate Offered Price of
notes tendered pursuant to a Net Proceeds Offer and the
aggregate Pari Passu Indebtedness Price paid to the holders of
such Pari Passu Indebtedness is less than the Payment Amount
relating thereto (such shortfall constituting a <B>&#147;Net
Proceeds Deficiency&#148;</B>), the Issuer may use the Net
Proceeds Deficiency, or a portion thereof, for general corporate
purposes, subject to the provisions of the Indenture.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the event of the transfer of substantially all (but not all)
of the assets of the Issuer and the Restricted Subsidiaries as
an entirety to a Person in a transaction covered by and effected
in accordance with the covenant described under
&#147;&#151;&nbsp;Limitations on Mergers, Consolidations,
Etc.,&#148; the successor corporation shall be deemed to have
sold for cash at Fair Market Value the assets of the Issuer and
the Restricted Subsidiaries not so transferred for purposes of
this covenant, and shall comply with the provisions of this
covenant with respect to such deemed sale as if it were an Asset
Sale (with such Fair Market Value being deemed to be Net
Available Proceeds for such purpose).

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Issuer will comply with applicable tender offer rules,
including the requirements of Rule&nbsp;14e-1 under the Exchange
Act and any other applicable laws and regulations in connection
with the purchase of notes pursuant to a Net Proceeds Offer. To
the extent that the provisions of any securities laws or
regulations conflict with the &#147;Limitations on Asset
Sales&#148; provisions of the Indenture, the Issuer shall comply
with the applicable securities laws and regulations and will not
be deemed to have breached its obligations under the
&#147;Limitations on Asset Sales&#148; provisions of the
Indenture by virtue of this compliance.

<P align="left">
<B>&nbsp;&nbsp;</B><I>Limitations on Designation of Unrestricted
Subsidiaries</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Issuer may designate any Subsidiary of the Issuer as an
&#147;Unrestricted Subsidiary&#148; under the Indenture (a
<B>&#147;Designation&#148;</B>) only if:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; no Default shall have occurred and be continuing at
	the time of or after giving effect to such Designation; and</TD>
</TR>

</TABLE>

<P align="center">70

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; the Issuer would be permitted to make, at the time of
	such Designation, (a)&nbsp;a Permitted Investment or (b)&nbsp;an
	Investment pursuant to the first paragraph of
	&#147;&#151;&nbsp;Limitations on Restricted Payments&#148;
	above, in either case, in an amount (the <B>&#147;Designation
	Amount&#148;</B>) equal to the Fair Market Value of the
	Issuer&#146;s proportionate interest in such Subsidiary on such
	date.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
No Subsidiary shall be Designated as an &#147;Unrestricted
Subsidiary&#148; unless such Subsidiary:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; has no Indebtedness other than Permitted Unrestricted
	Subsidiary Debt;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; is not party to any agreement, contract, arrangement
	or understanding with the Issuer or any Restricted Subsidiary
	unless the terms of the agreement, contract, arrangement or
	understanding are no less favorable to the Issuer or the
	Restricted Subsidiary than those that might be obtained at the
	time from Persons who are not Affiliates of the Issuer or such
	Restricted Subsidiary;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(3)&nbsp; is a Person with respect to which neither the Issuer
	nor any Restricted Subsidiary has any direct or indirect
	obligation (a)&nbsp;to subscribe for additional Equity Interests
	or (b)&nbsp;to maintain or preserve the Person&#146;s financial
	condition or to cause the Person to achieve any specified levels
	of operating results; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(4)&nbsp; has not guaranteed or otherwise directly or indirectly
	provided credit support for any Indebtedness of the Issuer or
	any Restricted Subsidiary, except for any guarantee given solely
	to support the pledge by the Issuer or any Restricted Subsidiary
	of the Equity Interests of such Unrestricted Subsidiary, which
	guarantee is not recourse to the Issuer or any Restricted
	Subsidiary, and except to the extent the amount thereof
	constitutes a Restricted Payment permitted pursuant to the
	covenant described under &#147;&#151;&nbsp;Limitations on
	Restricted Payments.&#148;</TD>
</TR>

</TABLE>

<P align="left">
If, at any time, any Unrestricted Subsidiary fails to meet the
preceding requirements as an Unrestricted Subsidiary, it shall
thereafter cease to be an Unrestricted Subsidiary for purposes
of the Indenture and any Indebtedness of the Subsidiary and any
Liens on assets of such Subsidiary shall be deemed to be
incurred by a Restricted Subsidiary as of the date and, if the
Indebtedness is not permitted to be incurred under the covenant
described under &#147;&#151;&nbsp;Limitations on Additional
Indebtedness&#148; or the Lien is not permitted under the
covenant described under &#147;&#151;&nbsp;Limitations on
Liens,&#148; the Issuer shall be in default of the applicable
covenant.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of the Issue Date, the Issuer shall be deemed to have
Designated Texas Home Mortgage Company as an Unrestricted
Subsidiary.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Issuer may redesignate an Unrestricted Subsidiary as a
Restricted Subsidiary (a <B>&#147;Redesignation&#148;</B>) only
if:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; no Default shall have occurred and be continuing at
	the time of and after giving effect to such Redesignation; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; all Liens, Indebtedness and Investments of such
	Unrestricted Subsidiary outstanding immediately following such
	Redesignation would, if incurred or made at such time, have been
	permitted to be incurred or made for all purposes of the
	Indenture.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All Designations and Redesignations must be evidenced by
resolutions of the Board of Directors of the Issuer, delivered
to the Trustee certifying compliance with the foregoing
provisions.

<P align="left">
<B>&nbsp;&nbsp;</B><I>Limitations on Mergers, Consolidations,
Etc.</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Issuer will not, directly or indirectly, in a single
transaction or a series of related transactions,
(a)&nbsp;consolidate or merge with or into (other than a merger
that satisfies the requirements of clause&nbsp;(1) below with a
Wholly-Owned Restricted Subsidiary solely for the purpose of
changing the Issuer&#146;s jurisdiction of incorporation to
another State of the United States), or sell, lease, transfer,
convey or

<P align="center">71

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
otherwise dispose of or assign all or substantially all of the
assets of the Issuer or the Issuer and the Restricted
Subsidiaries (taken as a whole) or (b)&nbsp;adopt a Plan of
Liquidation unless, in either case:
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; either:</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="94%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(a)&nbsp; the Issuer will be the surviving or continuing Person;
	or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(b)&nbsp; the Person formed by or surviving such consolidation
	or merger or to which such sale, lease, conveyance or other
	disposition shall be made (or, in the case of a Plan of
	Liquidation, any Person to which assets are transferred)
	(collectively, the <B>&#147;Successor&#148;</B>) is a
	corporation or limited liability company organized and existing
	under the laws of any State of the United States of America or
	the District of Columbia, and the Successor expressly assumes,
	by supplemental indenture in form and substance satisfactory to
	the Trustee, all of the obligations of the Issuer under the
	notes, the Indenture and the Registration Rights Agreement;
	<I>provided </I>that at any time the Successor is a limited
	liability company, there shall be a co-issuer of the notes that
	is a corporation;</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; immediately prior to and immediately after giving
	effect to such transaction and the assumption of the obligations
	as set forth in clause&nbsp;(1)(b) above and the incurrence of
	any Indebtedness to be incurred in connection therewith, no
	Default shall have occurred and be continuing; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(3)&nbsp; immediately after and giving effect to such
	transaction and the assumption of the obligations set forth in
	clause&nbsp;(1)(b) above and the incurrence of any Indebtedness
	to be incurred in connection therewith, and the use of any net
	proceeds therefrom on a pro forma basis, (a)&nbsp;the
	Consolidated Net Worth of the Issuer or the Successor, as the
	case may be, would be at least equal to the Consolidated Net
	Worth of the Issuer immediately prior to such transaction and
	(b)&nbsp;the Issuer or the Successor, as the case may be, could
	incur $1.00 of additional Indebtedness pursuant to the Ratio
	Exception.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For purposes of this covenant, any Indebtedness of the Successor
which was not Indebtedness of the Issuer immediately prior to
the transaction shall be deemed to have been incurred in
connection with such transaction.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Except as provided under the caption &#147;&#151;&nbsp;Note
Guarantees,&#148; no Guarantor may consolidate with or merge
with or into (whether or not such Guarantor is the surviving
Person) another Person, whether or not affiliated with such
Guarantor, unless:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; either:</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="94%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(a)&nbsp; such Guarantor will be the surviving or continuing
	Person; or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(b)&nbsp; the Person formed by or surviving any such
	consolidation or merger assumes, by supplemental indenture in
	form and substance satisfactory to the Trustee, all of the
	obligations of such Guarantor under the Note Guarantee of such
	Guarantor, the Indenture and the Registration Rights Agreement;
	and</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; immediately after giving effect to such transaction,
	no Default shall have occurred and be continuing.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series
of transactions) of all or substantially all of the assets of
one or more Restricted Subsidiaries, the Equity Interests of
which constitute all or substantially all of the assets of the
Issuer, will be deemed to be the transfer of all or
substantially all of the assets of the Issuer.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon any consolidation, combination or merger of the Issuer or a
Guarantor, or any transfer of all or substantially all of the
assets of the Issuer in accordance with the foregoing, in which
the Issuer or such Guarantor is not the continuing obligor under
the notes or its Note Guarantee, the surviving entity formed by
such consolidation or into which the Issuer or such Guarantor is
merged or to which the conveyance, lease or transfer is made
will succeed to, and be substituted for, and may exercise every
right and power

<P align="center">72

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
of, the Issuer or such Guarantor under the Indenture, the notes
and the Note Guarantees with the same effect as if such
surviving entity had been named therein as the Issuer or such
Guarantor and, except in the case of a conveyance, transfer or
lease, the Issuer or such Guarantor, as the case may be, will be
released from the obligation to pay the principal of and
interest on the notes or in respect of its Note Guarantee, as
the case may be, and all of the Issuer&#146;s or such
Guarantor&#146;s other obligations and covenants under the
notes, the Indenture and its Note Guarantee, if applicable.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Notwithstanding the foregoing, any Restricted Subsidiary may
merge into the Issuer or another Restricted Subsidiary.

<P align="left">
<B>&nbsp;&nbsp;</B><I>Additional Note Guarantees</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If, after the Issue Date, (a)&nbsp;the Issuer or any Restricted
Subsidiary shall acquire or create another Subsidiary (other
than a Subsidiary that has been designated an Unrestricted
Subsidiary) or (b)&nbsp;any Unrestricted Subsidiary is
redesignated a Restricted Subsidiary, then, in each such case,
the Issuer shall cause such Restricted Subsidiary to:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; execute and deliver to the Trustee (a)&nbsp;a
	supplemental indenture in form and substance satisfactory to the
	Trustee pursuant to which such Restricted Subsidiary shall
	unconditionally guarantee all of the Issuer&#146;s obligations
	under the notes and the Indenture and (b)&nbsp;a notation of
	guarantee in respect of its Note Guarantee; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; deliver to the Trustee one or more opinions of counsel
	that such supplemental indenture (a)&nbsp;has been duly
	authorized, executed and delivered by such Restricted Subsidiary
	and (b)&nbsp;constitutes a valid and legally binding obligation
	of such Restricted Subsidiary in accordance with its terms.</TD>
</TR>

</TABLE>

<P align="left">
<B>&nbsp;&nbsp;</B><I>Conduct of Business</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Issuer will not, and will not permit any Restricted
Subsidiary to, engage in any business other than the Permitted
Business.

<P align="left">
<B>&nbsp;&nbsp;</B><I>Reports</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Whether or not required by the Commission, so long as any notes
are outstanding, the Issuer will furnish to the Holders of
notes, within the time periods specified in the
Commission&#146;s rules and regulations (including any grace
periods or extensions permitted by the Commission):
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; all quarterly and annual financial information that
	would be required to be contained in a filing with the
	Commission on Forms&nbsp;10-Q and 10-K if the Issuer were
	required to file these Forms, including a
	&#147;Management&#146;s Discussion and Analysis of Financial
	Condition and Results of Operations&#148; and, with respect to
	the annual information only, a report on the annual financial
	statements by the Issuer&#146;s certified independent
	accountants; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; all current reports that would be required to be filed
	with the Commission on Form&nbsp;8-K if the Issuer were required
	to file these reports.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, whether or not required by the Commission, the
Issuer will file a copy of all of the information and reports
referred to in clauses&nbsp;(1) and (2) above with the
Commission for public availability within the time periods
specified in the Commission&#146;s rules and regulations (unless
the Commission will not accept the filing) and make the
information available to securities analysts and prospective
investors upon request. The Issuer and the Guarantors have
agreed that, for so long as any notes remain outstanding, the
Issuer will furnish to the Holders and to securities analysts
and prospective investors, upon their request, the information
required to be delivered pursuant to Rule&nbsp;144A(d)(4) under
the Securities Act.

<P align="center">73

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">
<B>Events of Default</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each of the following is an <B>&#147;Event of Default&#148;</B>:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; failure by the Issuer to pay interest on any of the
	notes when it becomes due and payable and the continuance of any
	such failure for 30&nbsp;days;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; failure by the Issuer to pay the principal on any of
	the notes when it becomes due and payable, whether at stated
	maturity, upon redemption, upon purchase, upon acceleration or
	otherwise;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(3)&nbsp; failure by the Issuer to comply with any of its
	agreements or covenants described above under
	&#147;&#151;&nbsp;Certain Covenants&nbsp;&#151; Limitations on
	Mergers, Consolidations, Etc.,&#148; or in respect of its
	obligations to make a Change of Control Offer as described above
	under &#147;&#151;&nbsp;Change of Control&#148;;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(4)&nbsp; failure by the Issuer to comply with any other
	agreement or covenant in the Indenture and continuance of this
	failure for 30&nbsp;days after notice of the failure has been
	given to the Issuer by the Trustee or by the Holders of at least
	25% of the aggregate principal amount of the notes then
	outstanding;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(5)&nbsp; default under any mortgage, indenture or other
	instrument or agreement under which there may be issued or by
	which there may be secured or evidenced Indebtedness of the
	Issuer or any Restricted Subsidiary, whether such Indebtedness
	now exists or is incurred after the Issue Date, which default:</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="94%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(a)&nbsp; is caused by a failure to pay when due principal on
	such Indebtedness within the applicable express grace period,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(b)&nbsp; results in the acceleration of such Indebtedness prior
	to its express final maturity or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(c)&nbsp; results in the commencement of judicial proceedings to
	foreclose upon, or to exercise remedies under applicable law or
	applicable security documents to take ownership of, the assets
	securing such Indebtedness, and</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	in each case, the principal amount of such Indebtedness,
	together with any other Indebtedness with respect to which an
	event described in clause&nbsp;(a), (b) or (c) has occurred and
	is continuing, aggregates $10.0 million or more;</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(6)&nbsp; one or more judgments or orders that exceed $10.0
	million in the aggregate (net of amounts covered by insurance or
	bonded) for the payment of money have been entered by a court or
	courts of competent jurisdiction against the Issuer or any
	Restricted Subsidiary and such judgment or judgments have not
	been satisfied, stayed, annulled or rescinded within 60 days of
	being entered;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(7)&nbsp; the Issuer or any Significant Subsidiary pursuant to
	or within the meaning of any Bankruptcy Law:</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="94%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(a)&nbsp; commences a voluntary case,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(b)&nbsp; consents to the entry of an order for relief against
	it in an involuntary case,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(c)&nbsp; consents to the appointment of a Custodian of it or
	for all or substantially all of its assets, or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(d)&nbsp; makes a general assignment for the benefit of its
	creditors;</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(8)&nbsp; a court of competent jurisdiction enters an order or
	decree under any Bankruptcy Law that:</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="94%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(a)&nbsp; is for relief against the Issuer or any Significant
	Subsidiary as debtor in an involuntary case,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(b)&nbsp; appoints a Custodian of the Issuer or any Significant
	Subsidiary or a Custodian for all or substantially all of the
	assets of the Issuer or any Significant Subsidiary, or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(c)&nbsp; orders the liquidation of the Issuer or any
	Significant Subsidiary,</TD>
</TR>

</TABLE>

<P align="center">74

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="94%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	and the order or decree remains unstayed and in effect for
	60&nbsp;days; or</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(9)&nbsp; any Note Guarantee of any Significant Subsidiary
	ceases to be in full force and effect (other than in accordance
	with the terms of such Note Guarantee and the Indenture) or is
	declared null and void and unenforceable or found to be invalid
	or any Guarantor denies its liability under its Note Guarantee
	(other than by reason of release of a Guarantor from its Note
	Guarantee in accordance with the terms of the Indenture and the
	Note Guarantee).</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If an Event of Default (other than an Event of Default specified
in clause&nbsp;(7) or (8) above with respect to the Issuer),
shall have occurred and be continuing under the Indenture, the
Trustee, by written notice to the Issuer, or the Holders of at
least 25% in aggregate principal amount of the notes then
outstanding by written notice to the Issuer and the Trustee, may
declare all amounts owing under the notes to be due and payable
immediately. Upon such declaration of acceleration, the
aggregate principal of and accrued and unpaid interest on the
outstanding notes shall immediately become due and payable;
<I>provided, however</I>, that after such acceleration, but
before a judgment or decree based on acceleration, the Holders
of a majority in aggregate principal amount of such outstanding
notes may, under certain circumstances, rescind and annul such
acceleration if all Events of Default, other than the nonpayment
of accelerated principal and interest, have been cured or waived
as provided in the Indenture. If an Event of Default specified
in clause&nbsp;(7) or (8) with respect to the Issuer occurs, all
outstanding notes shall become due and payable without any
further action or notice.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Trustee shall, within 30&nbsp;days after the occurrence of
any Default with respect to the notes, give the Holders notice
of all uncured Defaults thereunder known to it; <I>provided,
however</I>, that, except in the case of an Event of Default in
payment with respect to the notes or a Default in complying with
&#145;&#151;&nbsp;Certain Covenants&nbsp;&#151; Limitations on
Mergers, Consolidations, Etc.,&#148; the Trustee shall be
protected in withholding such notice if and so long as a
committee of its trust officers in good faith determines that
the withholding of such notice is in the interest of the Holders.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
No Holder will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless
the Trustee:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; has failed to act for a period of 60&nbsp;days after
	receiving written notice of a continuing Event of Default by
	such Holder and a request to act by Holders of at least 25% in
	aggregate principal amount of notes outstanding;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; has been offered indemnity satisfactory to it in its
	reasonable judgment; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(3)&nbsp; has not received from the Holders of a majority in
	aggregate principal amount of the outstanding notes a direction
	inconsistent with such request.</TD>
</TR>

</TABLE>

<P align="left">
However, such limitations do not apply to a suit instituted by a
Holder of any note for enforcement of payment of the principal
of or interest on such note on or after the due date therefor
(after giving effect to the grace period specified in clause
(1)&nbsp;of the first paragraph of this &#147;&#151;&nbsp;Events
of Default&#148; section).

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Issuer is required to deliver to the Trustee annually a
statement regarding compliance with the Indenture and, upon any
Officer of the Issuer becoming aware of any Default, a statement
specifying such Default and what action the Issuer is taking or
proposes to take with respect thereto.

<P align="left">
<B>Legal Defeasance and Covenant Defeasance</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Issuer may, at its option and at any time, elect to have its
obligations and the obligations of the Guarantors discharged
with respect to the outstanding notes (<B>&#147;Legal
Defeasance&#148;</B>). Legal Defeasance means that the Issuer
and the Guarantors shall be deemed to have paid and discharged
the entire indebtedness represented by the notes and the Note
Guarantees, and the Indenture shall cease to be of further
effect as to all outstanding notes and Note Guarantees, except
as to
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; rights of Holders to receive payments in respect of
	the principal of and interest on the notes when such payments
	are due from the trust funds referred to below,</TD>
</TR>

</TABLE>

<P align="center">75

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; the Issuer&#146;s obligations with respect to the
	notes concerning issuing temporary notes, registration of notes,
	mutilated, destroyed, lost or stolen notes, and the maintenance
	of an office or agency for payment and money for security
	payments held in trust,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(3)&nbsp; the rights, powers, trust, duties, and immunities of
	the Trustee, and the Issuer&#146;s obligation in connection
	therewith, and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(4)&nbsp; the Legal Defeasance provisions of the Indenture.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, the Issuer may, at its option and at any time,
elect to have its obligations and the obligations of the
Guarantors released with respect to most of the covenants under
the Indenture, except as described otherwise in the Indenture
(<B>&#147;Covenant Defeasance&#148;</B>), and thereafter any
omission to comply with such obligations shall not constitute a
Default. In the event Covenant Defeasance occurs, certain Events
of Default (not including non-payment and, solely for a period
of 91&nbsp;days following the deposit referred to in
clause&nbsp;(1) of the next paragraph, bankruptcy, receivership,
rehabilitation and insolvency events) will no longer apply.
Covenant Defeasance will not be effective until such bankruptcy,
receivership, rehabilitation and insolvency events no longer
apply. The Issuer may exercise its Legal Defeasance option
regardless of whether it previously exercised Covenant
Defeasance.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In order to exercise either Legal Defeasance or Covenant
Defeasance:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; the Issuer must irrevocably deposit with the Trustee,
	in trust, for the benefit of the Holders, U.S. legal tender,
	U.S. Government Obligations or a combination thereof, in such
	amounts as will be sufficient (without reinvestment) in the
	opinion of a nationally recognized firm of independent public
	accountants selected by the Issuer, to pay the principal of and
	interest on the notes on the stated date for payment or on the
	redemption date of the principal or installment of principal of
	or interest on the notes, and the Trustee must have a valid,
	perfected, exclusive security interest in such trust,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; in the case of Legal Defeasance, the Issuer shall have
	delivered to the Trustee an opinion of counsel in the United
	States reasonably acceptable to the Trustee confirming that:</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="94%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(a)&nbsp; the Issuer has received from, or there has been
	published by the Internal Revenue Service, a ruling, or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(b)&nbsp; since the date of the Indenture, there has been a
	change in the applicable U.S. federal income tax law,</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	in either case to the effect that, and based thereon this
	opinion of counsel shall confirm that, the Holders will not
	recognize income, gain or loss for U.S. federal income tax
	purposes as a result of the Legal Defeasance and will be subject
	to U.S. federal income tax on the same amounts, in the same
	manner and at the same times as would have been the case if such
	Legal Defeasance had not occurred,</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(3)&nbsp; in the case of Covenant Defeasance, the Issuer shall
	have delivered to the Trustee an opinion of counsel in the
	United States reasonably acceptable to the Trustee confirming
	that the Holders will not recognize income, gain or loss for
	U.S. federal income tax purposes as a result of such Covenant
	Defeasance and will be subject to U.S. federal income tax on the
	same amounts, in the same manner and at the same times as would
	have been the case if the Covenant Defeasance had not occurred,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(4)&nbsp; no Default shall have occurred and be continuing on
	the date of such deposit (other than a Default resulting from
	the borrowing of funds to be applied to such deposit and the
	grant of any Lien securing such borrowing),</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(5)&nbsp; the Legal Defeasance or Covenant Defeasance shall not
	result in a breach or violation of, or constitute a default
	under the Indenture or any other material agreement or
	instrument to which the Issuer or any of its Subsidiaries is a
	party or by which the Issuer or any of its Subsidiaries is bound,</TD>
</TR>

</TABLE>

<P align="center">76

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(6)&nbsp; the Issuer shall have delivered to the Trustee an
	Officers&#146; Certificate stating that the deposit was not made
	by it with the intent of preferring the Holders over any other
	of its creditors or with the intent of defeating, hindering,
	delaying or defrauding any other of its creditors or others, and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(7)&nbsp; the Issuer shall have delivered to the Trustee an
	Officers&#146; Certificate and an opinion of counsel, each
	stating that the conditions provided for in, in the case of the
	Officers&#146; Certificate, clauses&nbsp;(1) through (6) and, in
	the case of the opinion of counsel, clauses&nbsp;(1) (with
	respect to the validity and perfection of the security
	interest), (2) and/or (3) and (5) of this paragraph have been
	complied with.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If the funds deposited with the Trustee to effect Covenant
Defeasance are insufficient to pay the principal of and interest
on the notes when due, then our obligations and the obligations
of Guarantors under the Indenture will be revived and no such
defeasance will be deemed to have occurred.

<P align="left">
<B>Satisfaction and Discharge</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Indenture will be discharged and will cease to be of further
effect (except as to rights of registration of transfer or
exchange of notes which shall survive until all notes have been
canceled) as to all outstanding notes when either
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; all the notes that have been authenticated and
	delivered (except lost, stolen or destroyed notes which have
	been replaced or paid and notes for whose payment money has been
	deposited in trust or segregated and held in trust by the Issuer
	and thereafter repaid to the Issuer or discharged from this
	trust) have been delivered to the Trustee for cancellation, or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; (a)&nbsp;all notes not delivered to the Trustee for
	cancellation otherwise have become due and payable or have been
	called for redemption pursuant to the provisions described under
	&#147;&#151;&nbsp;Optional Redemption,&#148; and the Issuer has
	irrevocably deposited or caused to be deposited with the Trustee
	trust funds in trust in an amount of money sufficient to pay and
	discharge the entire Indebtedness (including all principal and
	accrued interest) on the notes not theretofore delivered to the
	Trustee for cancellation,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(b)&nbsp; the Issuer has paid all sums payable by it under the
	Indenture,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(c)&nbsp; the Issuer has delivered irrevocable instructions to
	the Trustee to apply the deposited money toward the payment of
	the notes at maturity or on the date of redemption, as the case
	may be, and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(d)&nbsp; the Trustee, for the benefit of the Holders, has a
	valid, perfected, exclusive security interest in this trust.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, the Issuer must deliver an Officers&#146;
Certificate and an opinion of counsel (as to legal matters)
stating that all conditions precedent to satisfaction and
discharge have been complied with.

<P align="left">
<B>Transfer and Exchange</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A Holder will be able to register the transfer of or exchange
notes only in accordance with the provisions of the Indenture.
The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to
pay any taxes and fees required by law or permitted by the
Indenture. Without the prior consent of the Issuer, the
Registrar is not required (1)&nbsp;to register the transfer of
or exchange any note selected for redemption, (2)&nbsp;to
register the transfer of or exchange any note for a period of
15&nbsp;days before a selection of notes to be redeemed or
(3)&nbsp;to register the transfer or exchange of a note between
a record date and the next succeeding interest payment date.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The notes will be issued in registered form and the registered
Holder will be treated as the owner of such note for all
purposes.

<P align="center">77

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">
<B>Amendment, Supplement and Waiver</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Subject to certain exceptions, the Indenture or the notes may be
amended with the consent (which may include consents obtained in
connection with a tender offer or exchange offer for notes) of
the Holders of at least a majority in principal amount of the
notes then outstanding, and any existing Default under, or
compliance with any provision of, the Indenture may be waived
(other than any continuing Default in the payment of the
principal or interest on the notes) with the consent (which may
include consents obtained in connection with a tender offer or
exchange offer for notes) of the Holders of a majority in
principal amount of the notes then outstanding; <I>provided
</I>that:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(a)&nbsp; no such amendment may, without the consent of the
	Holders of two-thirds in aggregate principal amount of notes
	then outstanding, amend the obligation of the Issuer under the
	heading &#147;&#151;&nbsp;Change of Control&#148; or the related
	definitions that could adversely affect the rights of any
	Holder; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(b)&nbsp; without the consent of each Holder affected, the
	Issuer and the Trustee may not:</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="94%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; change the maturity of any note;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; reduce the amount, extend the due date or otherwise
	affect the terms of any scheduled payment of interest on or
	principal of the notes;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(3)&nbsp; reduce any premium payable upon optional redemption of
	the notes, change the date on which any notes are subject to
	redemption or otherwise alter the provisions with respect to the
	redemption of the notes;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(4)&nbsp; make any note payable in money or currency other than
	that stated in the notes;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(5)&nbsp; modify or change any provision of the Indenture or the
	related definitions to affect the ranking of the notes or any
	Note Guarantee in a manner that adversely affects the Holders;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(6)&nbsp; reduce the percentage of Holders necessary to consent
	to an amendment or waiver to the Indenture or the notes;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(7)&nbsp; impair the rights of Holders to receive payments of
	principal of or interest on the notes;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(8)&nbsp; release any Guarantor from any of its obligations
	under its Note Guarantee or the Indenture, except as permitted
	by the Indenture; or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(9)&nbsp; make any change in these amendment and waiver
	provisions.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Notwithstanding the foregoing, the Issuer and the Trustee may
amend the Indenture, the Note Guarantees or the notes without
the consent of any Holder, to cure any ambiguity, defect or
inconsistency, to provide for uncertificated notes in addition
to or in place of certificated notes, to provide for the
assumption of the Issuer&#146;s obligations to the Holders in
the case of a merger or acquisition, to release any Guarantor
from any of its obligations under its Note Guarantee or the
Indenture (to the extent permitted by the Indenture), to make
any change that does not materially adversely affect the rights
of any Holder or, in the case of the Indenture, to maintain the
qualification of the Indenture under the Trust Indenture Act.

<P align="left">
<B>No Personal Liability of Directors, Officers, Employees and
Stockholders</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
No director, officer, employee, incorporator or stockholder of
the Issuer will have any liability for any obligations of the
Issuer under the notes or the Indenture or of any Guarantor
under its Note Guarantee or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each
Holder by accepting a note waives and releases all such
liability. The waiver and release are part of the consideration
for issuance of the notes and the Note Guarantees.

<P align="center">78

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">
<B>Concerning the Trustee</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Wells Fargo Bank, National Association is the Trustee under the
Indenture and has been appointed by the Issuer as Registrar and
Paying Agent with regard to the notes. The Indenture contains
certain limitations on the rights of the Trustee, should it
become a creditor of the Issuer, to obtain payment of claims in
certain cases, or to realize on certain assets received in
respect of any such claim as security or otherwise. The Trustee
will be permitted to engage in other transactions; however, if
it acquires any conflicting interest (as defined in the
Indenture), it must eliminate such conflict or resign.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Holders of a majority in principal amount of the then
outstanding notes will have the right to direct the time, method
and place of conducting any proceeding for exercising any remedy
available to the Trustee, subject to certain exceptions. The
Indenture provides that, in case an Event of Default occurs and
is not cured, the Trustee will be required, in the exercise of
its power, to use the degree of care of a prudent person in
similar circumstances in the conduct of his or her own affairs.
Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the
Indenture at the request of any Holder, unless such Holder shall
have offered to the Trustee security and indemnity satisfactory
to the Trustee.

<P align="left">
<B>Governing Law</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Indenture, the notes and the Note Guarantees will be
governed by, and construed in accordance with, the laws of the
State of New York.

<P align="left">
<B>Book-Entry, Delivery and Form of Notes</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The exchange notes will initially be represented by one or more
global notes (the <B>&#147;Global Notes&#148;</B>) in
definitive, fully registered form without interest coupons. The
Global Notes will be deposited with, or on behalf of, the
Depository Trust Company (<B>&#147;DTC&#148;</B>) and registered
in the name of Cede &#38; Co., as nominee of DTC (such nominee
being referred to herein as the <B>&#147;Global Note
Holder&#148;</B>). DTC will maintain the notes in denominations
of $1,000 and integral multiples thereof through its book-entry
facilities.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
DTC has advised the Issuer as follows:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	DTC is a limited-purpose trust company that was created to hold
	securities for its participating organizations, including the
	Euroclear System and Clearstream Banking, Soci&#233;t&#233;
	An&#243;nyme, Luxembourg (collectively, the
	<B>&#147;Participants&#148; </B>or the
	<B>&#147;Depositary&#146;s Participants&#148;</B>), and to
	facilitate the clearance and settlement of transactions in these
	securities between Participants through electronic book-entry
	changes in accounts of its Participants. The Depositary&#146;s
	Participants include securities brokers and dealers (including
	the initial purchasers), banks and trust companies, clearing
	corporations and certain other organizations. Access to
	DTC&#146;s system is also available to other entities such as
	banks, brokers, dealers and trust companies (collectively, the
	<B>&#147;Indirect Participants&#148; </B>or the
	<B>&#147;Depositary&#146;s Indirect Participants&#148;</B>) that
	clear through or maintain a custodial relationship with a
	Participant, either directly or indirectly. Persons who are not
	Participants may beneficially own securities held by or on
	behalf of DTC only through the Depositary&#146;s Participants or
	the Depositary&#146;s Indirect Participants. Pursuant to
	procedures established by DTC, ownership of the notes will be
	shown on, and the transfer of ownership thereof will be effected
	only through, records maintained by DTC (with respect to the
	interests of the Depositary&#146;s Participants) and the records
	of the Depositary&#146;s Participants (with respect to the
	interests of the Depositary&#146;s Indirect Participants).</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The laws of some states require that certain persons take
physical delivery in definitive form of securities that they
own. Consequently, the ability to transfer the notes will be
limited to such extent.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
So long as the Global Note Holder is the registered owner of any
notes, the Global Note Holder will be considered the sole holder
of outstanding notes represented by such Global Notes under the
Indenture. Except as provided below, owners of notes will not be
entitled to have notes registered in their names and will not be
considered the owners or holders thereof under the Indenture for
any purpose, including with

<P align="center">79

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
respect to the giving of any directions, instructions, or
approvals to the Trustee thereunder. None of the Issuer, the
Guarantors or the Trustee will have any responsibility or
liability for any aspect of the records relating to or payments
made on account of notes by DTC, or for maintaining, supervising
or reviewing any records of DTC relating to such notes.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Payments in respect of the principal of, premium, if any, and
interest on any notes registered in the name of a Global Note
Holder on the applicable record date will be payable by the
Trustee to or at the direction of such Global Note Holder in its
capacity as the registered holder under the Indenture. Under the
terms of the Indenture, the Issuer and the Trustee may treat the
persons in whose names any notes, including the Global Notes,
are registered as the owners thereof for the purpose of
receiving such payments and for any and all other purposes
whatsoever. Consequently, neither the Issuer nor the Trustee has
or will have any responsibility or liability for the payment of
such amounts to beneficial owners of notes (including principal,
premium, if any, and interest). The Issuer believes, however,
that it is currently the policy of DTC to immediately credit the
accounts of the relevant Participants with such payments, in
amounts proportionate to their respective beneficial interests
in the relevant security as shown on the records of DTC.
Payments by the Depositary&#146;s Participants and the
Depositary&#146;s Indirect Participants to the beneficial owners
of notes will be governed by standing instructions and customary
practice and will be the responsibility of the Depositary&#146;s
Participants or the Depositary&#146;s Indirect Participants.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Subject to certain conditions, any person having a beneficial
interest in the Global Notes may, upon request to the Trustee
and confirmation of such beneficial interest by the Depositary
or its Participants or Indirect Participants, exchange such
beneficial interest for notes in definitive form. Upon any such
issuance, the Trustee is required to register such notes in the
name of and cause the same to be delivered to, such person or
persons (or the nominee of any thereof). Such notes would be
issued in fully registered form. In addition, if (1)&nbsp;the
Issuer notifies the Trustee in writing that DTC is no longer
willing or able to act as a depositary and the Issuer is unable
to locate a qualified successor within 90&nbsp;days or
(2)&nbsp;the Issuer, at its option, notifies the Trustee in
writing that it elects to cause the issuance of notes in
definitive form under the Indenture, then, upon surrender by the
relevant Global Note Holder of its Global Note, notes in such
form will be issued to each person that such Global Note Holder
and DTC identifies as being the beneficial owner of the related
notes.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Neither the Issuer nor the Trustee will be liable for any delay
by the Global Note Holder or DTC in identifying the beneficial
owners of notes and the Issuer and the Trustee may conclusively
rely on, and will be protected in relying on, instructions from
the Global Note Holder or DTC for all purposes.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The information in this section concerning DTC, Euroclear and
Clearstream and their book-entry systems has been obtained from
sources that the Issuer believes to be reliable, but the Issuer
takes no responsibility for the accuracy thereof.

<P align="left">
<B>Certain Definitions</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Set forth below is a summary of certain of the defined terms
used in the Indenture. Reference is made to the Indenture for
the full definition of all such terms.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Acquired Indebtedness&#148; </B>means (1)&nbsp;with
respect to any Person that becomes a Restricted Subsidiary after
the Issue Date, Indebtedness of such Person and its Subsidiaries
existing at the time such Person becomes a Restricted Subsidiary
that was not incurred in connection with, or in contemplation
of, such Person becoming a Restricted Subsidiary and
(2)&nbsp;with respect to the Issuer or any Restricted
Subsidiary, any Indebtedness of a Person (other than the Issuer
or a Restricted Subsidiary) existing at the time such Person is
merged with or into the Issuer or a Restricted Subsidiary, or
Indebtedness expressly assumed by the Issuer or any Restricted
Subsidiary in connection with the acquisition of an asset or
assets from another Person, which Indebtedness was not, in any
case, incurred by such other Person in connection with, or in
contemplation of, such merger or acquisition.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Affiliate&#148; </B>of any Person means any other
Person which directly or indirectly controls or is controlled
by, or is under direct or indirect common control with, the
referent Person. For purposes of the covenant

<P align="center">80

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
described under &#147;&#151;&nbsp;Certain Covenants&nbsp;&#151;
Limitations on Transactions with Affiliates,&#148; Affiliates
shall be deemed to include, with respect to any Person, any
other Person (1)&nbsp;which beneficially owns or holds, directly
or indirectly, 10% or more of any class of the Voting Stock of
the referent Person, (2)&nbsp;of which 10% or more of the Voting
Stock is beneficially owned or held, directly or indirectly, by
the referenced Person or (3)&nbsp;with respect to an individual,
any immediate family member of such Person. For purposes of this
definition, <B>&#147;control&#148; </B>of a Person shall mean
the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;amend&#148; </B>means to amend, supplement, restate,
amend and restate or otherwise modify; and
<B>&#147;amendment&#148; </B>shall have a correlative meaning.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;asset&#148; </B>means any asset or property.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Asset Acquisition&#148; </B>means
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; an Investment by the Issuer or any Restricted
	Subsidiary of the Issuer in any other Person if, as a result of
	such Investment, such Person shall become a Restricted
	Subsidiary of the Issuer, or shall be merged with or into the
	Issuer or any Restricted Subsidiary of the Issuer, or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; the acquisition by the Issuer or any Restricted
	Subsidiary of the Issuer of all or substantially all of the
	assets of any other Person or any division or line of business
	of any other Person.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Asset Sale&#148; </B>means any sale, issuance,
conveyance, transfer, lease, assignment or other disposition by
the Issuer or any Restricted Subsidiary to any Person other than
the Issuer or any Restricted Subsidiary (including by means of a
Sale and Leaseback Transaction or a merger or consolidation)
(collectively, for purposes of this definition, a
<B>&#147;transfer&#148;</B>), in one transaction or a series of
related transactions, of any assets (including Equity Interests)
of the Issuer or any of its Restricted Subsidiaries other than
in the ordinary course of business. For purposes of this
definition, the term &#147;Asset Sale&#148; shall not include:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; transfers of cash or Cash Equivalents;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; transfers of assets (including Equity Interests) that
	are governed by, and made in accordance with, the provisions
	described under &#147;&#151;&nbsp;Certain Covenants&nbsp;&#151;
	Limitations on Mergers, Consolidations, Etc.&#148;;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(3)&nbsp; Permitted Investments and Restricted Payments
	permitted under the covenant described under
	&#147;&#151;&nbsp;Certain Covenants&nbsp;&#151; Limitations on
	Restricted Payments&#148;;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(4)&nbsp; the creation or realization of any Permitted Lien;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(5)&nbsp; transactions in the ordinary course of business,
	including, without limitation, sales (directly or indirectly),
	dedications and other donations to governmental authorities,
	leases and sales and leasebacks of (A)&nbsp;homes, improved land
	and unimproved land and (B)&nbsp;real estate (including related
	amenities and improvements);</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(6)&nbsp; dispositions of mortgage loans and related assets and
	mortgage-backed securities in the ordinary course of a mortgage
	lending business; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(7)&nbsp; any transfer or series of related transfers that, but
	for this clause, would be Asset Sales, if after giving effect to
	such transfers, the aggregate Fair Market Value of the assets
	transferred in such transaction or any such series of related
	transactions does not exceed $1.0 million.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Attributable Indebtedness&#148;</B>, when used with
respect to any Sale and Leaseback Transaction, means, as at the
time of determination, the present value (discounted at a rate
equivalent to the Issuer&#146;s then-current weighted average
cost of funds for borrowed money as at the time of
determination, compounded on a semi-annual basis) of the total
obligations of the lessee for rental payments during the
remaining term of any Capitalized Lease included in any such
Sale and Leaseback Transaction.

<P align="center">81

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Bankruptcy Law&#148; </B>means Title 11 of the United
States Code, as amended, or any similar federal or state law for
the relief of debtors.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Board of Directors&#148; </B>means, with respect to any
Person, the board of directors or comparable governing body of
such Person.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Borrowing Base&#148; </B>means, at any time of
determination, the sum of the following without duplication:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; 100% of all cash and Cash Equivalents held by the
	Issuer or any Restricted Subsidiary;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; 75% of the book value of Developed Land for which no
	construction has occurred;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(3)&nbsp; 95% of the cost of the land and construction costs
	including capitalized interest (as reasonably allocated by the
	Issuer) for all Units for which there is an executed purchase
	contract with a buyer not Affiliated with the Issuer, less any
	deposits, down payments or earnest money;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(4)&nbsp; 80% of the cost of the land and construction costs
	including capitalized interest (as reasonably allocated by the
	Issuer) for all Units for which construction has begun and for
	which there is not an executed purchase agreement with a buyer
	not Affiliated with the Company; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(5)&nbsp; 50% of the costs of Entitled Land (other than
	Developed Land) on which improvements have not commenced, less
	mortgage Indebtedness (other than under a Credit Facility)
	applicable to such land.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Business Day&#148; </B>means a day other than a
Saturday, Sunday or other day on which banking institutions in
New York are authorized or required by law to close.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Capitalized Lease&#148; </B>means a lease required to
be capitalized for financial reporting purposes in accordance
with GAAP.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Capitalized Lease Obligations&#148; </B>of any Person
means the obligations of such Person to pay rent or other
amounts under a Capitalized Lease, and the amount of such
obligation shall be the capitalized amount thereof determined in
accordance with GAAP.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Cash Equivalents&#148; </B>means:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; marketable obligations with a maturity of
	360&nbsp;days or less issued or directly and fully guaranteed or
	insured by the United States of America or any agency or
	instrumentality thereof;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; demand and time deposits and certificates of deposit
	or acceptances with a maturity of 180&nbsp;days or less of any
	financial institution that is a member of the Federal Reserve
	System having combined capital and surplus and undivided profits
	of not less than $500 million and is assigned at least a
	&#147;B&#148; rating by Thomson Financial BankWatch;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(3)&nbsp; commercial paper maturing no more than 180&nbsp;days
	from the date of creation thereof issued by a corporation that
	is not the Issuer or an Affiliate of the Issuer, and is
	organized under the laws of any State of the United States of
	America or the District of Columbia and rated at least A-1 by
	S&#38;P or at least P-1 by Moody&#146;s;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(4)&nbsp; repurchase obligations with a term of not more than
	ten days for underlying securities of the types described in
	clause&nbsp;(1) above entered into with any commercial bank
	meeting the specifications of clause (2) above; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(5)&nbsp; investments in money market or other mutual funds
	substantially all of whose assets comprise securities of the
	types described in clauses&nbsp;(1) through&nbsp;(4) above.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Change of Control&#148; </B>means the occurrence of any
of the following events:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; any &#147;person&#148; or &#147;group&#148; (as such
	terms are used in Sections&nbsp;13(d) and 14(d) of the Exchange
	Act), other than one or more Permitted Holders, is or becomes
	the beneficial owner (as defined in Rules&nbsp;13d-3 and 13d-5
	under the Exchange Act, except that for purposes of this clause
	that person or group shall be deemed to have &#147;beneficial
	ownership&#148; of all securities that any such</TD>
</TR>

</TABLE>

<P align="center">82

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	person or group has the right to acquire, whether such right is
	exercisable immediately or only after the passage of time),
	directly or indirectly, of Voting Stock representing more than
	50% of the voting power of the total outstanding Voting Stock of
	the Issuer;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; during any period of two consecutive years,
	individuals who at the beginning of such period constituted the
	Board of Directors (together with any new directors whose
	election to such Board of Directors or whose nomination for
	election by the stockholders of the Issuer was approved by a
	vote of the majority of the directors of the Issuer then still
	in office who were either directors at the beginning of such
	period or whose election or nomination for election was
	previously so approved) cease for any reason to constitute a
	majority of the Board of Directors of the Issuer;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(3)&nbsp; (a)&nbsp;all or substantially all of the assets of the
	Issuer and the Restricted Subsidiaries are sold or otherwise
	transferred to any Person other than a Wholly-Owned Restricted
	Subsidiary or one or more Permitted Holders or (b)&nbsp;the
	Issuer consolidates or merges with or into another Person other
	than a Permitted Holder or any Person other than a Permitted
	Holder consolidates or merges with or into the Issuer, in either
	case under this clause&nbsp;(3), in one transaction or a series
	of related transactions in which immediately after the
	consummation thereof Persons owning Voting Stock representing in
	the aggregate 100% of the total voting power of the Voting Stock
	of the Issuer immediately prior to such consummation do not own
	Voting Stock representing a majority of the total voting power
	of the Voting Stock of the Issuer or the surviving or transferee
	Person; or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(4)&nbsp; the Issuer shall adopt a plan of liquidation or
	dissolution or any such plan shall be approved by the
	stockholders of the Issuer.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Commission&#148; </B>means the U.S. Securities and
Exchange Commission.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Consolidated Amortization Expense&#148; </B>for any
period means the amortization expense of the Issuer and the
Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Consolidated Cash Flow Available for Fixed
Charges&#148; </B>for any period means, without duplication, the
sum of the amounts for such period of
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; Consolidated Net Income, plus</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; in each case only to the extent (and in the same
	proportion) deducted in determining Consolidated Net Income and
	with respect to the portion of Consolidated Net Income
	attributable to any Restricted Subsidiary only if a
	corresponding amount would be permitted at the date of
	determination to be distributed to the Issuer by such Restricted
	Subsidiary without prior approval (that has not been obtained),
	pursuant to the terms of its charter and all agreements,
	instruments, judgments, decrees, orders, statutes, rules and
	governmental regulations applicable to such Restricted
	Subsidiary or its stockholders,</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="94%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(a)&nbsp; Consolidated Income Tax Expense,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(b)&nbsp; Consolidated Amortization Expense (but only to the
	extent not included in Consolidated Interest Expense),</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(c)&nbsp; Consolidated Depreciation Expense,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(d)&nbsp; Consolidated Interest Expense and interest and other
	charges amortized to cost of home sales and cost of land sales,
	and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(e)&nbsp; all other non-cash items reducing the Consolidated Net
	Income (excluding any non-cash charge that results in an accrual
	of a reserve for cash charges in any future period) for such
	period,</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	in each case determined on a consolidated basis in accordance
	with GAAP, <I>minus</I></TD>
</TR>

</TABLE>

<P align="center">83

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(3)&nbsp; the aggregate amount of all non-cash items, determined
	on a consolidated basis, to the extent such items increased
	Consolidated Net Income for such period.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Consolidated Depreciation Expense&#148; </B>for any
period means the depreciation expense of the Issuer and the
Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Consolidated Fixed Charge Coverage Ratio&#148;
</B>means the ratio of Consolidated Cash Flow Available for
Fixed Charges during the most recent four consecutive full
fiscal quarters for which financial statements are available
(the <B>&#147;Four-Quarter Period&#148;</B>) ending on or prior
to the date of the transaction giving rise to the need to
calculate the Consolidated Fixed Charge Coverage Ratio (the
<B>&#147;Transaction Date&#148;</B>) to Consolidated Interest
Incurred for the Four-Quarter Period. For purposes of this
definition, Consolidated Cash Flow Available for Fixed Charges
and Consolidated Interest Incurred shall be calculated after
giving effect on a pro forma basis for the period of such
calculation to:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; the incurrence of any Indebtedness or the issuance of
	any Preferred Stock of the Issuer or any Restricted Subsidiary
	(and the application of the proceeds thereof) and any repayment
	of other Indebtedness or redemption of other Preferred Stock
	(and the application of the proceeds therefrom) (other than the
	incurrence or repayment of Indebtedness in the ordinary course
	of business for working capital purposes pursuant to any
	revolving credit arrangement) occurring during the Four-Quarter
	Period or at any time subsequent to the last day of the
	Four-Quarter Period and on or prior to the Transaction Date, as
	if such incurrence, repayment, issuance or redemption, as the
	case may be (and the application of the proceeds thereof),
	occurred on the first day of the Four-Quarter Period; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; any Asset Sale or Asset Acquisition (including,
	without limitation, any Asset Acquisition giving rise to the
	need to make such calculation as a result of the Issuer or any
	Restricted Subsidiary (including any Person who becomes a
	Restricted Subsidiary as a result of such Asset Acquisition)
	incurring Acquired Indebtedness and also including any
	Consolidated Cash Flow Available for Fixed Charges (including
	any pro forma expense and cost reductions calculated on a basis
	consistent with Regulation&nbsp;S-X under the Exchange Act)
	associated with any such Asset Acquisition) occurring during the
	Four-Quarter Period or at any time subsequent to the last day of
	the Four-Quarter Period and on or prior to the Transaction Date,
	as if such Asset Sale or Asset Acquisition or other disposition
	(including the incurrence of, or assumption or liability for,
	any such Indebtedness or Acquired Indebtedness) occurred on the
	first day of the Four-Quarter Period.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If the Issuer or any Restricted Subsidiary directly or
indirectly guarantees Indebtedness of a third Person, the
preceding sentence shall give effect to the incurrence of such
guaranteed Indebtedness as if the Issuer or such Restricted
Subsidiary had directly incurred or otherwise assumed such
guaranteed Indebtedness.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For purposes of calculating the Consolidated Fixed Charge
Coverage Ratio prior to the expiration of the first Four-Quarter
Period subsequent to the Issue Date, such calculation shall be
on the same pro forma basis as the pro forma financial
statements are presented in this offering memorandum.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In calculating Consolidated Interest Incurred for purposes of
determining the denominator (but not the numerator) of the
Consolidated Fixed Charge Coverage Ratio:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; interest on outstanding Indebtedness determined on a
	fluctuating basis as of the Transaction Date and which will
	continue to be so determined thereafter shall be deemed to have
	accrued at a fixed rate per annum equal to the rate of interest
	on this Indebtedness in effect on the Transaction Date;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; if interest on any Indebtedness actually incurred on
	the Transaction Date may optionally be determined at an interest
	rate based upon a factor of a prime or similar rate, a
	eurocurrency interbank offered rate, or other rates, then the
	interest rate in effect on the Transaction Date will be deemed
	to have been in effect during the Four-Quarter Period; and</TD>
</TR>

</TABLE>

<P align="center">84

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(3)&nbsp; notwithstanding clause (1)&nbsp;or (2)&nbsp;above,
	interest on Indebtedness determined on a fluctuating basis, to
	the extent such interest is covered by agreements with a term of
	at least one year after the Transaction Date relating to Hedging
	Obligations, shall be deemed to accrue at the rate per annum
	resulting after giving effect to the operation of these
	agreements.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Consolidated Income Tax Expense&#148; </B>for any
period means the provision for taxes of the Issuer and the
Restricted Subsidiaries, determined on a consolidated basis in
accordance with GAAP.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Consolidated Indebtedness&#148; </B>means, as of any
date, the total Indebtedness of the Issuer and the Restricted
Subsidiaries as of such date, determined on a consolidated basis.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Consolidated Interest Expense&#148; </B>for any period
means the sum, without duplication, of the total interest
expense (other than interest and other charges amortized to cost
of home sales and cost of land sales) of the Issuer and the
Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP and including without
duplication,
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; imputed interest on Capitalized Lease Obligations and
	Attributable Indebtedness,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; commissions, discounts and other fees and charges owed
	with respect to letters of credit securing financial
	obligations, bankers&#146; acceptance financing and receivables
	financings,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(3)&nbsp; the net costs associated with Hedging Obligations,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(4)&nbsp; amortization of debt issuance costs, debt discount or
	premium and other financing fees and expenses,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(5)&nbsp; the interest portion of any deferred payment
	obligations,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(6)&nbsp; all other non-cash interest expense,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(7)&nbsp; the product of (a)&nbsp;all dividend payments on any
	series of Disqualified Equity Interests of the Issuer or any
	Preferred Stock of any Restricted Subsidiary (other than any
	such Disqualified Equity Interests or any Preferred Stock held
	by the Issuer or a Wholly-Owned Restricted Subsidiary),
	<I>multiplied by </I>(b)&nbsp;a fraction, the numerator of which
	is one and the denominator of which is one <I>minus </I>the then
	current combined federal, state and local statutory tax rate of
	the Issuer and the Restricted Subsidiaries, expressed as a
	decimal,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(8)&nbsp; all interest payable with respect to discontinued
	operations, and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(9)&nbsp; all interest on any Indebtedness of any other Person
	guaranteed by the Issuer or any Restricted Subsidiary.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Consolidated Interest Incurred&#148; </B>for any period
means the sum, without duplication, of (1)&nbsp;Consolidated
Interest Expense and (2)&nbsp;interest capitalized for such
period (including interest capitalized with respect to
discontinued operations but not including interest or other
charges amortized to cost of home sales and cost of land sales).

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Consolidated Net Income&#148; </B>for any period means
the net income (or loss) of the Issuer and the Restricted
Subsidiaries for such period determined on a consolidated basis
in accordance with GAAP; <I>provided </I>that there shall be
excluded from such net income (to the extent otherwise included
therein), without duplication:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; the net income (or loss) of any Person (other than a
	Restricted Subsidiary) in which any Person other than the Issuer
	and the Restricted Subsidiaries has an ownership interest,
	except to the extent that cash in an amount equal to any such
	income has actually been received by the Issuer or any of its
	Restricted Subsidiaries during such period;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; except to the extent includible in the consolidated
	net income of the Issuer pursuant to the foregoing
	clause&nbsp;(1), the net income (or loss) of any Person that
	accrued prior to the date that (a)&nbsp;such Person becomes a
	Restricted Subsidiary or is merged into or consolidated with the
	Issuer or</TD>
</TR>

</TABLE>

<P align="center">85

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	any Restricted Subsidiary or (b)&nbsp;the assets of such Person
	are acquired by the Issuer or any Restricted Subsidiary;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(3)&nbsp; the net income of any Restricted Subsidiary during
	such period to the extent that the declaration or payment of
	dividends or similar distributions by such Restricted Subsidiary
	of that income is not permitted by operation of the terms of its
	charter or any agreement, instrument, judgment, decree, order,
	statute, rule or governmental regulation applicable to that
	Subsidiary during such period;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(4)&nbsp; for the purposes of calculating the Restricted
	Payments Basket only, in the case of a successor to the Issuer
	by consolidation, merger or transfer of its assets, any income
	(or loss) of the successor prior to such merger, consolidation
	or transfer of assets;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(5)&nbsp; other than for purposes of calculating the Restricted
	Payments Basket, any gain (or loss), together with any related
	provisions for taxes on any such gain (or the tax effect of any
	such loss), realized during such period by the Issuer or any
	Restricted Subsidiary upon (a)&nbsp;the acquisition of any
	securities, or the extinguishment of any Indebtedness, of the
	Issuer or any Restricted Subsidiary or (b)&nbsp;any Asset Sale
	by the Issuer or any Restricted Subsidiary; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(6)&nbsp; other than for purposes of calculating the Restricted
	Payments Basket, any extraordinary gain (or extraordinary loss),
	together with any related provision for taxes on any such
	extraordinary gain (or the tax effect of any such extraordinary
	loss), realized by the Issuer or any Restricted Subsidiary
	during such period.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, any return of capital with respect to an Investment
that increased the Restricted Payments Basket pursuant to
clause&nbsp;(3)(d) of the first paragraph under
&#147;&#151;&nbsp;Certain Covenants&nbsp;&#151; Limitations on
Restricted Payments&#148; or decreased the amount of Investments
outstanding pursuant to clause&nbsp;(14) of the definition of
&#147;Permitted Investments&#148; shall be excluded from
Consolidated Net Income for purposes of calculating the
Restricted Payments Basket.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Consolidated Net Worth&#148; </B>means, with respect to
any Person as of any date, the consolidated stockholders&#146;
equity of such Person, determined on a consolidated basis in
accordance with GAAP, less (without duplication) (1)&nbsp;any
amounts thereof attributable to Disqualified Equity Interests of
such Person or its Subsidiaries or any amount attributable to
Unrestricted Subsidiaries and (2)&nbsp;all write-ups (other than
write-ups resulting from foreign currency translations and
write-ups of tangible assets of a going concern business made
within twelve months after the acquisition of such business)
subsequent to the Issue Date in the book value of any asset
owned by such Person or a Subsidiary of such Person.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Consolidated Tangible Assets&#148; </B>means, as of any
date, the total amount of assets of the Issuer and the
Restricted Subsidiaries on a consolidated basis at the end of
the fiscal quarter immediately preceding such date, as
determined in accordance with GAAP, less (1)&nbsp;Intangible
Assets and (2)&nbsp;any assets securing Non-Recourse
Indebtedness.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Consolidated Tangible Net Worth&#148; </B>means, with
respect to any Person as of any date, the Consolidated Net Worth
of such Person as of such date less (without duplication) all
Intangible Assets of such Person as of such date.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Credit Facilities&#148; </B>means (i)&nbsp;the Wells
Fargo Credit Agreement and (ii)&nbsp;the Master Loan Agreement
dated as of January&nbsp;31, 1993, as amended, between Legacy/
Monterey Homes L.P., as borrower, and Guaranty Federal Bank,
F.S.B, as lender, in each case&nbsp;(i) and&nbsp;(ii), including
any notes, guarantees, collateral and security documents,
instruments and agreements executed in connection therewith
(including Hedging Obligations related to the Indebtedness
incurred thereunder), and in each case as amended or refinanced
from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring
(including increasing the amount of borrowings or other
Indebtedness outstanding or available to be borrowed thereunder)
all or any portion of the Indebtedness under such agreements,
and any successor or replacement agreement or agreements with
the same or any other agents, creditor, lender or group of
creditors or lenders.

<P align="center">86

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Custodian&#148; </B>means any receiver, trustee,
assignee, liquidator or similar official under any Bankruptcy
Law.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Default&#148; </B>means (1)&nbsp;any Event of Default
or (2)&nbsp;any event, act or condition that, after notice or
the passage of time or both, would be an Event of Default.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Designation&#148; </B>has the meaning given to this
term in the covenant described under &#147;&#151;&nbsp;Certain
Covenants&nbsp;&#151; Limitations on Designation of Unrestricted
Subsidiaries.&#148;

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Designation Amount&#148; </B>has the meaning given to
this term in the covenant described under
&#147;&#151;&nbsp;Certain Covenants&nbsp;&#151; Limitations on
Designation of Unrestricted Subsidiaries.&#148;

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Developed Land&#148; </B>means all Entitled Land of the
Issuer and its Restricted Subsidiaries which is undergoing
active development or is ready for vertical construction.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Disqualified Equity Interests&#148; </B>of any Person
means any Equity Interests of such Person that, by their terms,
or by the terms of any related agreement or of any security into
which they are convertible, puttable or exchangeable, are, or
upon the happening of any event or the passage of time would be,
required to be redeemed by such Person, whether or not at the
option of the holder thereof, or mature or are mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise,
in whole or in part, on or prior to the date which is
91&nbsp;days after the final maturity date of the notes;
<I>provided, however,</I>that any class of Equity Interests of
such Person that, by its terms, authorizes such Person to
satisfy in full its obligations with respect to the payment of
dividends or upon maturity, redemption (pursuant to a sinking
fund or otherwise) or repurchase thereof or otherwise by the
delivery of Equity Interests that are not Disqualified Equity
Interests, and that are not convertible, puttable or
exchangeable for Disqualified Equity Interests or Indebtedness,
will not be deemed to be Disqualified Equity Interests so long
as such Person satisfies its obligations with respect thereto
solely by the delivery of Equity Interests that are not
Disqualified Equity Interests; <I>provided, further, however,
</I>that any Equity Interests that would not constitute
Disqualified Equity Interests but for provisions thereof giving
holders thereof (or the holders of any security into or for
which such Equity Interests are convertible, exchangeable or
exercisable) the right to require the Issuer to redeem such
Equity Interests upon the occurrence of a change in control
occurring prior to the final maturity date of the notes shall
not constitute Disqualified Equity Interests if the change in
control provisions applicable to such Equity Interests are no
more favorable to such holders than the provisions described
under the caption &#147;&#151;&nbsp;Change of Control&#148; and
such Equity Interests specifically provide that the Issuer will
not redeem any such Equity Interests pursuant to such provisions
prior to the Issuer&#146;s purchase of the notes as required
pursuant to the provisions described under the caption
&#147;&#151;&nbsp;Change of Control.&#148;

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Entitled Land&#148; </B>means all land of the Issuer
and its Restricted Subsidiaries (a)&nbsp;on which Units may be
constructed or which may be utilized for commercial, retail or
industrial uses, in each case, under applicable laws and
regulations and (b)&nbsp;the intended use by the Issuer for
which is permissible under the applicable regional plan,
development agreement or applicable zoning ordinance.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Equity Interests&#148; </B>of any Person means
(1)&nbsp;any and all shares or other equity interests (including
common stock, preferred stock, limited liability company
interests and partnership interests) in such Person and
(2)&nbsp;all rights to purchase, warrants or options (whether or
not currently exercisable), participations or other equivalents
of or interests in (however designated) such shares or other
interests in such Person.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Exchange Act&#148; </B>means the U.S. Securities
Exchange Act of 1934, as amended.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Fair Market Value&#148; </B>means, with respect to any
asset, the price (after taking into account any liabilities
relating to such assets) that would be negotiated in an
arm&#146;s-length transaction for cash between a willing seller
and a willing and able buyer, neither of which is under any
compulsion to complete the transaction, as such price is
determined in good faith by the Board of Directors of the Issuer
or a duly authorized committee thereof, as evidenced by a
resolution of such Board or committee.

<P align="center">87

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;GAAP&#148; </B>means generally accepted accounting
principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements
of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a
significant segment of the accounting profession of the United
States, as in effect on the Issue Date.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;guarantee&#148; </B>means a direct or indirect
guarantee by any Person of any Indebtedness of any other Person
and includes any obligation, direct or indirect, contingent or
otherwise, of such Person: (1)&nbsp;to purchase or pay (or
advance or supply funds for the purchase or payment of)
Indebtedness of such other Person (whether arising by virtue of
partnership arrangements, or by agreements to keep-well, to
purchase assets, goods, securities or services (unless such
purchase arrangements are on arm&#146;s-length terms and are
entered into in the ordinary course of business), to
take-or-pay, or to maintain financial statement conditions or
otherwise); or (2)&nbsp;entered into for purposes of assuring in
any other manner the obligee of such Indebtedness of the payment
thereof or to protect such obligee against loss in respect
thereof (in whole or in part). <B>&#147;guarantee,&#148;
</B>when used as a verb, and <B>&#147;guaranteed&#148; </B>have
correlative meanings.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Guarantors&#148; </B>means each Restricted Subsidiary
of the Issuer on the Issue Date, and each other Person that is
required to become a Guarantor by the terms of the Indenture
after the Issue Date, in each case, until such Person is
released from its Note Guarantee.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Hedging Obligations&#148; </B>of any Person means the
obligations of such Person pursuant to (1)&nbsp;any interest
rate swap agreement, interest rate collar agreement or other
similar agreement or arrangement designed to protect such Person
against fluctuations in interest rates, (2)&nbsp;agreements or
arrangements designed to protect such Person against
fluctuations in foreign currency exchange rates in the conduct
of its operations, or (3)&nbsp;any forward contract, commodity
swap agreement, commodity option agreement or other similar
agreement or arrangement designed to protect such Person against
fluctuations in commodity prices, in each case entered into in
the ordinary course of business for bona fide hedging purposes
and not for the purpose of speculation.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Holder&#148; </B>means any registered holder, from time
to time, of the notes.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;incur&#148; </B>means, with respect to any Indebtedness
or Obligation, incur, create, issue, assume, guarantee or
otherwise become directly or indirectly liable, contingently or
otherwise, with respect to such Indebtedness or Obligation;
<I>provided </I>that (1)&nbsp;the Indebtedness of a Person
existing at the time such Person became a Restricted Subsidiary
or at the time such Person merged with or into the Issuer or a
Restricted Subsidiary shall be deemed to have been incurred at
such time and (2)&nbsp;neither the accrual of interest nor the
accretion of original issue discount shall be deemed to be an
incurrence of Indebtedness.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Indebtedness&#148; </B>of any Person at any date means,
without duplication:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; all liabilities, contingent or otherwise, of such
	Person for borrowed money (whether or not the recourse of the
	lender is to the whole of the assets of such Person or only to a
	portion thereof);</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; all obligations of such Person evidenced by bonds,
	debentures, notes or other similar instruments;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(3)&nbsp; all obligations of such Person in respect of letters
	of credit or other similar instruments (or reimbursement
	obligations with respect thereto);</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(4)&nbsp; all obligations of such Person to pay the deferred and
	unpaid purchase price of property or services, except trade
	payables and accrued expenses incurred by such Person in the
	ordinary course of business in connection with obtaining goods,
	materials or services;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(5)&nbsp; the maximum fixed redemption or repurchase price of
	all Disqualified Equity Interests of such Person;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(6)&nbsp; all Capitalized Lease Obligations of such Person;</TD>
</TR>

</TABLE>

<P align="center">88

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(7)&nbsp; all Indebtedness of others secured by a Lien on any
	asset of such Person, whether or not such Indebtedness is
	assumed by such Person;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(8)&nbsp; all Indebtedness of others guaranteed by such Person
	to the extent of such guarantee; <I>provided</I> that
	Indebtedness of the Issuer or its Subsidiaries that is
	guaranteed by the Issuer or the Issuer&#146;s Subsidiaries shall
	be counted only once in the calculation of the amount of
	Indebtedness of the Issuer and its Subsidiaries on a
	consolidated basis;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(9)&nbsp; all Attributable Indebtedness;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(10)&nbsp; to the extent not otherwise included in this
	definition, Hedging Obligations of such Person;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(11)&nbsp; all obligations of such Person under conditional sale
	or other title retention agreements relating to assets purchased
	by such Person; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(12)&nbsp; the liquidation value of Preferred Stock of a
	Subsidiary of such Person issued and outstanding and held by any
	Person other than such Person (or one of its Wholly-Owned
	Restricted Subsidiaries).</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Notwithstanding the foregoing, (a)&nbsp;earn-outs or similar
profit sharing arrangements provided for in acquisition
agreements which are determined on the basis of future operating
earnings or other similar performance criteria (which are not
determinable at the time of acquisition) of the acquired assets
or entities and (b)&nbsp;accrued expenses, trade payables,
customer deposits or deferred income taxes arising in the
ordinary course of business shall not be considered
Indebtedness. Any Indebtedness which is incurred at a discount
to the principal amount at maturity thereof shall be deemed to
have been incurred in the amount of the full principal amount at
maturity thereof. The amount of Indebtedness of any Person at
any date shall be the outstanding balance at such date of all
unconditional obligations as described above, the maximum
liability of such Person for any such contingent obligations at
such date and, in the case of clause&nbsp;(7), the lesser of
(a)&nbsp;the Fair Market Value of any asset subject to a Lien
securing the Indebtedness of others on the date that the Lien
attaches and (b)&nbsp;the amount of the Indebtedness secured.
For purposes of clause&nbsp;(5), the &#147;maximum fixed
redemption or repurchase price&#148; of any Disqualified Equity
Interests that do not have a fixed redemption or repurchase
price shall be calculated in accordance with the terms of such
Disqualified Equity Interests as if such Disqualified Equity
Interests were redeemed on any date on which an amount of
Indebtedness outstanding shall be required to be determined
pursuant to the Indenture.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Indenture will not restrict any Unrestricted Subsidiary from
incurring Indebtedness nor will Indebtedness of any Unrestricted
Subsidiaries be included in the Consolidated Fixed Charge
Coverage Ratio or the ratio of Consolidated Indebtedness to
Consolidated Tangible Net Worth hereunder, as long as the
Unrestricted Subsidiary incurring such Indebtedness remains an
Unrestricted Subsidiary.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Independent Director&#148;</B> means a director of the
Issuer who
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; is independent with respect to the transaction at
	issue;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; does not have any material financial interest in the
	Issuer or any of its Affiliates (other than as a result of
	holding securities of the Issuer); and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(3)&nbsp; has not and whose Affiliates or affiliated firm has
	not, at any time during the twelve months prior to the taking of
	any action hereunder, directly or indirectly, received, or
	entered into any understanding or agreement to receive,
	compensation, payment or other benefit, of any type or form,
	from the Issuer or any of its Affiliates in excess of $60,000,
	other than customary directors&#146; fees for serving on the
	Board of Directors of the Issuer or any Affiliate and
	reimbursement of out-of-pocket expenses for attendance at the
	Issuer&#146;s or Affiliate&#146;s board and board committee
	meetings.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Independent Financial Advisor&#148;</B> means an
accounting, appraisal or investment banking firm of nationally
recognized standing that is, in the reasonable judgment of the
Issuer&#146;s Board of Directors, qualified to perform the task
for which it has been engaged and disinterested and independent
with respect

<P align="center">89

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
to the Issuer and its Affiliates; <I>provided, however</I>, that
the prior rendering of service to the Issuer or an Affiliate of
the Issuer shall not, by itself, disqualify the advisor.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;initial purchasers&#148;</B> means UBS Warburg LLC and
Deutsche Banc Alex. Brown Inc.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Intangible Assets&#148;</B> means, with respect to any
Person, all unamortized debt discount and expense, unamortized
deferred charges, goodwill, patents, trademarks, service marks,
trade names, copyrights, write-ups of assets over their carrying
value (other than write-ups which occurred prior to the Issue
Date and other than, in connection with the acquisition of an
asset, the write-up of the value of such asset to its Fair
Market Value in accordance with GAAP on the date of acquisition)
and all other items which would be treated as intangibles on the
consolidated balance sheet of such Person prepared in accordance
with GAAP.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;interest&#148;</B> means, with respect to the notes,
interest and Liquidated Damages, if any, on the notes.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Investments&#148;</B> of any Person means:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; all direct or indirect investments by such Person in
	any other Person in the form of loans, advances or capital
	contributions or other credit extensions constituting
	Indebtedness of such other Person, and any guarantee of
	Indebtedness of any other Person;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; all purchases (or other acquisitions for
	consideration) by such Person of Indebtedness, Equity Interests
	or other securities of any other Person;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(3)&nbsp; all other items that would be classified as
	investments on a balance sheet of such Person prepared in
	accordance with GAAP; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(4)&nbsp; the Designation of any Subsidiary as an Unrestricted
	Subsidiary.</TD>
</TR>

</TABLE>

<P align="left">
Except as otherwise expressly specified in this definition, the
amount of any Investment (other than an Investment made in cash)
shall be the Fair Market Value thereof on the date such
Investment is made. The amount of Investment pursuant to
clause&nbsp;(4) shall be the Designation Amount determined in
accordance with the covenant described under
&#147;&#151;&nbsp;Certain Covenants&nbsp;&#151; Limitations on
Designation of Unrestricted Subsidiaries.&#148; If the Issuer or
any Subsidiary sells or otherwise disposes of any Equity
Interests of any direct or indirect Subsidiary such that, after
giving effect to any such sale or disposition, such Person is no
longer a Subsidiary, the Issuer shall be deemed to have made an
Investment on the date of any such sale or other disposition
equal to the Fair Market Value of the Equity Interests of and
all other Investments in such Subsidiary not sold or disposed
of, which amount shall be determined by the Board of Directors
of the Issuer. Notwithstanding the foregoing, redemptions of
Equity Interests of the Issuer shall be deemed not to be
Investments.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Issue Date&#148;</B> means the date on which the
outstanding notes were originally issued.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Lien&#148;</B> means, with respect to any asset, any
mortgage, deed of trust, lien (statutory or other), pledge,
lease, easement, restriction, covenant, charge, security
interest or other encumbrance of any kind or nature in respect
of such asset, whether or not filed, recorded or otherwise
perfected under applicable law, including any conditional sale
or other title retention agreement, and any lease in the nature
thereof, any option or other agreement to sell, and any filing
of, or agreement to give, any financing statement under the
Uniform Commercial Code (or equivalent statutes) of any
jurisdiction (other than cautionary filings in respect of
operating leases).

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Moody&#146;s&#148;</B> means Moody&#146;s Investors
Service, Inc., and its successors.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Net Available Proceeds&#148;</B> means, with respect to
any Asset Sale, the proceeds thereof in the form of cash or Cash
Equivalents, net of
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; brokerage commissions and other fees and expenses
	(including fees and expenses of legal counsel, accountants and
	investment banks) of such Asset Sale;</TD>
</TR>

</TABLE>

<P align="center">90

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; provisions for taxes payable as a result of such Asset
	Sale (after taking into account any available tax credits or
	deductions and any tax sharing arrangements);</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(3)&nbsp; amounts required to be paid to any Person (other than
	the Issuer or any Restricted Subsidiary) owning a beneficial
	interest in the assets subject to the Asset Sale or having a
	Lien thereon;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(4)&nbsp; payments of unassumed liabilities (not constituting
	Indebtedness) relating to the assets sold at the time of, or
	within 30&nbsp;days after the date of, such Asset Sale; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(5)&nbsp; appropriate amounts to be provided by the Issuer or
	any Restricted Subsidiary, as the case may be, as a reserve
	required in accordance with GAAP against any liabilities
	associated with such Asset Sale and retained by the Issuer or
	any Restricted Subsidiary, as the case may be, after such Asset
	Sale, including pensions and other postemployment benefit
	liabilities, liabilities related to environmental matters and
	liabilities under any indemnification obligations associated
	with such Asset Sale, all as reflected in an Officers&#146;
	Certificate delivered to the Trustee; provided, however, that
	any amounts remaining after adjustments, revaluations or
	liquidations of such reserves shall constitute Net Available
	Proceeds.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Non-Recourse Indebtedness&#148;</B> with respect to any
Person means Indebtedness of such Person for which (1)&nbsp;the
sole legal recourse for collection of principal and interest on
such Indebtedness is against the specific property identified in
the instruments evidencing or securing such Indebtedness and
such property was acquired with the proceeds of such
Indebtedness or such Indebtedness was incurred within
90&nbsp;days after the acquisition of such property and
(2)&nbsp;no other assets of such Person may be realized upon in
collection of principal or interest on such Indebtedness.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Obligation&#148;</B> means any principal, interest,
penalties, fees, indemnification, reimbursements, costs,
expenses, damages and other liabilities payable under the
documentation governing any Indebtedness.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Officer&#148;</B> means any of the following of the
Issuer: the Chairman of the Board of Directors, the Chief
Executive Officer, the Chief Financial Officer, the President,
any Vice President, the Treasurer or the Secretary.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Officers&#146; Certificate&#148;</B> means a
certificate signed by two Officers.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Pari Passu Indebtedness&#148;</B> means any
Indebtedness of the Issuer or any Guarantor that ranks pari
passu as to payment with the notes or the Note Guarantees, as
applicable.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Permitted Business&#148;</B> means the businesses
engaged in by the Issuer and its Subsidiaries on the Issue Date
as described in this offering memorandum and businesses that are
reasonably related thereto or reasonable extensions thereof
(including, without limitation, land development, home alarm,
pest control, title and other ancillary businesses).

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Permitted Holders&#148;</B> means Steven&nbsp;J. Hilton
and John&nbsp;R. Landon, their respective wives and children,
any corporation, limited liability company or partnership in
which either of them has voting control and is the direct and
beneficial owner of a majority of the Equity Interests and any
trust for the benefit of either of them or their wives or
children.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Permitted Investment&#148;</B> means:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; Investments by the Issuer or any Restricted Subsidiary
	in (a)&nbsp;any Restricted Subsidiary or (b)&nbsp;in any Person
	that is or will become immediately after such Investment a
	Restricted Subsidiary or that will merge or consolidate into the
	Issuer or a Restricted Subsidiary;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; Investments in the Issuer by any Restricted Subsidiary;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(3)&nbsp; loans and advances to directors, employees and
	officers of the Issuer and the Restricted Subsidiaries for bona
	fide business purposes and to purchase Equity Interests of the
	Issuer not in excess of $2.0 million at any one time outstanding;</TD>
</TR>

</TABLE>

<P align="center">91

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(4)&nbsp; Hedging Obligations incurred pursuant to
	clause&nbsp;(4) of the second paragraph under the covenant
	described under &#147;&#151;&nbsp;Certain Covenants&nbsp;&#151;
	Limitations on Additional Indebtedness&#148;;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(5)&nbsp; Cash Equivalents;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(6)&nbsp; receivables owing to the Issuer or any Restricted
	Subsidiary if created or acquired in the ordinary course of
	business and payable or dischargeable in accordance with
	customary trade terms; provided, however, that such trade terms
	may include such concessionary trade terms as the Issuer or any
	such Restricted Subsidiary deems reasonable under the
	circumstances;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(7)&nbsp; Investments in securities of trade creditors or
	customers received pursuant to any plan of reorganization or
	similar arrangement upon the bankruptcy or insolvency of such
	trade creditors or customers;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(8)&nbsp; Investments made by the Issuer or any Restricted
	Subsidiary as a result of consideration received in connection
	with an Asset Sale made in compliance with the covenant
	described under &#147;&#151;&nbsp;Certain Covenants&nbsp;&#151;
	Limitations on Asset Sales&#148;;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(9)&nbsp; lease, utility and other similar deposits in the
	ordinary course of business;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(10)&nbsp; Investments made by the Issuer or a Restricted
	Subsidiary for consideration consisting only of Qualified Equity
	Interests of the Issuer;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(11)&nbsp; stock, obligations or securities received in
	settlement of debts created in the ordinary course of business
	and owing to the Issuer or any Restricted Subsidiary or in
	satisfaction of judgments;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(12)&nbsp; Investments in existence on the Issue Date;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(13)&nbsp; Investments made by the Issuer or any Restricted
	Subsidiary in joint ventures in a Permitted Business with
	unaffiliated third parties in an aggregate amount at any one
	time outstanding not to exceed 10% of the Issuer&#146;s
	Consolidated Tangible Net Worth at such time (with each
	Investment being valued as of the date made and without regard
	to subsequent changes in value); and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(14)&nbsp; other Investments in an aggregate amount not to
	exceed $5.0 million at any one time outstanding (with each
	Investment being valued as of the date made and without regard
	to subsequent changes in value).</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The amount of Investments outstanding at any time pursuant to
clause&nbsp;(14) above shall be deemed to be reduced:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(a)&nbsp; upon the disposition or repayment of or return on any
	Investment made pursuant to clause&nbsp;(14) above, by an amount
	equal to the return of capital with respect to such Investment
	to the Issuer or any Restricted Subsidiary (to the extent not
	included in the computation of Consolidated Net Income), less
	the cost of the disposition of such Investment and net of taxes;
	and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(b)&nbsp; upon a Redesignation of an Unrestricted Subsidiary as
	a Restricted Subsidiary, by an amount equal to the lesser of
	(x)&nbsp;the Fair Market Value of the Issuer&#146;s
	proportionate interest in such Subsidiary immediately following
	such Redesignation, and (y)&nbsp;the aggregate amount of
	Investments in such Subsidiary that increased (and did not
	previously decrease) the amount of Investments outstanding
	pursuant to clause&nbsp;(14) above.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Permitted Liens&#148;</B> means the following types of
Liens:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; (a)&nbsp;statutory Liens of landlords and Liens of
	carriers, warehousemen, mechanics, suppliers, materialmen,
	repairmen and other Liens imposed by law incurred in the
	ordinary course of business and (b)&nbsp;Liens for taxes,
	assessments or governmental charges or claims, in either case,
	for sums not yet delinquent or being contested in good faith, if
	such reserve or other appropriate provision, if any, as shall be
	required by GAAP shall have been made in respect thereof;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; Liens incurred or deposits made in the ordinary course
	of business in connection with workers&#146; compensation,
	unemployment insurance and other types of social security, or to
	secure the</TD>
</TR>

</TABLE>

<P align="center">92

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	performance of tenders, statutory obligations, surety and appeal
	bonds, bids, leases, government contracts, performance and
	return-of-money bonds and other similar obligations (exclusive
	of obligations for the payment of borrowed money);</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(3)&nbsp; Liens upon specific items of inventory or other goods
	and proceeds of any Person securing such Person&#146;s
	obligations in respect of bankers&#146; acceptances issued or
	created for the account of such Person to facilitate the
	purchase, shipment or storage of such inventory or other goods;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(4)&nbsp; Liens securing reimbursement obligations with respect
	to commercial letters of credit which encumber documents and
	other assets relating to such letters of credit and products and
	proceeds thereof;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(5)&nbsp; Liens encumbering deposits made to secure obligations
	arising from statutory, regulatory, contractual or warranty
	requirements of the Issuer or any Restricted Subsidiary,
	including rights of offset and setoff;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(6)&nbsp; bankers&#146; Liens, rights of setoff and other
	similar Liens existing solely with respect to cash and Cash
	Equivalents on deposit in one or more accounts maintained by the
	Issuer or any Restricted Subsidiary, in each case granted in the
	ordinary course of business in favor of the bank or banks with
	which such accounts are maintained, securing amounts owing to
	such bank with respect to cash management and operating account
	arrangements, including those involving pooled accounts and
	netting arrangements; provided that in no case shall any such
	Liens secure (either directly or indirectly) the repayment of
	any Indebtedness;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(7)&nbsp; leases or subleases (or any Liens related thereto)
	granted to others that do not materially interfere with the
	ordinary course of business of the Issuer or any Restricted
	Subsidiary;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(8)&nbsp; Liens arising from filing Uniform Commercial Code
	financing statements regarding leases;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(9)&nbsp; Liens securing all of the notes and Liens securing any
	Note Guarantee;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(10)&nbsp; Liens existing on the Issue Date securing
	Indebtedness outstanding on the Issue Date and Liens securing
	Refinancing Indebtedness with respect to Indebtedness incurred
	pursuant to clause&nbsp;(2) of the definition of &#147;Permitted
	Indebtedness;&#148;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(11)&nbsp; Liens in favor of the Issuer or a Guarantor;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(12)&nbsp; Liens securing Indebtedness under the Credit
	Facilities incurred pursuant to clause&nbsp;(1) of
	&#147;&#151;&nbsp;Limitations on Additional Indebtedness;&#148;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(13)&nbsp; without limiting any other clause in this definition
	of &#147;Permitted Liens,&#148; Liens securing Indebtedness of
	the Issuer or any Restricted Subsidiary permitted to be incurred
	under the Indenture; provided, that the aggregate amount of all
	consolidated Indebtedness of the Issuer and the Restricted
	Subsidiaries secured by Liens (including all Indebtedness
	permitted to be secured by the other provisions of this
	definition, but excluding Non-Recourse Indebtedness) shall not
	exceed 40% of Consolidated Tangible Assets at any one time
	outstanding (after giving effect to the incurrence of such
	Indebtedness and the use of the proceeds thereof);</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(14)&nbsp; Liens securing Non-Recourse Indebtedness of the
	Issuer or any Restricted Subsidiary permitted to be incurred
	under the Indenture; provided, that such Liens apply only to the
	property financed out of the net proceeds of such Non-Recourse
	Indebtedness within 90&nbsp;days after the incurrence of such
	Non-Recourse Indebtedness;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(15)&nbsp; Liens securing Purchase Money Indebtedness permitted
	to be incurred under the Indenture; provided that such Liens
	apply only to the property acquired, constructed or improved
	with the proceeds of such Purchase Money Indebtedness within
	90&nbsp;days after the incurrence of such Purchase Money
	Indebtedness;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(16)&nbsp; Liens securing Acquired Indebtedness permitted to be
	incurred under the Indenture; provided that the Liens do not
	extend to assets not subject to such Lien at the time of
	acquisition</TD>
</TR>

</TABLE>

<P align="center">93

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	(other than improvements thereon) and are no more favorable to
	the lienholders than those securing such Acquired Indebtedness
	prior to the incurrence of such Acquired Indebtedness by the
	Issuer or a Restricted Subsidiary;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(17)&nbsp; Liens on assets of a Person existing at the time such
	Person is acquired or merged with or into or consolidated with
	the Issuer or any such Restricted Subsidiary (and not created in
	anticipation or contemplation thereof);</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(18)&nbsp; Liens to secure Attributable Indebtedness permitted
	to be incurred under the Indenture; provided that any such Lien
	shall not extend to or cover any assets of the Issuer or any
	Restricted Subsidiary other than the assets which are the
	subject of the Sale and Leaseback Transaction in which the
	Attributable Indebtedness is incurred;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(19)&nbsp; attachment or judgment Liens not giving rise to a
	Default and which are being contested in good faith by
	appropriate proceedings;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(20)&nbsp; easements, rights-of-way, restrictions and other
	similar charges or encumbrances not materially interfering with
	the ordinary course of business of the Issuer and its
	Subsidiaries;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(21)&nbsp; zoning restrictions, licenses, restrictions on the
	use of real property or minor irregularities in title thereto,
	which do not materially impair the use of such real property in
	the ordinary course of business of the Issuer and its
	Subsidiaries or the value of such real property for the purpose
	of such business; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(22)&nbsp; any option, contract or other agreement to sell an
	asset; provided such sale is not otherwise prohibited under the
	Indenture.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Permitted Unrestricted Subsidiary Debt&#148; </B>means
Indebtedness of an Unrestricted Subsidiary:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; as to which neither the Issuer nor any Restricted
	Subsidiary (a)&nbsp;provides credit support of any kind
	(including any undertaking, agreement or instrument that would
	constitute Indebtedness), (b)&nbsp;is directly or indirectly
	liable as a guarantor or otherwise, or (c)&nbsp;constitutes the
	lender;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; no default with respect to which (including any rights
	that the holders thereof may have to take enforcement action
	against an Unrestricted Subsidiary) would permit upon notice,
	lapse of time or both any holder of any other Indebtedness
	(other than the notes) of the Issuer or any Restricted
	Subsidiary to declare a default on the other Indebtedness or
	cause the payment thereof to be accelerated or payable prior to
	its stated maturity; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(3)&nbsp; as to which the lenders have been notified in writing
	that they will not have any recourse to the Equity Interests or
	assets of the Issuer or any Restricted Subsidiary.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Person&#148; </B>means any individual, corporation,
partnership, limited liability company, joint venture,
incorporated or unincorporated association, joint-stock company,
trust, unincorporated organization or government or other agency
or political subdivision thereof or other entity of any kind.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Plan of Liquidation&#148; </B>with respect to any
Person, means a plan that provides for, contemplates or the
effectuation of which is preceded or accompanied by (whether or
not substantially contemporaneously, in phases or otherwise):
(1)&nbsp;the sale, lease, conveyance or other disposition of all
or substantially all of the assets of such Person otherwise than
as an entirety or substantially as an entirety; and (2)&nbsp;the
distribution of all or substantially all of the proceeds of such
sale, lease, conveyance or other disposition of all or
substantially all of the remaining assets of such Person to
creditors and holders of Equity Interests of such Person.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Preferred Stock&#148; </B>means, with respect to any
Person, any and all preferred or preference stock or other
equity interests (however designated) of such Person whether now
outstanding or issued after the Issue Date.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;principal&#148; </B>means, with respect to the notes,
the principal of, and premium, if any, on the notes.

<P align="center">94

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Purchase Money Indebtedness&#148; </B>means
Indebtedness, including Capitalized Lease Obligations, of the
Issuer or any Restricted Subsidiary incurred for the purpose of
financing all or any part of the purchase price of property,
plant or equipment used in the business of the Issuer or any
Restricted Subsidiary or the cost of installation, construction
or improvement thereof; <I>provided, however,</I> that
(1)&nbsp;the amount of such Indebtedness shall not exceed such
purchase price or cost, (2)&nbsp;such Indebtedness shall not be
secured by any asset other than the specified asset being
financed or, in the case of real property or fixtures, including
additions and improvements, the real property to which such
asset is attached and (3)&nbsp;such Indebtedness shall be
incurred within 90 days after such acquisition of such asset by
the Issuer or such Restricted Subsidiary or such installation,
construction or improvement.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Qualified Equity Interests&#148; </B>means Equity
Interests of the Issuer other than Disqualified Equity
Interests; <I>provided </I>that such Equity Interests shall not
be deemed Qualified Equity Interests to the extent sold or owed
to a Subsidiary of the Issuer or financed, directly or
indirectly, using funds (1) borrowed from the Issuer or any
Subsidiary of the Issuer until and to the extent such borrowing
is repaid or (2)&nbsp;contributed, extended, guaranteed or
advanced by the Issuer or any Subsidiary of the Issuer
(including, without limitation, in respect of any employee stock
ownership or benefit plan).

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Qualified Equity Offering&#148; </B>means the issuance
and sale of Qualified Equity Interests of the Issuer to Persons
other than any Permitted Holder or any other Person who is not,
prior to such issuance and sale, an Affiliate of the Issuer.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Ratio Exception&#148; </B>has the meaning set forth in
the proviso in the first paragraph of the covenant described
under &#147;&#151;&nbsp;Certain Covenants&nbsp;&#151;
Limitations on Additional Indebtedness.&#148;

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Receivables&#148; </B>means an amount owed with respect
to completed sales of housing units, lots and parcels sold to an
unaffiliated purchaser.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Redeem&#148; </B>means to redeem, repurchase, purchase,
defease, retire, discharge or otherwise acquire or retire for
value; and <B>&#147;redemption&#148; </B>shall have a
correlative meaning.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Redesignation&#148; </B>has the meaning given to such
term in the covenant described under &#147;&#151;&nbsp;Certain
Covenants&nbsp;&#151; Limitations on Designation of Unrestricted
Subsidiaries.&#148;

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;refinance&#148; </B>means to refinance, repay, prepay,
replace, renew or refund.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Refinancing Indebtedness&#148; </B>means Indebtedness
of the Issuer or a Restricted Subsidiary issued in exchange for,
or the proceeds from the issuance and sale or disbursement of
which are used substantially concurrently to redeem or refinance
in whole or in part, or constituting an amendment of, any
Indebtedness of the Issuer or any Restricted Subsidiary (the
<B>&#147;Refinanced Indebtedness&#148;</B>) in a principal
amount not in excess of the principal amount of the Refinanced
Indebtedness so repaid or amended (plus the amount of any
premium paid and the amount of reasonable expenses incurred by
the Issuer or any Restricted Subsidiary in connection with such
repayment or amendment) (or, if such Refinancing Indebtedness
refinances Indebtedness under a revolving credit facility or
other agreement providing a commitment for subsequent
borrowings, with a maximum commitment not to exceed the maximum
commitment under such revolving credit facility or other
agreement); <I>provided </I>that:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; if the Refinanced Indebtedness was subordinated to or
	pari passu with the notes or the Note Guarantees, as the case
	may be, then such Refinancing Indebtedness, by its terms, is
	expressly pari passu with (in the case of Refinanced
	Indebtedness that was pari passu with) or subordinate in right
	of payment to (in the case of Refinanced Indebtedness that was
	subordinated to) the notes or the Note Guarantees, as the case
	may be, at least to the same extent as the Refinanced
	Indebtedness;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; the Refinancing Indebtedness is scheduled to mature
	either (a)&nbsp;no earlier than the Refinanced Indebtedness
	being repaid or amended or (b)&nbsp;after the maturity date of
	the notes;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(3)&nbsp; the portion, if any, of the Refinancing Indebtedness
	that is scheduled to mature on or prior to the maturity date of
	the notes has a Weighted Average Life to Maturity at the time
	such Refinancing Indebtedness is incurred that is equal to or
	greater than the Weighted Average Life to</TD>
</TR>

</TABLE>

<P align="center">95

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	Maturity of the portion of the Refinanced Indebtedness being
	repaid that is scheduled to mature on or prior to the maturity
	date of the notes; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(4)&nbsp; the Refinancing Indebtedness is secured only to the
	extent, if at all, and by the assets, that the Refinanced
	Indebtedness being repaid, extended or amended is secured.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Registration Rights Agreement&#148; </B>means the
registration rights agreement dated as of the Issue Date among
the Issuer, the Guarantors and the initial purchasers.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Restricted Payment&#148; </B>means any of the following:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; the declaration or payment of any dividend or any
	other distribution on Equity Interests of the Issuer or any
	Restricted Subsidiary or any payment made to the direct or
	indirect holders (in their capacities as such) of Equity
	Interests of the Issuer or any Restricted Subsidiary, including,
	without limitation, any payment in connection with any merger or
	consolidation involving the Issuer, but excluding
	(a)&nbsp;dividends or distributions payable solely in Qualified
	Equity Interests and (b)&nbsp;in the case of Restricted
	Subsidiaries, dividends or distributions payable to the Issuer
	or to a Restricted Subsidiary and pro rata dividends or
	distributions payable to minority stockholders of any Restricted
	Subsidiary;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; the redemption of any Equity Interests of the Issuer
	or any Restricted Subsidiary, including, without limitation, any
	payment in connection with any merger or consolidation involving
	the Issuer, but excluding any such Equity Interests held by the
	Issuer or any Restricted Subsidiary;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(3)&nbsp; any Investment other than a Permitted Investment; or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(4)&nbsp; any redemption prior to the scheduled maturity or
	prior to any scheduled repayment of principal or sinking fund
	payment, as the case may be, in respect of Subordinated
	Indebtedness.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Restricted Payments Basket&#148; </B>has the meaning
given to such term in the first paragraph of the covenant
described under &#147;&#151;&nbsp;Certain Covenants&nbsp;&#151;
Limitations on Restricted Payments.&#148;

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Restricted Subsidiary&#148; </B>means any Subsidiary of
the Issuer other than an Unrestricted Subsidiary.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;S&#38;P&#148; </B>means Standard&nbsp;&#38; Poor&#146;s
Ratings Services, a division of the McGraw-Hill Companies, Inc.,
and its successors.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Sale and Leaseback Transaction&#148; </B>means, with
respect to any Person, an arrangement with any bank, insurance
company or other lender or investor or to which such lender or
investor is a party, providing for the leasing by such Person of
any asset of such Person which has been or is being sold or
transferred by such Person to such lender or investor or to any
Person to whom funds have been or are to be advanced by such
lender or investor on the security of such asset.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Secretary&#146;s Certificate&#148; </B>means a
certificate signed by the Secretary of the Issuer.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Securities Act&#148; </B>means the U.S. Securities Act
of 1933, as amended.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Significant Subsidiary&#148; </B>means (1)&nbsp;any
Restricted Subsidiary that would be a &#147;significant
subsidiary&#148; as defined in Regulation&nbsp;S-X promulgated
pursuant to the Securities Act as such Regulation is in effect
on the Issue Date and (2)&nbsp;any Restricted Subsidiary that,
when aggregated with all other Restricted Subsidiaries that are
not otherwise Significant Subsidiaries and as to which any event
described in clause (7)&nbsp;or (8)&nbsp;under
&#147;&#151;&nbsp;Events of Default&#148; has occurred and is
continuing, would constitute a Significant Subsidiary under
clause (1)&nbsp;of this definition.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Subordinated Indebtedness&#148; </B>means Indebtedness
of the Issuer or any Restricted Subsidiary that is subordinated
in right of payment to the notes or the Note Guarantees,
respectively.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Subsidiary&#148; </B>means, with respect to any Person:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(1)&nbsp; any corporation, limited liability company,
	association or other business entity of which more than 50% of
	the total voting power of the Equity Interests entitled (without
	regard to the occurrence</TD>
</TR>

</TABLE>

<P align="center">96

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	of any contingency) to vote in the election of the Board of
	Directors thereof are at the time owned or controlled, directly
	or indirectly, by such Person or one or more of the other
	Subsidiaries of that Person (or a combination thereof); and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; any partnership (a)&nbsp;the sole general partner or
	the managing general partner of which is such Person or a
	Subsidiary of such Person or (b)&nbsp;the only general partners
	of which are such Person or one or more Subsidiaries of such
	Person (or any combination thereof).</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Unless otherwise specified, &#147;Subsidiary&#148; refers to a
Subsidiary of the Issuer.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Trust Indenture Act&#148; </B>means the Trust Indenture
Act of 1939, as amended.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Unit&#148; </B>means a residence, whether single or
part of a multifamily building, whether completed or under
construction, held by the Issuer or any Restricted Subsidiary
for sale or rental in the ordinary course of business;
<I>provided, however</I>, that the number of Units that are
rental Units at the time of determination shall not exceed 25%
of the total Units sold or rented by the Issuer and its
Restricted Subsidiaries during the immediately preceding twelve
month period.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Unrestricted Subsidiary&#148; </B>means (1)&nbsp;any
Subsidiary that at the time of determination shall be designated
an Unrestricted Subsidiary by the Board of Directors of the
Issuer in accordance with the covenant described under
&#147;&#151;&nbsp;Certain Covenants&nbsp;&#151; Limitations on
Designation of Unrestricted Subsidiaries&#148; and (2)&nbsp;any
Subsidiary of an Unrestricted Subsidiary.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;U.S. Government Obligations&#148; </B>means direct
non-callable obligations of, or obligations guaranteed by, the
United States of America for the payment of which guarantee or
obligations the full faith and credit of the United States is
pledged.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Voting Stock&#148; </B>with respect to any Person,
means securities of any class of Equity Interests of such Person
entitling the holders thereof (whether at all times or only so
long as no senior class of stock or other relevant equity
interest has voting power by reason of any contingency) to vote
in the election of members of the Board of Directors of such
Person.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Weighted Average Life to Maturity&#148; </B>when
applied to any Indebtedness at any date, means the number of
years obtained by dividing (1)&nbsp;the sum of the products
obtained by multiplying (a)&nbsp;the amount of each then
remaining installment, sinking fund, serial maturity or other
required payment of principal, including payment at final
maturity, in respect thereof by (b)&nbsp;the number of years
(calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment by (2)&nbsp;the then
outstanding principal amount of such Indebtedness.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Wells Fargo Credit Agreement&#148; </B>means the Loan
Agreement dated as of December&nbsp;29, 1999, as amended, by and
among Monterey Homes Construction, Inc., Monterey Homes Arizona,
Inc., Meritage Paseo Construction, LLC, Meritage Homes of
Northern California, Inc., Meritage Paseo Crossing, LLC,
Meritage Homes Construction, Inc. and Meritage Homes of Arizona,
Inc., as borrowers, Wells Fargo Bank Arizona, National
Association, as administrative agent and a lender, and
California Bank&nbsp;&#38; Trust, as documentation and
syndication agent and a lender.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>&#147;Wholly-Owned Restricted Subsidiary&#148; </B>means a
Restricted Subsidiary of which 100% of the Equity Interests
(except for directors&#146; qualifying shares or certain
minority interests owned by other Persons solely due to local
law requirements that there be more than one stockholder, but
which interest is not in excess of what is required for such
purpose) are owned directly by the Issuer or through one or more
Wholly-Owned Restricted Subsidiaries.

<P align="center">97

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "THE EXCHANGE OFFER" -->
<DIV align="left"><A NAME="015"></A></DIV>

<P align="center">
<B>THE EXCHANGE OFFER</B>

<P align="left">
<B>Purposes and Effects</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We issued the outstanding notes on May&nbsp;30, 2001 to the
initial purchasers, who resold the outstanding notes to
&#147;qualified institutional buyers&#148; (as defined in
Rule&nbsp;144A under the Securities Act) and certain non-U.S.
persons in accordance with Regulation&nbsp;S of the Securities
Act. In connection with the sale of the outstanding notes, we
and the initial purchasers entered into the registration rights
agreement pursuant to which we agreed to file with the
Commission a registration statement with respect to an offer to
exchange exchange notes for the outstanding notes within
75&nbsp;days after the outstanding notes were issued. In
addition, we agreed to use our reasonable best efforts to cause
the registration statement to become effective under the
Securities Act within 150&nbsp;days after the outstanding notes
were issued and to issue the exchange notes pursuant to the
exchange offer. A copy of the registration rights agreement has
been filed as an exhibit to the registration statement of which
this prospectus is a part.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The exchange offer is being made pursuant to the registration
rights agreement. Holders of outstanding notes who do not tender
their outstanding notes or whose outstanding notes are tendered
but not accepted would have to rely on exemptions from
registration requirements under the securities laws, including
the Securities Act, if they wish to sell their outstanding notes.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Based on interpretations by the staff of the Commission set
forth in no-action letters issued to persons unrelated to us, we
believe the exchange notes issued pursuant to the exchange offer
in exchange for outstanding notes may be offered for sale, sold
and otherwise transferred by any holder (other than a person
that is an &#147;affiliate&#148; of ours within the meaning of
Rule&nbsp;405 under the Securities Act and except as set forth
in the next paragraph) without registration or the delivery of a
prospectus under the Securities Act, provided the holder
acquires the exchange notes in the ordinary course of the
holder&#146;s business and the holder is not participating and
does not intend to participate, and has no arrangement or
understanding with any person to participate, in the
distribution of the exchange notes.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If a person were to participate in the exchange offer for the
purpose of distributing securities in a manner not permitted by
the Commission&#146;s interpretation, (1)&nbsp;the position of
the staff of the Commission enunciated in the no-action letters
would not be applicable to the person and (2)&nbsp;the person
would be required to comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a
sale of the exchange notes.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each broker-dealer that receives exchange notes for its own
account in exchange for outstanding notes which the
broker-dealer acquired as a result of market-making activities
or other trading activities, must acknowledge that it will
deliver a prospectus in connection with any sale of those
exchange notes.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The exchange offer is not being made to, nor will we accept
surrenders for exchange from, holders of exchange notes with
addresses in any jurisdiction in which the exchange offer or the
issuance of exchange notes pursuant to it would violate
applicable securities or blue sky laws. Prior to the exchange
offer, however, we will register or qualify, or cooperate with
the holders of the outstanding notes and their respective
counsel in connection with the registration or qualification of,
the exchange notes for offer and sale under the securities or
blue sky laws of such jurisdictions as are necessary to permit
consummation of the exchange offer and do anything else which is
necessary or advisable to enable the offer and issuance of the
exchange notes in those jurisdictions.

<P align="left">
<B>Terms of the Exchange Offer</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon the terms and subject to the conditions set forth in this
prospectus and in the accompanying letter of transmittal, we
will issue exchange notes in exchange for all outstanding notes
which are validly tendered prior to 5:00&nbsp;p.m., New York
City time, on the expiration date (as defined below) and not
withdrawn. The principal amount of the exchange notes issued in
the exchange will be the same as the principal amount of the
outstanding notes for which they are exchanged. Holders may
tender some or all of their outstanding notes in response to the
exchange offer.

<P align="center">98

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
However, outstanding notes may be tendered only in multiples of
$1,000. See &#147;Description of the Exchange Notes.&#148;

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The form and terms of the exchange notes will be the same in all
material respects as the form and terms of the outstanding
notes, except that (1)&nbsp;the exchange notes will be
registered under the Securities Act and hence will not bear
legends regarding restrictions on transfer and (2)&nbsp;because
the exchange notes will be registered, holders of exchange notes
will not be, and upon the consummation of the exchange offer,
except under limited circumstances, holders of outstanding notes
will no longer be, entitled to rights under the registration
rights agreement intended for holders of unregistered securities.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Outstanding notes which are not tendered for exchange or are
tendered but not accepted in the exchange offer will remain
outstanding and be entitled to the benefits of the indenture,
but will not be entitled to any registration rights under the
registration rights agreement.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We will be deemed to accept all the outstanding notes which are
validly tendered and not withdrawn when we give oral or written
notice to that effect to the exchange agent. The exchange agent
will act as agent for the tendering holders for the purpose of
receiving exchange notes from us.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If any tendered outstanding notes are not accepted for exchange
because of an invalid tender or otherwise, certificates for
those outstanding notes will be returned, without expense, to
the tendering holder as promptly as practicable after the
expiration date.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Holders who tender outstanding notes in response to the exchange
offer will not be required to pay brokerage commissions or fees
or, except as described in the instructions in the letter of
transmittal, transfer taxes. We will pay all charges and
expenses, other than certain taxes described below, in
connection with the exchange offer. See &#147;&#151;&nbsp;Fees
and Expenses.&#148;

<P align="left">
<B>Expiration Date; Extension; Termination; Amendments</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The exchange offer will expire at 5:00&nbsp;p.m., New York City
time, on
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
 2001, the &#147;expiration date&#148; unless we extend it by
notice to the exchange agent. We reserve the right to extend the
exchange offer at our discretion. If we extend the exchange
offer, the term &#147;expiration date&#148; will mean the time
and date on which the exchange offer as extended will expire. We
will notify the exchange agent of any extension by oral or
written notice and will make a public announcement of any
extension, not later than 9:00&nbsp;a.m., New York City time, on
the business day after the previously scheduled expiration date.

<P align="left">
<B>Termination of Certain Rights</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The registration rights agreement provides that, with certain
exceptions, if: (1)&nbsp;the exchange offer Registration
Statement has not been filed with the Commission on or prior to
the 75th&nbsp;calendar day following the date of original issue
of the outstanding notes; (2)&nbsp;the exchange offer
registration statement has not been declared effective on or
prior to the 150th&nbsp;calendar day following the date of
original issue of the outstanding notes, or (3)&nbsp;the
exchange offer is not consummated on or prior to the 180th day
following the date of original issue of the outstanding notes
(each event referred to in clauses&nbsp;(1) through (3) above
being a &#147;registration default&#148;), the interest rate
borne by the outstanding notes will be increased by 0.25% per
annum upon the occurrence of a registration default. This rate
will continue to increase by 0.25% each 90&nbsp;day period that
the liquidated damages (as defined below) continue to accrue
under any such circumstance. However, the maximum total increase
in the interest rate will in no event exceed one percent (1.0%)
per year. We refer to this increase in the interest rate on the
notes as &#147;liquidated damages.&#148; Such interest is
payable in addition to any other interest payable from time to
time with respect to the outstanding notes and the exchange
notes in cash on each interest payment date to the holders of
record for such interest payment date. After the cure of
registration defaults, the accrual of liquidated damages will
stop and the interest rate will revert to the original rate.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Holders of exchange notes will not be and, upon consummation of
the exchange offer, holders of outstanding notes will no longer
be, entitled to rights under the registration rights agreement
intended for holders of outstanding notes which are restricted
as to transferability. The exchange offer will be deemed

<P align="center">99

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
consummated when we deliver to the exchange agent exchange notes
in the same aggregate principal amount as that of the
outstanding notes which are validly tendered and not withdrawn.
</DIV>

<P align="left">
<B>Procedures for Tendering</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Only a holder of outstanding notes may tender outstanding notes
in response to the exchange offer. To tender outstanding notes,
the holder must complete, sign and date the letter of
transmittal, or a facsimile of one, have the signatures
guaranteed if required by the letter of transmittal, and mail or
otherwise deliver the letter of transmittal or facsimile of one,
together with the outstanding notes (unless the tender is being
effected using the procedure for book-entry transfer described
below) and any other required documents, to the exchange agent
prior to 5:00&nbsp;p.m., New York City time, on the expiration
date.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Any financial institution that is a participant in DTC&#146;s
Book-Entry Transfer Facility System may make book-entry delivery
of outstanding notes by causing DTC to transfer the outstanding
notes into the exchange agent&#146;s account in accordance with
DTC&#146;s transfer procedure. Although delivery of outstanding
notes may be effected through book-entry transfer into the
exchange agent&#146;s account at DTC, the letter of transmittal
(or a facsimile of one), with any required signature guarantees
and any other required documents, must be transmitted to and
received or confirmed by the exchange agent at its addresses as
set forth under the caption &#147;&#151;&nbsp;Exchange
Agent&#148; below prior to 5:00&nbsp;p.m., New York City time,
on the expiration date.

<P align="left">
LETTERS OF TRANSMITTAL AND OUTSTANDING NOTES MUST BE SENT TO THE
EXCHANGE AGENT. DELIVERY OF A DOCUMENT TO DTC DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A tender of outstanding notes by a holder will constitute an
agreement by the holder to transfer the outstanding notes to us
in exchange for exchange notes on the terms and subject to the
conditions set forth in this prospectus and in the letter of
transmittal.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The method of delivering outstanding notes and the letter of
transmittal and any other required documents to the exchange
agent is at the election and risk of the holder. It is
recommended that holders use overnight or hand delivery
services. In all cases, sufficient time should be allowed to
assure delivery to the exchange agent before the expiration
time. No letter of transmittal or outstanding notes should be
sent to us. Holders may ask their brokers, dealers, commercial
banks, trust companies or nominees to assist them in effecting
tenders.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Signatures on a letter of transmittal or a notice of withdrawal,
as the case may be, must be guaranteed by an eligible
institution unless the outstanding notes are being tendered for
the account of an eligible institution. An eligible institution
is a bank, broker, dealer, credit union, savings association or
other entity which is a member in good standing of the
Securities Transfer Agents Medallion Program.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If the letter of transmittal or any outstanding notes or bond
powers are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, they should so
indicate when signing, and we may require that evidence
satisfactory to us of their authority to sign be submitted with
the letter of transmittal.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All questions as to the validity, form, eligibility (including
time of receipt) and acceptance and withdrawal of tendered
outstanding notes will be determined by us in our sole
discretion, and that determination will be final and binding. We
reserve the right to reject any outstanding notes which are not
properly tendered or the acceptance of which we believe might be
unlawful. We also reserve the right to waive any defects,
irregularities or conditions of tender as to particular
outstanding notes, without being required to waive the same
defects, irregularities or conditions as to other outstanding
notes. Our interpretation of the terms and conditions of the
exchange offer (including the instructions in the letter of
transmittal) will be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders
of outstanding notes must be cured by the expiration date, or by
such later time as we may determine. Although we intend to
request the exchange agent to notify holders of defects or
irregularities with respect to tenders of outstanding notes,
neither we, the exchange agent nor any other

<P align="center">100

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
person will incur any liability for failure to give such
notification. Tenders of outstanding notes will not be deemed to
have been made until all defects and irregularities have been
cured or waived. Any outstanding notes received by the exchange
agent that are not properly tendered and as to which the defects
or irregularities have not been cured or waived will be returned
by the exchange agent to the tendering holders, unless otherwise
provided in the letter of transmittal, as soon as practicable
following the expiration date.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have the right (subject to limitations contained in the
indenture) (1)&nbsp;to purchase or make offers for any
outstanding notes that remain outstanding after the expiration
date and (2)&nbsp;to the extent permitted by applicable law, to
purchase outstanding notes in privately negotiated transactions
or otherwise. The terms of any such purchases or offers could
differ from the terms of the exchange offer.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
By tendering, a holder will be representing to us that the
person who will acquire the exchange notes being issued as a
result of the exchange offer (whether or not that is the holder)
will be acquiring them in the ordinary course of that
person&#146;s business and that neither the holder nor any such
other person has an arrangement or understanding with any person
to participate in a distribution of the exchange notes or is an
&#147;affiliate&#148; of ours (as defined in Rule&nbsp;405 under
the Securities Act). If the holder is a broker-dealer that will
receive exchange notes for its own account in exchange for
outstanding notes that were acquired as result of market-making
activities or other trading activities, the holder will, by
tendering, acknowledge that it will deliver a prospectus in
connection with any resale of those exchange notes.

<P align="left">
<B>Conditions of the Exchange Offer</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Notwithstanding any other term of the exchange offer, we will
not be required to accept for exchange, or exchange securities
for, any outstanding notes, and may terminate or amend the
exchange offer as provided herein before the acceptance of such
outstanding notes, if:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(a)&nbsp; any action or proceeding is instituted or threatened
	in any court or by or before any governmental agency with
	respect to the exchange offer which could reasonably be expected
	to materially impair our ability to proceed with the exchange
	offer or any material adverse development has occurred in any
	existing action or proceeding with respect to us or any of the
	guarantors that would impair our or their ability to proceed;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(b)&nbsp; any law, statute, rule, regulation or interpretation
	by the staff of the Commission is proposed, adopted or enacted,
	which, in our judgment and based on written advice of counsel,
	could reasonably be expected to materially impair our ability to
	proceed with the exchange offer or materially impair the
	contemplated benefits of the exchange offer to us; or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(c)&nbsp; any governmental approval has not been obtained, which
	approval we deem necessary for the consummation of the exchange
	offer.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If any of the conditions are not satisfied, we may
(i)&nbsp;refuse to accept any outstanding notes and return all
tendered outstanding notes to the tendering holders,
(ii)&nbsp;extend the exchange offer and retain all outstanding
notes tendered prior to the expiration of the exchange offer,
subject, however, to the rights of holders to withdraw such
outstanding notes (see &#147;&#151;&nbsp;Withdrawal of
Tenders&#148;) or (iii)&nbsp;waive such unsatisfied conditions
with respect to the Exchange Offer and accept all properly
tendered outstanding notes which have not been withdrawn.

<P align="left">
<B>Guaranteed Delivery Procedures</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Holders who wish to tender their outstanding notes and
(1)&nbsp;whose outstanding notes are not immediately available,
or (2)&nbsp;who cannot deliver their outstanding notes or any
other required documents

<P align="center">101

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
to the exchange agent or cannot complete the procedure for
book-entry transfer prior to the expiration date, may effect a
tender if:
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(a)&nbsp; The tender is made through an eligible institution;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(b)&nbsp; Prior to the expiration date, the exchange agent
	receives from the eligible institution a properly completed and
	duly executed notice of guaranteed delivery (by facsimile
	transmission, mail or hand) setting forth the name and address
	of the eligible holder, the certificate number(s) of the
	outstanding notes (if available) and the principal amount of
	outstanding notes tendered, together with a duly executed letter
	of transmittal (or a facsimile of one), stating that the tender
	is being made by that notice of guaranteed delivery and
	guaranteeing that, within five business days after the
	expiration date, the certificate(s) representing the outstanding
	notes (or confirmation of a book-entry transfer into the
	exchange agent&#146;s account at DTC) and any other documents
	required by the letter of transmittal will be delivered to the
	exchange agent; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(c)&nbsp; The certificate(s) representing all the tendered
	outstanding notes (or confirmation of a book-entry transfer into
	the exchange agent&#146;s account at DTC) and all other
	documents required by the letter of transmittal are received by
	the exchange agent within five business days after the
	expiration date.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon request to the exchange agent, a form of notice of
guaranteed delivery will be sent to holders who wish to use the
guaranteed delivery procedures described above.

<P align="left">
<B>Withdrawal of Tenders</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Except as otherwise described below, tenders of outstanding
notes may be withdrawn at any time prior to 5:00&nbsp;p.m., New
York City time, on the last business day on which the exchange
offer remains open.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To withdraw a tender of outstanding notes, a written or
facsimile transmission notice of withdrawal must be received by
the exchange agent prior to 5:00&nbsp;p.m., New York City time,
on the above date, and before the outstanding notes have been
accepted for exchange by us. Any notice of withdrawal must
(i)&nbsp;specify the name of the person who deposited the
outstanding notes to be withdrawn, (ii)&nbsp;identify the
outstanding notes to be withdrawn (including the certificate
numbers and principal amounts of the outstanding notes),
(iii)&nbsp;be signed by the depositor in the same manner as the
signature on the letter of transmittal by which the outstanding
notes were tendered (including any required signature
guarantees) or be accompanied by documents of transfer
sufficient to have the trustee register the transfer of the
outstanding notes into the name of the person who withdraws the
tender, and (iv)&nbsp;specify the name in which the withdrawn
outstanding notes are to be registered, if different from that
of the depositor. All questions as to the validity, form and
eligibility (including time of receipt) of withdrawal notices
will be determined by us in our sole discretion, and that
determination will be final and binding on all parties. Any
outstanding notes which are withdrawn will be deemed not to have
been validly tendered for purposes of the exchange offer, and no
exchange notes will be issued with respect to those outstanding
notes unless they are validly re-tendered. Any outstanding notes
which have been tendered but which are not accepted for exchange
or which are withdrawn will be returned to the holder without
cost to the holder as soon as practicable after withdrawal,
rejection of tender or termination of the exchange offer.
Properly withdrawn outstanding notes may be re-tendered at any
time prior to the expiration date.

<P align="left">
<B>Fees and Expenses</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We will bear the expenses of soliciting tenders pursuant to the
exchange offer. The principal solicitation of tenders is being
made by mail. However, solicitations also may be made by
telecopy, telephone or in person by officers and regular
employees of ours and our affiliates.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have not retained any dealer-manager in connection with the
exchange offer and will not make any payments to brokers,
dealers or others for soliciting acceptances of the exchange
offer. We will, however, pay the exchange agent reasonable and
customary fees for its services and reimburse it for its
reasonable out-of-pocket expenses in connection with the
exchange offer. We may also reimburse

<P align="center">102

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
brokerage houses and other custodians, nominees and fiduciaries
for the reasonable out-of-pocket expenses they incur in
forwarding copies of this prospectus, letters of transmittal and
related documents to the beneficial owners of the outstanding
notes and in handling or forwarding tenders for exchange. We
will pay the other expenses incurred in connection with the
exchange offer, including fees and expenses of the trustee,
accounting and legal fees and printing costs.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We will pay all transfer taxes, if any, applicable to the
exchange of outstanding notes for exchange notes pursuant to the
exchange offer. If, however, certificates representing exchange
notes or outstanding notes for principal amounts which are not
tendered or accepted for exchange are to be delivered to, or are
to be issued in the name of, a person other than the registered
holder of the outstanding notes tendered, or if tendered
outstanding notes are registered in the name of a person other
than the person who signs the letter of transmittal, or if a
transfer tax is imposed for any other reason, other than the
exchange of outstanding notes for exchange notes pursuant to the
exchange offer, the tendering holder must pay the transfer taxes
(whether imposed on the registered holder or any other person).
Unless satisfactory evidence of payment of transfer taxes or
exemption from the need to pay them is submitted with the letter
of transmittal, the amount of the transfer taxes will be billed
directly to the tendering holder. We may refuse to issue
exchange notes in exchange for outstanding notes, or to return
certificates evidencing outstanding notes which are not
exchanged, until we receive evidence satisfactory to us that any
transfer taxes payable by the holder have been paid.

<P align="left">
<B>Consequences of Failure to Exchange Outstanding Notes</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If a holder does not exchange outstanding notes for exchange
notes in response to the exchange offer, the outstanding notes
will continue to be subject to the restrictions on transfer
described in the legend on the certificate evidencing the
outstanding notes, and will not have the benefit of any
agreement by us to register outstanding notes under the
Securities Act. In general, notes may not be offered or sold,
unless the sale is registered under the Securities Act, or
unless the offer and sale are exempt from, or not subject to,
the Securities Act or any applicable state securities laws.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Participation in the exchange offer is voluntary and holders
should carefully consider whether to accept the exchange offer
and tender their outstanding notes. Holders of outstanding notes
are urged to consult their financial and tax advisors in making
their own decisions on what action to take.

<P align="left">
<B>Accounting Treatment</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The exchange notes will be recorded in our accounting records at
the same carrying value as the outstanding notes on the date of
the exchange. Accordingly, we will not recognize any gain or
loss for accounting purposes as a result of the exchange offer.
We will amortize the expenses of the exchange offer over the
term of the exchange notes.

<P align="left">
<B>Exchange Agent</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Wells Fargo Bank, National Association has been appointed as
exchange agent for the exchange offer. All correspondence in
connection with the exchange offer and the letter of transmittal
should be addressed to the exchange agent, as follows:

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="33%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="32%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="29%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="center" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<I><FONT size="2">By Facsimile:
	</FONT></I></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="center" valign="top">
	<I><FONT size="2">By Overnight Courier:
	</FONT></I></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="center" valign="top">
	<I><FONT size="2">By Registered or<BR>
	Certified Mail:
	</FONT></I></TD>
</TR>

<TR>
	<TD align="center" valign="top">
	<FONT size="2">Wells Fargo Bank,<BR>
	National Association<BR>
	Facsimile: (213)&nbsp;614-3355<BR>
	Attention: Jeanie Mar<BR>
	Telephone: (213)&nbsp;614-3349
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="center" valign="top">
	<FONT size="2">Wells Fargo Bank,<BR>
	National Association<BR>
	707 Wilshire Blvd.<BR>
	17th&nbsp;Floor<BR>
	Los&nbsp;Angeles, CA 90017<BR>
	Attention: Jeanie Mar
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="center" valign="top">
	<FONT size="2">Wells Fargo Bank,<BR>
	National Association<BR>
	707 Wilshire Blvd.<BR>
	l7th&nbsp;Floor<BR>
	Los&nbsp;Angeles, CA 90017<BR>
	Attention: Jeanie Mar
	</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">103

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Requests for additional copies of this prospectus or the letter
of transmittal should be directed to the exchange agent.

<!-- link1 "Certain United States Federal Income Tax Considerations" -->
<DIV align="left"><A NAME="016"></A></DIV>

<P align="center">
<B>CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following discussion addresses the material United States
federal income tax considerations applicable to a holder that
exchanges outstanding notes for exchange notes. This discussion
is based on the provisions of the Internal Revenue Code of 1986,
as amended (the &#147;Code&#148;), the applicable treasury
regulations promulgated or proposed under the Code, judicial
authority and current administrative rulings and practice. All
of these authorities may change without notice, possibly on a
retroactive basis. This summary deals only with holders that
will hold exchange notes as capital assets within the meaning of
Section&nbsp;1221 of the Code. It does not address tax
considerations applicable to investors that may be subject to
special tax rules, such as banks and other financial
institutions; tax-exempt organizations; insurance companies;
traders or dealers in securities or currencies; custodians,
nominees or similar financial intermediaries holding exchange
notes for others; or persons that will hold exchange notes as a
position in a hedging transaction, straddle or conversion
transaction for tax purposes. This summary does not discuss the
tax consequences of any conversion of currency into or out of
the United States dollar as such a conversion relates to the
purchase, ownership or disposition of the exchange notes.
Meritage has not sought any ruling from the Internal Revenue
Service (IRS) with respect to the statements made and the
conclusions reached in the following summary. There can be no
assurance that the IRS will agree with such statements and
conclusions.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>HOLDERS OF THE OUTSTANDING NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE APPLICATION OF THE UNITED STATES
FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL
AS ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE,
LOCAL OR FOREIGN TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX
TREATY AS TO HOW THEIR PARTICULAR TAX SITUATION MIGHT BE
AFFECTED BY THE EXCHANGE OF THE OUTSTANDING NOTES FOR THE
EXCHANGE NOTES AND THE PURCHASE, HOLDING AND DISPOSITION OF
THEIR EXCHANGE NOTES.</B>

<P align="left">
<B>United States Holders</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A United States holder is the beneficial owner of an exchange
note that, for United States federal income tax purposes, is:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	an individual citizen or resident of the United States;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	a corporation or other entity taxable as a corporation created
	or organized under the laws of the United States or any state
	thereof or the District of Columbia;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	an estate, the income of which is subject to United States
	federal income taxation regardless of its source; or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	a trust, if one or more United States persons (as defined in
	Section&nbsp; 7701(a)(30) of the Code) have the authority to
	control all substantial decisions of the trust and a court
	within the United States is able to exercise primary supervision
	over the administration of the trust;</TD>
</TR>

</TABLE>

<P align="left">
or that has otherwise validly elected to be treated as a United
States person.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A non-United States holder is a beneficial owner of an exchange
note who is not a United States holder. If a partnership holds
notes, the tax treatment of a partner will generally depend on
the status of the partner and on the activities of the
partnership. Partners of partnerships holding outstanding notes
should consult their tax advisors.

<P align="center">104

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">
<B>&nbsp;&nbsp;</B><I>The Exchange Offer</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The exchange of outstanding notes for exchange notes pursuant to
the exchange offer should not constitute a significant
modification of the terms of the outstanding notes and,
accordingly, such exchange should not be treated as a taxable
event for United States federal income tax purposes. Therefore,
a United States holder of outstanding notes (i)&nbsp;should not
recognize taxable gain or loss as a result of exchanging
outstanding notes for exchange notes, (ii) the holding period of
exchange notes should include the holding period of the
outstanding notes exchanged therefor, and (iii)&nbsp;the
adjusted tax basis of the exchange notes should be the same as
the adjusted tax basis of the outstanding notes exchanged
therefor immediately before such exchange. Further, United
States holders of exchange notes would continue to be required
to include interest on the exchange notes in their gross income
in accordance with their method of accounting for United States
federal tax purposes.

<P align="left">
<B>&nbsp;&nbsp;</B><I>Payment of Interest</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Stated interest on an exchange note generally will be includible
in the income of a United States holder as ordinary income at
the time such interest is received or accrued, in accordance
with the holder&#146;s method of accounting for United States
federal income tax purposes.

<P align="left">
<B>&nbsp;&nbsp;</B><I>Market Discount</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
United States holders should be aware that the resale of an
outstanding note or an exchange note may be affected by the
market discount rules of the Code. Under these rules, a
subsequent purchaser of an outstanding note or an exchange note
acquiring the note at a market discount generally would be
required to include as ordinary income a portion of the gain
realized upon the disposition or retirement of the note to the
extent of the market discount that has accrued while the debt
instrument was held by the purchaser. A purchaser at a market
discount includes the purchase of an outstanding note or an
exchange note after its original issuance at a price less than
the note&#146;s stated redemption price at maturity. The amount
of market discount, if any, will generally equal the excess of:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the sum of the issue price of the note and the aggregate amount
	of the original issue discount includible in the gross income of
	all United States holders, over</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the purchase price.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Gain recognized on the disposition, including a redemption, by a
United States holder of an exchange note that has accrued market
discount will be treated as ordinary income, and not capital
gain, to the extent of the accrued market discount, but only if
the amount of market discount exceeds a statutorily-defined de
minimis amount. Under the de minimis exception, there is no
market discount on a note if the excess of the stated redemption
price at maturity of the note over the holder&#146;s tax basis
in the note is less than 0.25% of the stated redemption price at
maturity multiplied by the number of complete years after the
acquisition date to the note&#146;s date of maturity. Unless the
holder elects otherwise, as described below, the accrued market
discount would be the amount calculated by multiplying the
market discount by a fraction:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the numerator of which is the number of days the obligation has
	been held by the holder; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the denominator of which is the number of days after the
	holder&#146;s acquisition of the obligation up to and including
	its maturity date.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A United States holder of an outstanding note or an exchange
note acquired at market discount will be deemed to have realized
an amount equal to the fair market value of the note if the
holder disposes of the note in specified transactions other than
a sale, exchange or involuntary conversion, even though the
transaction is otherwise non-taxable (for example, a gift). The
United States holder will be required to recognize as ordinary
income any accrued market discount to the extent of the deemed
gain. A holder of an outstanding note or an exchange note
acquired at a market discount also may be required to defer the

<P align="center">105

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
deduction of all or a portion of the interest on any
indebtedness incurred or maintained to purchase or carry the
note until it is disposed of in a taxable transaction.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A United States holder of an outstanding note or an exchange
note acquired at market discount may elect to include the market
discount in income as it accrues. This election would apply to
all market discount obligations acquired by the electing United
States holder on or after the first day of the first taxable
year to which the election applies. The election may be revoked
only with the consent of the IRS. If a United States holder of a
note elects to include market discount in income currently, the
rules discussed above with respect to ordinary income
recognition resulting from sales and certain other dispositions
and to deferral of interest deductions would not apply.

<P align="left">
<B>&nbsp;&nbsp;</B><I>Market Premium</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
An outstanding note or an exchange note may also be acquired at
a bond premium, generally equal to the excess, if any, of its
tax basis over the amount payable at maturity or, if a smaller
premium would result, on an earlier call date. A United States
holder may elect to amortize the bond premium, in which case
amortizable bond premium is allocated to payments of interest
and treated as an offset to interest income. If an election to
amortize bond premium is not made, a United States holder must
include the full amount of each interest payment in income in
accordance with its regular method of tax accounting and will
generally receive a tax benefit from the bond premium only upon
computing its gain or loss upon the sale or other disposition or
payment of the principal amount of the note.

<P align="left">
<B>&nbsp;&nbsp;</B><I>Sale, Exchange or Redemption of Exchange
Notes</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon the sale, exchange or redemption of an exchange note, a
United States holder generally will recognize capital gain or
loss equal to the difference between:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the amount of cash proceeds and the fair market value of any
	property received on the sale, exchange or redemption, except to
	the extent such amount is attributable to accrued interest
	income, which is taxable as ordinary income; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	such holder&#146;s adjusted tax basis in the exchange note.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A United States holder&#146;s adjusted tax basis in an exchange
note generally will equal the cost of the exchange note to such
holder, less any amortized bond premium and any principal
payments received by such holder plus the original issue
discount and any market discount previously included in income.
Such capital gain or loss will be long-term if the United States
holder&#146;s holding period is more than 12&nbsp;months and
will be short-term if the holding period is 12&nbsp;months or
less. Long-term capital gains recognized by individuals are
generally taxed at a maximum federal tax rate of 20%, and
short-term capital gains are generally taxed at a maximum
federal tax rate of 39.6%.

<P align="left">
<B>&nbsp;&nbsp;</B><I>Information Reporting and Backup
Withholding</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In general, information reporting requirements will apply to
certain noncorporate United States holders with respect to
payments of principal, premium, interest and original issue
discount on an exchange note, and to payments of the proceeds of
the sale of a note. The receipt of such payments may be subject
to &#147;backup withholding&#148; at a 31% rate under certain
circumstances. Backup withholding generally applies only if the
holder:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	fails to furnish his or her Social Security or other taxpayer
	identification number within a reasonable time after the request
	for it;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	furnishes an incorrect taxpayer identification number;</TD>
</TR>

</TABLE>

<P align="center">106

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	is notified by the IRS that he or she has failed to report
	properly interest, dividends or original issue discount; or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	fails, under specified circumstances, to provide a certified
	statement, signed under penalties of perjury, that the taxpayer
	identification number provided is the correct number and that he
	or she is not subject to backup withholding.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Any amounts withheld under the backup withholding rules from a
payment to a United States holder will be allowed as a credit
against such holder&#146;s United States federal income tax and
may entitle the holder to a refund, provided that the required
information is furnished to the IRS.

<P align="left">
<B>Non-United States Holders</B>

<P align="left">
<B>&nbsp;&nbsp;</B><I>The Exchange Offer</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The exchange of outstanding notes for exchange notes pursuant to
the exchange offer should not constitute a significant
modification of the terms of the outstanding notes and,
accordingly, such exchange should not be treated as a taxable
event for United States federal income tax purposes. Therefore,
a non-United States holder of outstanding notes (i)&nbsp;should
not recognize taxable gain or loss as a result of exchanging
outstanding notes for exchange notes, (ii)&nbsp;the holding
period of exchange notes should include the holding period of
the outstanding notes exchanged therefor, and (iii)&nbsp;the
adjusted tax basis of the exchange notes should be the same as
the adjusted tax basis of the outstanding notes exchanged
therefor immediately before such exchange. Further, non-United
States holders of exchange notes would continue to be required
to include interest on the exchange notes in their gross income
in accordance with their method of accounting for United States
federal tax purposes.

<P align="left">
<B>&nbsp;&nbsp;</B><I>Payment of Interest</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Generally, interest income of a non-United States holder that is
not effectively connected with a United States trade or business
will be subject to a withholding tax at a 30% rate or any lower
rate that may be prescribed by an income tax treaty between the
United States and the holder&#146;s country of residence.
However, interest paid on an exchange note to a non-United
States holder will qualify for the portfolio interest exemption
and, therefore, will not be subject to United States federal
income tax or withholding tax if such interest income is not
effectively connected with a United States trade or business of
the non-United States holder, and the non-United States holder:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	does not actually or constructively own 10% or more of the
	combined voting power of all classes of stock of Meritage
	entitled to vote,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	is not a controlled foreign corporation related to Meritage,
	actually or constructively through stock ownership under section
	864(d)(4) of the Code,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	is not a bank which acquired the note in consideration for an
	extension of credit made pursuant to a loan agreement entered
	into in the ordinary course of business, and either</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="3%"></TD>
	<TD width="91%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#151;&nbsp;</TD>
	<TD align="left">
	provides to Meritage or its agent an appropriate W-8&nbsp;Series
	Form or a suitable substitute form signed under penalties of
	perjury that includes its name and address and certifies as to
	the holder&#146;s non-United States status, and Meritage does
	not have actual knowledge or reason to know that the holder is a
	United States person, or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#151;&nbsp;</TD>
	<TD align="left">
	Meritage does not have actual knowledge or reason to know that
	the holder is a United States person and Meritage receives
	(i)&nbsp;a withholding certificate from an intermediary payee
	(such as a withholding foreign partnership, qualified
	intermediary or U.S. branch of a non-United States bank or of a
	non-United States insurance company), and such intermediary
	obtains appropriate certification with respect to the
	holder&#146;s non-United States status and, if required,
	provides a copy of such certification to Meritage, or
	(ii)&nbsp;if the payee is a securities clearing organization,
	bank or other financial institution that holds securities for
	its customers in the ordinary course, a statement signed under
	penalties of perjury that the institution has received</TD>
</TR>

</TABLE>

<P align="center">107

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="3%"></TD>
	<TD width="91%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD></TD>
	<TD align="left">
	a withholding certificate from the beneficial owner (or that it
	has received a similar statement from another financial
	institution), listing the name and address of the beneficial
	owner and attaching a copy of the beneficial owner&#146;s
	withholding certificate.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A non-United States holder which does not qualify for the
&#147;portfolio interest exemption&#148; may nevertheless be
entitled to an exemption from, or reduction on the rate of, the
United States withholding tax on the interest and discount if
such holder:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	resides in a jurisdiction which has a favorable income tax
	treaty with the United States,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	satisfies the conditions for the application of such treaty, and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	provides to Meritage or its agent the appropriate Form&nbsp;W-8
	or a suitable substitute form.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Except to the extent that an applicable treaty otherwise
provides, a non-United States holder generally will be taxed in
the same manner as a United States holder with respect to
interest and discount if the interest and discount is
effectively connected with a United States trade or business of
the non-United States holder. Effectively connected interest and
discount received by a corporate non-United States holder may
also, under certain circumstances, be subject to an additional
branch profits tax at a 30% rate or, if applicable, a lower
treaty rate. Even though such effectively connected interest and
discount is subject to income tax, and may be subject to the
branch profits tax, it is not subject to withholding if the
non-United States holder delivers an appropriate and properly
executed W-8 series Form to Meritage or its agent.

<P align="left">
<B>&nbsp;&nbsp;</B><I>Sale, Exchange or Redemption of Notes</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A non-United States holder of an exchange note will generally
not be subject to United States federal income tax or
withholding tax on any gain realized on the sale, exchange or
redemption of the exchange note, other than gain attributable to
accrued interest or discount, unless:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the gain is effectively connected with a United States trade or
	business of the non-United States holder,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	in the case of a non-United States holder who is an individual,
	the holder is present in the United States for a period or
	periods aggregating 183&nbsp;days or more during the taxable
	year of the disposition, or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the holder is subject to tax pursuant to the provisions of the
	Code applicable to certain United States expatriates.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The amount of gain realized upon the sale, exchange, or
redemption of an exchange note may include amounts attributable
to accrued interest and the discount. Gain attributable to
accrued interest and discount will be taxable, if at all, as
described above under &#147;&#151;&nbsp;Non-United States
Holders&nbsp;&#151; Payment of Interest.&#148;

<P align="left">
<B>&nbsp;&nbsp;</B><I>Information Reporting and Backup
Withholding</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In general, payments of principal or interest (including
discount) made by Meritage and other payors to a non-United
States holder will not be subject to backup withholding and
information reporting, provided that the non-United States
holder certifies its non-United States holder status under
penalties of perjury or otherwise establishes an exemption. In
general, payment of the proceeds from the sale of exchange notes
effected at a United States office of a broker is subject to
both United States backup withholding and information reporting.
However, a holder will not be subject to backup withholding and
information reporting on such a sale provided that:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the broker does not have actual knowledge or reason to know that
	the holder is a United States person and the holder has
	furnished to the broker:</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="3%"></TD>
	<TD width="91%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#151;&nbsp;</TD>
	<TD align="left">
	an appropriate W-8&nbsp;Series Form or an acceptable substitute
	form upon which the holder certifies, under penalties of
	perjury, that the holder is a non-United States person, or</TD>
</TR>

</TABLE>

<P align="center">108

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="3%"></TD>
	<TD width="91%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#151;&nbsp;</TD>
	<TD align="left">
	other documentation upon which it may rely to treat the payment
	as made to a non-United States person in accordance with U.S.
	Treasury regulations, or</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the holder otherwise establishes an exemption.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If a holder fails to establish an exemption and the broker does
not possess adequate documentation of the holder&#146;s status
as a non-United States person, the payments may be subject to
information reporting and backup withholding. However, backup
withholding will not apply with respect to payments made outside
the United States to an offshore account maintained by the
holder unless the payor has actual knowledge that the holder is
a United States person. Meritage and other payors are required
to report payments of interest (including discount) on the
exchange notes on Internal Revenue Service Form&nbsp;1042-S even
if the payments are not otherwise subject to information
reporting requirements.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In general, payment of the proceeds from the sale of exchange
notes effected at a foreign office of a broker will not be
subject to information reporting or backup withholding. However,
a sale effected at a foreign office of a broker will be subject
to information reporting and backup withholding if:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the proceeds are transferred to an account maintained by the
	holder in the United States,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the payment of proceeds or the confirmation of the sale is
	mailed to the holder at a United States address, or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the sale has some other specified connection with the United
	States as provided in U.S. Treasury regulations, unless the
	broker does not have actual knowledge or reason to know that the
	holder is a United States person and the documentation
	requirements described above (relating to a sale of notes
	effected at a United States office of a broker) are met or the
	holder otherwise establishes an exemption.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, payments of the proceeds from the sale of exchange
notes effected at a foreign office of a broker will be subject
to information reporting, but not backup withholding, if the
sale is effected at a foreign office of a broker that is:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	a United States person,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	a controlled foreign corporation for United States tax purposes,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	a foreign person 50% or more of whose gross income is
	effectively connected with the conduct of a United States trade
	or business for a specified three-year period, or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	a foreign partnership, if at any time during its tax year:</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="3%"></TD>
	<TD width="91%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#151;&nbsp;</TD>
	<TD align="left">
	one or more of its partners are United States persons, who in
	the aggregate hold more than 50% of the income or capital
	interest in the partnership, or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#151;&nbsp;</TD>
	<TD align="left">
	such foreign partnership is engaged in the conduct of a United
	States trade or business unless the broker does not have actual
	knowledge or reason to know that the holder is a United States
	person and the documentation requirements described above
	(relating to a sale of notes effected at a United States office
	of a broker) are met or the holder otherwise establishes an
	exemption.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Recently enacted Treasury regulations contain a number of other
provisions affecting United States withholding taxes and
reporting requirements including special rules for payments made
to nonqualified intermediaries, flow-through entities and United
States branches. Prospective investors should consult their tax
advisors regarding the effect of these regulations.

<P align="left">
<B>&nbsp;&nbsp;</B><I>United States Federal Estate Tax</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Your estate will not be subject to United States federal estate
tax on exchange notes of a series beneficially owned by you at
the time of your death, provided that (1)&nbsp;you do not own
10% or more of the total combined voting power of all classes of
our voting stock (within the meaning of the Code and the

<P align="center">109
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
United States Treasury Regulations) and (2)&nbsp;interest on
that exchange note would not have been, if received at the time
of your death, effectively connected with the conduct by you of
a trade or business in the United States.
</DIV>

<P align="left">
<B>Liquidated Damages; Redemption at Premium; Repurchase at
Premium</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The treatment of interest described above with respect to the
exchange notes is based, in part, upon Meritage&#146;s
determination that, as of the date of the issuance of the
outstanding notes, the possibility that (1)&nbsp;liquidated
damages will be paid, (2)&nbsp;Meritage will redeem the notes at
a premium, or (3)&nbsp;Meritage will be required to offer to
repurchase the notes at a premium upon a change of control is
remote. Although not free from doubt, if liquidated damages are
in fact paid, Meritage redeems the notes at a premium, or
Meritage repurchases the notes at a premium, Meritage believes
that such liquidated damages or premium payments should be
taxable to a holder as ordinary income, at the time such income
accrues or is received, in accordance with such holder&#146;s
regular method of tax accounting. It is possible, however, that
the IRS may take a different position, in which case the timing
and amount of income inclusion described above with respect to
the notes may be different.

<!-- link1 "PLAN OF DISTRIBUTION" -->
<DIV align="left"><A NAME="017"></A></DIV>

<P align="center">
<B>PLAN OF DISTRIBUTION</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each broker-dealer that receives exchange notes for its own
account pursuant to the exchange offer must acknowledge that it
will deliver a prospectus in connection with any resale of such
exchange notes. The prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer
in connection with sales of exchange notes received in exchange
for outstanding notes which were acquired as a result of
market-making activities or other trading activities. We have
agreed that, starting on the expiration date and ending on the
close of business on the first anniversary of the expiration
date, we will make this prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any
such resale. In addition, until
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
 2001, all dealers effecting transactions in the exchange notes
may be required to deliver a prospectus.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We will not receive any proceeds from any sale of exchange notes
by broker-dealers. exchange notes received by broker-dealers for
their own account pursuant to the exchange offer may be sold
from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the
writing of options on the exchange notes or a combination of
those methods of resale, at prices which may or may not be based
upon market prices prevailing at the time of the sale. Any such
sale may be made directly to purchasers or to or through brokers
or dealers who may receive compensation in the form of
commissions or concessions from the selling broker-dealer and/or
the purchasers of the exchange notes. Any broker-dealer that
sells exchange notes that were received by it for its own
account pursuant to the exchange offer and any broker or dealer
that participates in a distribution of such exchange notes may
be deemed to be an &#147;underwriter&#148; within the meaning of
the Securities Act and any profit from sale of the exchange
notes and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation. The
letter of transmittal states that a broker-dealer will not, by
delivering a prospectus, be deemed to admit that it is an
&#147;underwriter&#148; within the meaning of the Securities Act.

<!-- link1 "LEGAL MATTERS" -->
<DIV align="left"><A NAME="018"></A></DIV>

<P align="center">
<B>LEGAL MATTERS</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The validity of the notes offered hereby will be passed upon for
us by Snell&nbsp;&#38; Wilmer L.L.P., Phoenix, Arizona.

<P align="center">110

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "EXPERTS" -->
<DIV align="left"><A NAME="019"></A></DIV>

<P align="center">
<B>EXPERTS</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The consolidated financial statements of Meritage Corporation
and subsidiaries as of December&nbsp;31, 2000 and 1999, and for
each of the years in the three-year period ended
December&nbsp;31, 2000, have been included herein and in the
registration statement in reliance upon the report of KPMG LLP,
independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in
accounting and auditing.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The combined financial statements of Hancock Communities as of
December 31, 2000, and for the one-year period ended
December&nbsp;31, 2000, included in this registration statement,
have been audited by McGladrey&nbsp;&#38; Pullen LLP,
independent certified public accountants, as stated in their
report appearing herein.

<!-- link1 "AVAILABLE INFORMATION" -->
<DIV align="left"><A NAME="020"></A></DIV>

<P align="center">
<B>AVAILABLE INFORMATION</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Meritage and the Guarantors have filed with the Securities and
Exchange Commission a registration statement on Form&nbsp;S-4
(together with all amendments and exhibits thereto, the
&#147;registration statement&#148;) under the Securities Act for
the registration of the exchange notes offered hereby. As
permitted by the rules and regulations of the Commission, this
prospectus does not contain all of the information set forth in
the registration statement and the exhibits and schedules
thereto. For further information with respect to Meritage, the
Guarantors and the exchange notes offered hereby, reference is
made to the registration statement and to the exhibits and
schedules filed therewith. Statements contained in this
prospectus concerning the contents of any contract or other
document are not necessarily complete. With respect to each such
contract or other document filed with the Commission as an
exhibit to the registration statement, reference is made to the
exhibit for a more complete description of the matter involved,
and each such statement shall be deemed qualified in its
entirety by such reference.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are subject to the informational requirements of the Exchange
Act, and file reports, proxy statements and other information
with the Commission. These reports, proxy statements and other
information may be inspected and copied at the public reference
facilities maintained by the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the following
Regional offices of the Commission: Citicorp Center,
500&nbsp;West Madison Street, Suite&nbsp;1400, Chicago,
Illinois&nbsp;60661; and 7&nbsp;World Trade Center,
Suite&nbsp;1300, New York, New York 10048. Copies of such
material may also be obtained from the Public Reference Room of
the Commission at 450&nbsp;Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. You may obtain information on the
operation of the Public Reference Room by calling the Commission
at (800) SEC-0330. The Commission also maintains a World Wide
Web site that contains reports, proxy and information statements
and other information regarding registrants like us that file
electronically with the Commission (at http://www.sec.gov).
Meritage&#146;s common stock is listed on the New York Stock
Exchange (Symbol: MTH). Reports, proxy statements and other
information relating to Meritage can be inspected at the offices
of the New York Stock Exchange, 20&nbsp;Broad Street, New York,
New York 10005.

<P align="center">111
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "INCORPORATION OF CERTAIN INFORMATION BY REFERENCE" -->
<DIV align="left"><A NAME="021"></A></DIV>

<P align="center">
<B>INCORPORATION OF CERTAIN INFORMATION BY REFERENCE</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following documents have been filed by Meritage with the
Commission and are hereby incorporated by reference in this
prospectus:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(a)&nbsp; our Annual Report on Form&nbsp;10-K for the year ended
	December&nbsp;31, 2000;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(b)&nbsp; our Quarterly Report on Form&nbsp;10-Q for the quarter
	ended March&nbsp;31, 2001;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(c)&nbsp; our Current Report on Form&nbsp;8-K dated June&nbsp;5,
	2001;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(d)&nbsp; our Current Report on Form&nbsp;8-K dated May&nbsp;10,
	2001, as amended by Form&nbsp;8-K/ A dated May&nbsp;11, 2001; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(e)&nbsp; our Definitive Proxy Statement dated March&nbsp;30,
	2001.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All documents filed by Meritage under Section&nbsp;13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934, after the
date of this prospectus are incorporated into this prospectus by
reference and will constitute a part of this prospectus from the
date they are filed.

<!-- link1 "SUBSIDIARY GUARANTORS" -->
<DIV align="left"><A NAME="022"></A></DIV>

<P align="center">
<B>SUBSIDIARY GUARANTORS</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each subsidiary guarantor is exempt from Exchange Act reporting
pursuant to Rule&nbsp;12h-5 under the Exchange Act, as:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	Meritage Corporation has no independent assets or operations;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the guarantees of the subsidiary guarantors are full and
	unconditional and joint and several; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	any subsidiaries of Meritage Corporation other than the
	subsidiary guarantors are, individually and in the aggregate,
	minor.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There are no significant restrictions on the ability of Meritage
Corporation or any subsidiary guarantor to obtain funds from its
subsidiaries by dividend or loan.

<P align="center">112
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "INDEX TO FINANCIAL STATEMENTS" -->
<DIV align="left"><A NAME="023"></A></DIV>

<P align="center">
<B>INDEX TO FINANCIAL STATEMENTS</B>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="91%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">MERITAGE CORPORATION
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Report of Independent Auditors
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="bottom">
	<FONT size="2">F-2
	</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Consolidated Balance Sheets as of
	December&nbsp;31, 2000 and 1999
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="bottom">
	<FONT size="2">F-3
	</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Consolidated Statements of Earnings for the years
	ended December&nbsp;31, 2000, 1999 and 1998
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="bottom">
	<FONT size="2">F-4
	</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Consolidated Statements of Stockholders&#146;
	Equity for the years ended December&nbsp;31, 2000, 1999 and 1998
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="bottom">
	<FONT size="2">F-5
	</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Consolidated Statements of Cash Flows for the
	years ended December&nbsp;31, 2000, 1999 and 1998
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="bottom">
	<FONT size="2">F-6
	</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Notes to Consolidated Financial Statements
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="bottom">
	<FONT size="2">F-7
	</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Consolidated Balance Sheets as of March&nbsp;31,
	2001 (Unaudited) and December&nbsp;31, 2000
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="bottom">
	<FONT size="2">F-17
	</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Consolidated Statements of Earnings for the three
	months ended March&nbsp;31, 2001 and 2000 (Unaudited)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="bottom">
	<FONT size="2">F-18
	</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Consolidated Statements of Cash Flows for the
	three months ended March&nbsp;31, 2001 and 2000 (Unaudited)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="bottom">
	<FONT size="2">F-19
	</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Notes to Consolidated Financial Statements
	(Unaudited)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="bottom">
	<FONT size="2">F-20
	</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">HANCOCK COMMUNITIES LIMITED LIABILITY COMPANY
	AND HC BUILDERS, INC.
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Independent Auditor&#146;s Report
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="bottom">
	<FONT size="2">F-24
	</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Combined Balance Sheets as of March&nbsp;31, 2001
	(unaudited)&nbsp; and December&nbsp;31, 2000
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="bottom">
	<FONT size="2">F-25
	</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Combined Statements of Income for the three
	months ended March&nbsp;31, 2001 (unaudited)&nbsp;and the year
	ended December&nbsp; 31, 2000
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="bottom">
	<FONT size="2">F-26
	</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Combined Statements of Owners&#146; Equity for
	the three months ended March&nbsp;31, 2001 (unaudited)&nbsp;and
	the year ended December&nbsp;31, 2000
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="bottom">
	<FONT size="2">F-27
	</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Combined Statements of Cash Flows for the three
	months ended March&nbsp;31, 2001 (unaudited)&nbsp;and the year
	ended December&nbsp;31, 2000
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="bottom">
	<FONT size="2">F-28
	</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Notes to Combined Financial Statements
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="bottom">
	<FONT size="2">F-29
	</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">F-1

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>REPORT OF INDEPENDENT AUDITORS</B>

<P align="left">
The Board of Directors and Stockholders

<DIV align="left">
Meritage Corporation:
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have audited the accompanying consolidated balance sheets of
Meritage Corporation and subsidiaries (the Company) as of
December&nbsp;31, 2000 and 1999, and the related consolidated
statements of earnings, stockholders&#146; equity and cash flows
for each of the years in the three-year period ended
December&nbsp;31, 2000. These consolidated financial statements
are the responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audits.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Meritage Corporation and subsidiaries as of
December&nbsp;31, 2000 and 1999, and the results of their
operations and their cash flows for each of the years in the
three-year period ended December&nbsp;31, 2000, in conformity
with accounting principles generally accepted in the United
States of America.
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="38%"></TD>
	<TD width="62%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	/s/ KPMG LLP</TD>
</TR>

</TABLE>

<P align="left">
Phoenix, Arizona

<DIV align="left">
February&nbsp;8, 2001
</DIV>

<P align="center">F-2

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>MERITAGE CORPORATION AND SUBSIDIARIES</B>

<P align="center">
<B>CONSOLIDATED BALANCE SHEETS</B>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="69%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1999</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">(In thousands, except</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">share&nbsp;data)</FONT></B></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Assets
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cash and cash equivalents
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,397</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13,422</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Real estate under development
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">211,307</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">171,012</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Deposits on real estate under option or contract
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">24,251</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">15,700</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Other receivables
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,179</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,643</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Deferred tax asset
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">543</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">699</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Goodwill
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">17,675</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">18,742</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Property and equipment, net
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,717</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,040</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Other assets
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,006</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,301</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total Assets
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">267,075</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">226,559</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Liabilities
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Accounts payable and accrued liabilities
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">48,907</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">41,951</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Home sale deposits
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,917</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,261</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Notes payable
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">86,152</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">85,936</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total Liabilities
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">145,976</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">136,148</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Stockholders&#146; Equity
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Common stock, $.01 par value, 50,000,000 shares
	authorized, 5,922,822 shares at December&nbsp;31, 2000 and
	5,474,906 shares at December&nbsp;31, 1999, issued and
	outstanding
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">59</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">55</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Additional paid-in capital
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">102,526</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">100,407</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Retained earnings (accumulated deficit)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">29,530</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(8,149</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Treasury stock at cost, 811,963 and 186,000
	shares at December&nbsp;31, 2000 and 1999, respectively
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(11,016</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,902</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total Stockholders&#146; Equity
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">121,099</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">90,411</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total Liabilities and Stockholders&#146; Equity
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">267,075</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">226,559</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
See accompanying notes to consolidated financial statements

<P align="center">F-3

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>MERITAGE CORPORATION AND SUBSIDIARIES</B>

<P align="center">
<B>CONSOLIDATED STATEMENTS OF EARNINGS</B>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="59%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="11"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="11" align="center" nowrap><B><FONT size="2">Years Ended December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1999</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1998</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="11"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="11" align="center" nowrap><B><FONT size="2">(In thousands, except per share data)</FONT></B></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Home sales revenue
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">515,428</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">334,007</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">255,985</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Land sales revenue
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,039</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,779</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,128</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">520,467</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">341,786</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">257,113</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cost of home sales
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(411,203</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(270,197</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(204,409</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cost of land sales
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,446</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(7,090</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(779</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(415,649</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(277,287</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(205,188</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Home sales gross profit
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">104,225</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">63,810</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">51,576</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Land sales gross profit
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">593</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">689</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">349</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">104,818</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">64,499</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">51,925</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Commissions and other sales costs
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(28,680</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(19,243</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(14,292</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">General and administrative expenses
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(21,215</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(15,100</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(10,632</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Interest expense
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(8</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(6</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(462</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Other income, net
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,847</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,064</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">751</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Earnings from mortgage assets
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,231</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Minority interest in net income of consolidated
	joint ventures
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,021</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Earnings before income taxes
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">56,762</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">32,215</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">30,500</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Income taxes
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(21,000</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(13,269</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(6,497</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net earnings
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">35,762</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">18,945</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">24,003</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Basic earnings per share
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6.92</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.49</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4.51</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Diluted earnings per share
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6.26</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.14</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.92</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
See accompanying notes to consolidated financial statements

<P align="center">F-4

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>MERITAGE CORPORATION AND SUBSIDIARIES</B>

<P align="center">
<B>CONSOLIDATED STATEMENTS OF STOCKHOLDERS&#146; EQUITY</B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="36%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="23"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="23" align="center" nowrap><B><FONT size="2">Years Ended December 31, 2000, 1999 and 1998</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="23" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="11"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Retained</FONT></B></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Additional</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Earnings/</FONT></B></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Number of</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Common</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Paid-In</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">(Accumulated</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Treasury</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Shares</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Stock</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Capital</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Deficit)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Stock</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Total</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="23"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="23" align="center" nowrap><B><FONT size="2">(In thousands)</FONT></B></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Balance at December&nbsp;31, 1997
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,255</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">53</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">97,819</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(51,097</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(410</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">46,365</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net earnings
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">24,003</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">24,003</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Exercise of stock options
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">44</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">514</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">514</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Contingent and warrant shares issued
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">89</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Stock option and contingent stock compensation
	expenses
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,398</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,398</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Retirement of treasury stock
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(53</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(410</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">410</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Balance at December&nbsp;31, 1998
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,335</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">53</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">99,320</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(27,094</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">72,279</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net earnings
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">18,945</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">18,945</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Exercise of stock options
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">51</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">495</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">496</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Contingent shares issued
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">89</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Stock option and contingent stock compensation
	expenses
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">593</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">593</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Purchase of treasury stock
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,902</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,902</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Balance at December&nbsp;31, 1999
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,475</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">55</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">100,407</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(8,149</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,902</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">90,411</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net earnings
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">35,762</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">35,762</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Tax benefit from stock option exercise
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,917</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,917</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Exercise of stock options
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">359</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,047</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,050</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Contingent shares issued
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">89</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Stock option and contingent stock compensation
	expenses
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">73</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">73</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Purchase of treasury stock
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(9,114</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(9,114</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Balance at December&nbsp;31, 2000
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,923</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">59</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">102,526</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">29,530</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(11,016</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">121,099</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
See accompanying notes to consolidated financial statements

<P align="center">F-5

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>MERITAGE CORPORATION AND SUBSIDIARIES</B>

<P align="center">
<B>CONSOLIDATED STATEMENTS OF CASH FLOWS</B>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="55%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="11"></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="11" align="center" nowrap><B><FONT size="2">Years Ended December 31,</FONT></B></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1999</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1998</FONT></B></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="11"></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="11" align="center" nowrap><B><FONT size="2">(In thousands)</FONT></B></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Cash flows from operating activities:
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net earnings
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">35,762</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">18,945</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">24,003</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Adjustments to reconcile net earnings to net cash
	provided by operating activities:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Depreciation and amortization
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,407</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,528</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,637</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Minority interest in net income of consolidated
	joint ventures
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,021</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Deferred tax expense
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">156</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,236</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,969</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Tax benefit from stock option exercise
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,917</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Stock option compensation expense
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">73</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">593</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,398</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Gain on sales of residual interests
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(5,180</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Increase in real estate under development
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(40,295</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(66,254</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(32,046</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Increase in deposits on real estate under option
	or contract
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(8,551</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(8,361</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(3,578</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">(Increase) decrease in other receivables and
	other assets
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,241</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">680</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,775</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Increase in accounts payable and accrued
	liabilities
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">12,368</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9,571</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,375</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Increase (decrease)&nbsp;in home sale deposits
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,656</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(326</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,810</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net cash provided by (used in) operating
	activities
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,252</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(36,387</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,366</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Cash flows from investing activities:
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cash acquired in merger/acquisition
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">785</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cash paid for merger/acquisition
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(5,158</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(6,967</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(9,744</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Purchases of property and equipment
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(3,017</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,935</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,569</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Proceeds from sales of residual interest
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,600</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net cash used in investing activities
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(8,175</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(9,902</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(3,928</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Cash flows from financing activities:
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Borrowings
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">447,269</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">273,824</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">174,446</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Repayment of borrowings
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(447,054</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(225,093</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(164,524</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Purchase of treasury shares
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(9,114</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,902</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Stock options exercised
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,797</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">495</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">514</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net cash (used in) provided by financing
	activities
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(7,102</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">47,324</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,436</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net (decrease)&nbsp;increase in cash and cash
	equivalents
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(9,025</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,035</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,142</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cash and cash equivalents at beginning of year
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13,422</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">12,387</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,245</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cash and cash equivalents at end of year
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,397</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13,422</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">12,387</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Supplemental information:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cash paid for interest
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,403</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,873</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,997</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cash paid for income taxes
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">18,786</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,423</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,333</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
See accompanying notes to consolidated financial statements

<P align="center">F-6

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>MERITAGE CORPORATION AND SUBSIDIARIES</B>

<P align="center">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B>

<DIV align="center">
<B>December&nbsp;31, 2000, 1999 and 1998</B>
</DIV>

<P align="left">
<B>Note 1&nbsp;&#151; Organization and Basis of Presentation</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Business. </I></B>Meritage Corporation develops,
constructs and sells new high quality, single-family homes in
the semi-custom luxury, move-up and entry-level markets.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We were formed in 1988 as a real estate investment trust
(&#147;REIT&#148;) that invested in mortgage-related assets and
real estate loans. On December&nbsp;31, 1996, the Company
acquired by merger the homebuilding operations of various
entities operating under the Monterey Homes name, and has phased
out the mortgage-related operations. Monterey has been building
homes in Arizona for over 15&nbsp;years, specializing in move-up
and semi-custom luxury homes.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As part of our strategy to diversify operations, on July&nbsp;1,
1997, we combined with Legacy Homes, a group of entities with
homebuilding operations in Texas. Legacy has been in business
since 1988, and designs, builds and sells entry-level and
move-up homes. On July&nbsp;1, 1998 we acquired Sterling
Communities, now Meritage Homes of Northern California, which
has homebuilding operations in the San Francisco Bay and
Sacramento metropolitan areas, and targets move-up homebuyers.
In September&nbsp;1998, with shareholder approval, Meritage
Corporation became our new corporate name.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Basis of Presentation. </I></B>The consolidated financial
statements include the accounts of Meritage Corporation and its
subsidiaries (&#147;Meritage&#148; or &#147;the Company&#148;).
Intercompany balances and transactions have been eliminated in
consolidation and certain prior period amounts have been
reclassified to be consistent with current period financial
statement presentation. Financial results include the operations
of Meritage Homes of Northern California from July&nbsp;1, 1998.

<P align="left">
<B>Note 2&nbsp;&#151; Summary of Significant Accounting
Policies</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Cash and Cash Equivalents. </I></B>We consider short-term
investments in liquid debt instruments with an initial maturity
of three months or less to be cash equivalents. Amounts in
transit from title companies for home closings of approximately
$5.5 million and $1.6 million are included in cash at
December&nbsp;31, 2000 and 1999, respectively.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Real Estate Under Development. </I></B>Real estate under
development consists of raw land, lots under development, homes
under construction and completed homes. This inventory is
carried at cost unless such costs would not be recovered from
the cash flows generated by future disposition. In this case,
amounts are carried at estimated fair value less disposal costs.
Costs capitalized include direct construction costs for homes,
development period interest and certain common costs that
benefit the entire community. Common costs are allocated on a
community-by-community basis to residential lots based on the
number of lots to be built in the community, which approximates
the relative sales value method.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Deposits paid related to land options and contracts to purchase
land are capitalized when incurred and classified as deposits on
real estate under option or contract until the related land is
purchased. The deposits are then transferred to real estate
under development.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Cost of Home Sales. </I></B>Cost of home sales includes
land acquisition and development costs, direct home construction
costs, development period interest and closing costs and an
allocation of common costs.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Revenue Recognition and Classification of Costs.
</I></B>Revenues and profits from sales of residential real
estate and related activities are recognized when closings have
occurred, the buyer has made a minimum down payment and other
criteria for sale and profit recognition are satisfied.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Estimated future warranty costs are charged to cost of sales in
the period when the revenues from the related home closings are
recognized. These estimated warranty costs generally range from
 .3% to .75% of the home&#146;s sales price. To date, the reserve
has been sufficient to cover warranty costs incurred.

<P align="center">F-7

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>MERITAGE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<P align="center">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&nbsp;&#151;
(Continued)</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Property and Equipment. </I></B>Property and equipment is
stated at cost less accumulated depreciation. Depreciation is
calculated using the straight-line method over the estimated
useful lives of the assets, which range from three to seven
years. Accumulated depreciation was approximately $5.4 million
and $3.5 million at December&nbsp;31, 2000 and 1999,
respectively. Maintenance and repair costs are expensed as
incurred.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Goodwill. </I></B>Goodwill represents the excess of
purchase price over fair value of net assets acquired and is
being amortized on a straight-line basis over a 20-year period.
Accumulated amortization was approximately $2.8 million at
December&nbsp;31, 2000 and $1.8 million at December&nbsp;31,
1999. Management periodically evaluates the businesses to which
the goodwill relates to determine if the carrying value of
goodwill has been impaired. The amount of goodwill impairment,
if any, is measured based on projected discounted future
operating cash flows using a discount rate reflecting our
average cost of funds. No goodwill impairment was recorded in
the accompanying statements of earnings.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Residual Interests. </I></B>During 1998, we owned residual
interests in collateralized mortgage obligations (CMOs) and in
mortgage participation certificates (MPCs) (collectively
residual interests). We used the prospective net level yield
method, in which interest is recorded at cost and amortized over
the life of the related CMO or MPC issuance, to account for the
residual interests. During 1998 we sold our remaining residual
interests for a gain and generated interest income from these
assets prior to sale totaling approximately $5.2&nbsp;million.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Income Taxes. </I></B>We account for income taxes in
accordance with Statement of Financial Accounting Standards
(SFAS)&nbsp;No.&nbsp;109, &#147;Accounting for Income
Taxes&#148;. Under the asset and liability method of SFAS
No.&nbsp;109, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing
assets and liabilities and their respective tax basis. Deferred
tax assets and liabilities are measured using the enacted tax
rates expected to apply to taxable income in future years and
are subsequently adjusted for changes in the rates. The effect
on deferred tax assets and liabilities of a change in tax rates
is a charge or credit to deferred tax expense in the period of
enactment.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Earnings Per Share. </I></B>We compute basic earnings per
share by dividing income available to common stockholders by the
weighted-average number of common shares outstanding during the
year. Diluted earnings per share reflects the potential dilution
that could occur if securities or contracts to issue common
stock were exercised or converted into common stock or resulted
in the issuance of common stock that then shared in our earnings.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Use of Estimates. </I></B>The preparation of financial
statements in accordance with accounting principles generally
accepted in the United States of America requires management to
make estimates and assumptions relating to amounts reported in
the financial statements and accompanying notes. Actual results
could differ materially from these estimates.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Fair Value of Financial Instruments. </I></B>The carrying
amounts of our short-term financial instruments are reasonable
approximations of fair value. Our notes payable carry interest
rates that are variable and/or comparable to current market
rates based on the nature of the loans, their terms and
remaining maturity, and therefore are stated at approximate fair
value. Considerable judgment is required in interpreting market
data to develop estimates of fair value. Accordingly, these fair
value estimates are subjective and not necessarily indicative of
the amounts we would pay or receive in actual market
transactions.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Stock Option Plans. </I></B>We have elected to account for
stock-based compensation using the intrinsic value method
prescribed in Accounting Principles Board Opinion
(APB)&nbsp;No.&nbsp;25 as allowed by SFAS No.&nbsp;123
&#147;Accounting for Stock-Based Compensation&#148;. As such,
compensation expense would be recorded on the date of the grant
only if the market price of the stock underlying the grant was
greater than the exercise price. The pro forma disclosures that
are required by SFAS No.&nbsp;123 are presented in Note&nbsp;6.

<P align="center">F-8

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>MERITAGE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<P align="center">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&nbsp;&#151;
(Continued)</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Segment Information. </I></B>Statement of Financial
Accounting Standards No.&nbsp;131, &#147;Disclosures about
Segments for an Enterprise and Related Information&#148; was
issued in June&nbsp;1997. SFAS No.&nbsp;131 establishes
standards for the way that public companies report selected
information about operating segments in financial reports issued
to stockholders. We have adopted the provisions of SFAS
No.&nbsp;131, which caused no significant impact on our
definitions of our operating segments and related disclosures.

<P align="left">
<B>Note 3&nbsp;&#151; Real Estate Under Development and
Capitalized Interest</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Real estate under development at December&nbsp;31 includes (in
thousands):

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="74%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1999</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Homes under contract, in production
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">92,881</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">71,987</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Finished lots and lots under development
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">88,266</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">63,610</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Model homes and homes held for resale
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">26,937</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">31,797</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Land held for development
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,223</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,618</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">211,307</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">171,012</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We capitalize certain interest costs incurred during development
and construction. Capitalized interest is allocated to real
estate under development and charged to cost of home sales when
the property is delivered. Summaries of interest capitalized and
interest expensed follow (in thousands):

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="75%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">Year Ended</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">December 31,</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1999</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Beginning unamortized capitalized interest
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,971</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,982</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Interest capitalized
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,626</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,025</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Amortization to cost of home sales
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(9,171</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(5,036</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Ending unamortized capitalized interest
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,426</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,971</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Interest incurred
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,634</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,031</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Interest capitalized
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(10,626</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(7,025</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Interest expense
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under option contracts with specific performance, purchase of
the properties is dependent upon the completion of certain
requirements by us and the sellers. At December&nbsp;31, 2000,
we had approximately 785 lots with an aggregate purchase price
of approximately $24.5 million under option contracts with
specific performance.

<P align="left">
<B>Note 4&nbsp;&#151; Notes Payable</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Notes payable at December&nbsp;31 consists of the following (in
thousands):

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="76%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
	<TD></TD>
	<TD align="center" nowrap><B><FONT size="2">1999</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<FONT size="2">$100 million bank revolving construction line of
	credit, interest payable monthly approximating prime (9.5% at
	December&nbsp;31, 2000) or LIBOR plus 1.75% (at rates ranging
	from 8.320% to 8.553% at December&nbsp;31, 2000) payable at the
	earlier of close of escrow, maturity date of individual homes
	within the line or over a 24&nbsp;month period beginning on
	January&nbsp;1, 2002, secured by first deeds of trust on real
	estate
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom">
	<FONT size="2">$50,354
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom">
	<FONT size="2">$37,411
	</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">F-9

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>MERITAGE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<P align="center">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&nbsp;&#151;
(Continued)</B>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="73%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
	<TD></TD>
	<TD align="center" nowrap><B><FONT size="2">1999</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<FONT size="2">$65 million bank revolving construction line of
	credit, interest payable monthly approximating prime or LIBOR
	(30&nbsp; day LIBOR 6.565% at December&nbsp;31, 2000) plus 2.0%,
	payable at the earlier of close of escrow, maturity date of
	individual homes within the line or July&nbsp;31, 2001, secured
	by first deeds of trust on real estate
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom">
	<FONT size="2">17,269
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom">
	<FONT size="2">26,104
	</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<FONT size="2">$15 million unsecured bank revolving line of
	credit, interest payable monthly at prime, matured
	January&nbsp;17, 2000
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom">
	<FONT size="2">&#151;
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom">
	<FONT size="2">6,000
	</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<FONT size="2">Acquisition and development credit facilities and
	seller carry back financing totaling $5.7 million, interest
	payable monthly, ranging from prime to prime plus .25% or at a
	fixed 10% per annum rate; payable at the earlier of funding of
	construction financing or the maturity date of the individual
	projects, secured by first deeds of trust on real estate
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom">
	<FONT size="2">3,516
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom">
	<FONT size="2">1,396
	</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<FONT size="2">Senior unsecured notes, maturing
	September&nbsp;15, 2005, annual interest of 9.1% payable
	quarterly, principal payable in three equal installments on
	September&nbsp;15, 2003, 2004 and 2005
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom">
	<FONT size="2">15,000
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom">
	<FONT size="2">15,000
	</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<FONT size="2">Other
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom">
	<FONT size="2">13
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom">
	<FONT size="2">25
	</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Total
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom">
	<FONT size="2">$86,152
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom">
	<FONT size="2">$85,936
	</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The bank credit facilities and senior unsecured notes contain
covenants which require certain levels of tangible net worth,
the maintenance of certain minimum financial ratios, place
limitations on the payment of dividends and limit incurrence of
indebtedness, asset dispositions and creations of liens, among
other items. As of December&nbsp;31, 2000 and throughout the
year, we were in compliance with these covenants.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On October&nbsp;2, 1998, we issued $15 million in 9.1% Senior
Unsecured notes due September&nbsp;1, 2005 in a private
placement to accredited investors under Section&nbsp;4(2) of the
Securities Act of 1933. Placement agents for this issue were
paid a fee of 2.75% of the face amounts of the notes. The notes
were sold at par to four entities controlled by Massachusetts
Mutual Life Insurance Company. The proceeds of the issue were
used to pay down existing indebtedness.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Scheduled maturities of notes payable as of December&nbsp;31,
2000 follow (in thousands):

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="87%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD align="center" nowrap><B><FONT size="2">Years Ended December 31,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">2001
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">19,586</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">2002
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">50,354</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">2003
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,212</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">2004
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">2005
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Thereafter
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">86,152</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">F-10

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>MERITAGE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<P align="center">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&nbsp;&#151;
(Continued)</B>

<P align="left">
<B>Note 5&nbsp;&#151; Earnings Per Share</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A summary of the reconciliation from basic earnings per share to
diluted earnings per share for the years ended December&nbsp;31,
follows (in thousands, except per share amounts):

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="63%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1999</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1998</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net earnings
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">35,762</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">18,945</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">24,003</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Basic EPS&nbsp;&#151; Weighted average shares
	outstanding
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,171</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,431</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,317</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Basic earnings per share
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6.92</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.49</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4.51</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Basic EPS&nbsp;&#151; Weighted average shares
	outstanding
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,171</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,431</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,317</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Effect of dilutive securities:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Contingent shares and warrants
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">19</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">89</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">158</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Stock options
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">524</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">512</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">641</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Dilutive EPS&nbsp;&#151; Weighted average shares
	outstanding
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,714</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,032</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,116</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Diluted earnings per share
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6.26</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.14</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.92</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Antidilutive stock options not included in
	diluted EPS
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">38</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">279</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">59</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<B>Note 6&nbsp;&#151; Stock Options</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our Board of Directors administers our stock option plan. The
plan provides for stock option grants to key personnel and
directors, and provide a means of performance-based compensation
in order to attract and retain qualified employees.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We apply APB Opinion No.&nbsp;25 and related interpretations in
accounting for our plan. Under APB&nbsp;25, if the exercise
price of the Company&#146;s stock options is equal to the market
price of the underlying stock on the date of the grant, no
compensation expense is recognized.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Had compensation cost for these plans been determined consistent
with SFAS No.&nbsp;123, our net earnings and earnings per share
would have been reduced to the following pro forma amounts (in
thousands, except for per share amounts):

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="50%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="13%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
	<TD></TD>
	<TD align="center" nowrap><B><FONT size="2">1999</FONT></B></TD>
	<TD></TD>
	<TD align="center" nowrap><B><FONT size="2">1998</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net earnings
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">As reported
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top">
	<FONT size="2">$35,762
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top">
	<FONT size="2">$18,945
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top">
	<FONT size="2">$24,003
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Pro forma
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top">
	<FONT size="2">35,464
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top">
	<FONT size="2">18,472
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top">
	<FONT size="2">23,573
	</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Basic earnings per share
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">As reported
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top">
	<FONT size="2">6.92
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top">
	<FONT size="2">3.49
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top">
	<FONT size="2">4.51
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Pro forma
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top">
	<FONT size="2">6.86
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top">
	<FONT size="2">3.40
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top">
	<FONT size="2">4.43
	</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Diluted earnings per share
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">As reported
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top">
	<FONT size="2">6.26
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top">
	<FONT size="2">3.14
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top">
	<FONT size="2">3.92
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Pro forma
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top">
	<FONT size="2">6.21
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top">
	<FONT size="2">3.06
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top">
	<FONT size="2">3.85
	</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The per share weighted average fair values of stock options
granted during 2000, 1999 and 1998 were $5.67, $7.81 and $9.91,
respectively, on the dates of grant using the Black-Scholes
pricing model based on the following weighted average
assumptions:

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="72%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1999</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1998</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Expected dividend yield
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">.5</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Risk-free interest rate
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6.71</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4.76</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5.75</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Expected volatility
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">47</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">52</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">51</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Expected life (in years)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">F-11

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>MERITAGE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<P align="center">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&nbsp;&#151;
(Continued)</B>

<P align="left">
<B>&nbsp;&nbsp;</B><I>The Meritage Plan</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Meritage shareholders approved our current stock option plan at
the 1997 Annual Shareholders Meeting. The plan authorizes grants
of incentive stock options and non-qualified stock options to
our executives, directors, employees and consultants. A total of
742,700 shares of Meritage common stock are reserved for
issuance upon exercise of stock options granted under this plan.
The options vest over periods from two to five years, are based
on continued employment, and expire five to ten years after the
date of grant.

<P align="left">
<B>&nbsp;&nbsp;</B><I>The Prior Plan</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The 1988 Homeplex Mortgage Investments Corporation Stock Option
Plan (the prior plan) was in effect at the time of the merger.
No new grants were issued under this plan since the merger, and
all remaining options were exercised during December&nbsp;31,
2000.

<P align="left">
<B>&nbsp;&nbsp;</B><I>Other Options</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the merger and Legacy combination,
Messrs.&nbsp;Hilton, Landon and Cleverly each received 166,667
non-qualified stock options that vest over three years. The
exercise price of the options is $5.25 per share, which was
negotiated at the time of the transactions.
Mr.&nbsp;Hilton&#146;s and Mr. Cleverly&#146;s options expire in
December&nbsp;2002 and Mr.&nbsp;Landon&#146;s expire in June
2001.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
An ex-member of our board of directors who served as our
president and chairman prior to the merger held 250,000
non-qualified stock options. The options were granted in
exchange for the director forgoing his annual salary and bonus,
and were approved by shareholders at the 1996 Annual Meeting.
These options were exercised in 2000 at an exercise price of
$4.50 per share.

<P align="left">
<B>&nbsp;&nbsp;</B><I>Summary of stock option activity:</I>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="28%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">1999</FONT></B></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">1998</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Weighted</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Weighted</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Weighted</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Average</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Average</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Average</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Exercise</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Exercise</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Exercise</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Options</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Price</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Options</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Price</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Options</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Price</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Options outstanding at beginning of year
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,173,226</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7.65</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,028,302</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6.25</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,041,480</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5.86</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Options granted
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">89,800</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10.43</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">264,500</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14.74</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">57,500</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">16.54</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Options exercised
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(359,026</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5.00</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(51,076</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7.08</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(43,660</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10.04</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Options canceled
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(10,000</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">12.17</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(68,500</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14.39</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(27,018</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7.22</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Options outstanding at end of year
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">894,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8.73</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,173,226</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7.65</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,028,302</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6.25</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Options exercisable at end of year
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">587,700</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">801,669</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">613,579</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Price range of options exercised
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4.37&nbsp;-&nbsp;$14.25</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5.62&nbsp;-&nbsp;$11.25</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4.50&nbsp;-&nbsp;$11.25</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Price range of options outstanding
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5.25&nbsp;-&nbsp;$18.00</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4.50&nbsp;-&nbsp;$17.63</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4.50&nbsp;-&nbsp;$17.63</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total shares reserved at end of year
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,226,571</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,386,583</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,525,547</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">F-12

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>MERITAGE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<P align="center">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&nbsp;&#151;
(Continued)</B>

<P align="left">
<B>&nbsp;&nbsp;</B><I>Stock options outstanding at
December&nbsp;31, 2000 were:</I>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="21%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="11"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="11" align="center" nowrap><B><FONT size="2">Options Outstanding</FONT></B></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">Options Exercisable</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Weighted</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Weighted</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Weighted</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Average</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Average</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Average</FONT></B></TD>
</TR>

<TR>
	<TD align="center" nowrap><B><FONT size="2">Range of</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Remaining</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Exercise</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Exercise</FONT></B></TD>
</TR>

<TR>
	<TD align="center" nowrap><B><FONT size="2">Exercise Prices</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Options</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Contractual Life</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Price</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Options</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Price</FONT></B></TD>
</TR>

<TR>
	<TD align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD align="center" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">$&nbsp;5.25&nbsp;-&nbsp;$&nbsp;5.
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">62 502,500</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.4 years</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5.27</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">489,500</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5.26</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD align="center" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">$&nbsp;8.50&nbsp;-&nbsp;$13.
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">37 145,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6.0</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9.81</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">36,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9.15</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD align="center" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">$14.25&nbsp;-&nbsp;$18.0
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0 246,500</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">15.13</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">62,200</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">15.32</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">894,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.7 years</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8.73</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">587,700</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6.57</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<B>Note 7&nbsp;&#151; Commitments and Contingencies</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are involved in legal proceedings and claims that arise in
the ordinary course of business. Management believes the amount
of ultimate liability, if any, with respect to these actions
will not have a material adverse effect on our financial
position.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the normal course of business, we provide standby letters of
credit and performance bonds issued to third parties to secure
performance under various contracts. At December&nbsp;31, 2000
outstanding letters of credit were $5.7 million and performance
bonds were $29.1 million.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We lease office facilities, model homes and equipment under
various operating lease agreements. Approximate future minimum
lease payments for noncancellable operating leases as of
December&nbsp;31, 2000 are as follows (in thousands):

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="89%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD align="center" nowrap><B><FONT size="2">Years Ending December 31,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">2001
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,940</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">2002
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">795</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">2003
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">478</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">2004
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">391</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">2005
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">107</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Thereafter
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,711</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Rental expense approximated $1.6 million in 2000 and $1.1
million in 1999 and 1998. Included in these amounts are $185,600
in 2000, $415,000 in 1999 and $380,000 in 1998 related to office
facilities leased from companies owned beneficially either by
one of our Co-Chairmen or by a Co-Chairman and a Director.

<P align="center">F-13

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>MERITAGE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<P align="center">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&nbsp;&#151;
(Continued)</B>

<P align="left">
<B>Note 8&nbsp;&#151; Income Taxes</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Components of income tax expense are (in thousands):

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="61%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1999</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1998</FONT></B></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Current taxes:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Federal
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">18,255</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,748</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">561</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">State
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,589</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,285</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">967</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">20,844</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,033</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,528</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Deferred taxes:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Federal
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">140</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,121</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,587</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">State
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">16</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">115</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">382</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">156</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,236</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,969</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">21,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13,269</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,497</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Deferred tax assets and liabilities have been recognized in the
consolidated balance sheets due to the following temporary
differences (in thousands):

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="75%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1999</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Warranty reserve
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">675</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">311</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Real estate and fixed asset basis differences
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">324</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">374</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Stock options
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">282</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Sale/ leaseback gain deferred
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">47</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">154</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Other
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">174</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">102</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,220</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,223</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Deductible merger/ acquisition costs
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(677</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(524</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net deferred tax asset
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">543</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">699</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Management believes it is more likely than not that future
operating results will generate sufficient taxable income to
realize the net deferred tax asset.

<P align="left">
<B>&nbsp;&nbsp;</B><I>Reconciliation of Effective Income Tax
Expense:</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Income taxes differ for the years ended December&nbsp;31, 2000,
1999 and 1998 from the amounts computed using the federal
statutory income tax rate as a result of the following (in
thousands):

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="63%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1999</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1998</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Expected taxes at current federal statutory
	income tax rate
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">19,299</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,953</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,678</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">State income taxes
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,719</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">890</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">967</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Utilization of NOL
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(5,709</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Alternative minimum tax
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">561</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Non-deductible merger/ acquisition costs and other
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(18</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,426</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Income tax expense
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">21,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13,269</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,497</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">F-14

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>MERITAGE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<P align="center">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&nbsp;&#151;
(Continued)</B>

<P align="left">
<B>Note 9&nbsp;&#151; Selected Quarterly Financial Data
(Unaudited)</B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="38%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Home Sales</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Basic Earnings</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Diluted Earnings</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Revenue</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Net Earnings</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Per Share</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Per Share</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="15"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="15" align="center" nowrap><B><FONT size="2">(in thousands, except per share amounts)</FONT></B></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">2000&nbsp;&#151; Three months ended:
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">March&nbsp;31
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">91,653</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,771</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">.90</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">.82</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">June&nbsp;30
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">120,802</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,573</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.62</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.50</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">September&nbsp;30
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">134,464</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,509</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.06</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.85</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">December&nbsp;31
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">168,509</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,909</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.38</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.12</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">1999&nbsp;&#151; Three months ended:
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">March&nbsp;31
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">51,306</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,325</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">.43</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">.38</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">June&nbsp;30
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">76,647</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,541</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">.83</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">.75</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">September&nbsp;30
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">76,786</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,027</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">.74</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">.67</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">December&nbsp;31
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">129,268</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,052</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.50</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.37</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<B>Note 10&nbsp;&#151; Segment Information</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We classify our operations into three primary geographic
segments: Texas, Arizona and California. These segments generate
revenues through the sales of homes to external customers. We
are not dependent on any one major customer.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Operational information relating to the different business
segments follows. Information has been included for the
California operations from July&nbsp;1, 1998, the acquisition
date. Certain information has not been included by segment due
to the immateriality of the amount to the segment or in total.
We evaluate segment performance based on several factors, of
which the primary financial measure is earnings before interest
and taxes (EBIT). The accounting policies of the business
segments are the same as those described in notes&nbsp;1 and 2.
There are no significant transactions between segments.

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="62%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="11"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="11" align="center" nowrap><B><FONT size="2">Years Ended December 31,</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1999</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1998</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="11"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="11" align="center" nowrap><B><FONT size="2">(in thousands)</FONT></B></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Home Sales Revenue:
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Texas
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">214,472</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">174,850</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">130,860</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Arizona
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">175,674</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">120,909</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">105,942</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">California
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">125,282</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">38,248</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">19,183</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">515,428</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">334,007</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">255,985</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">EBIT:
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Texas
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">35,082</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">22,652</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">18,300</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Arizona
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">17,666</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14,515</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">12,918</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">California
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">16,819</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,185</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,858</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Corporate and other
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(3,626</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,094</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,504</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">65,941</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">37,258</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">34,580</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Amortization of Capitalized Interest:
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Texas
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,416</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,758</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,143</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Arizona
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,013</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,777</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,410</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">California
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,742</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">501</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">66</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9,171</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,036</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,619</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">F-15

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>MERITAGE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<P align="center">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&nbsp;&#151;
(Continued)</B>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="62%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="11"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="11" align="center" nowrap><B><FONT size="2">December 31,</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1999</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">1998</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="11"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="11" align="center" nowrap><B><FONT size="2">(in thousands)</FONT></B></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Assets at Year End:
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Texas
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">108,238</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">97,832</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">64,448</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Arizona
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">102,746</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">77,195</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">58,758</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">California
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">53,723</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">43,773</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">12,321</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Corporate and other
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,368</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,759</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">16,723</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">267,075</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">226,559</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">152,250</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">F-16

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>MERITAGE CORPORATION AND SUBSIDIARIES</B>

<P align="center">
<B>CONSOLIDATED BALANCE SHEETS</B>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="63%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">March 31,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">December 31,</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">(Unaudited)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">(in thousands, except</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">share data)</FONT></B></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Assets
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cash and cash equivalents
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,359</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,397</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Real estate under development
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">233,446</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">211,307</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Deposits on real estate under option or contract
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">28,776</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">24,251</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Other receivables
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,673</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,179</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Deferred tax asset
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">526</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">543</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Goodwill
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">17,408</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">17,675</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Property and equipment, net
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,016</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,717</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Other assets
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,244</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,006</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total Assets
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">295,448</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">267,075</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Liabilities
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Accounts payable and accrued liabilities
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">36,692</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">48,907</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Home sale deposits
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13,121</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,917</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">notes payable
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">116,928</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">86,152</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total Liabilities
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">166,741</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">145,976</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Stockholders&#146; Equity
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Common stock, $.01 par value; 50,000,000 shares
	authorized, 5,941,202 shares at March&nbsp;31, 2001, and
	5,922,822 shares at December&nbsp;31, 2000, issued and
	outstanding
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">59</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">59</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Additional paid-in capital
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">102,745</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">102,526</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Retained earnings
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">36,919</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">29,530</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Treasury stock at cost, 811,963 shares at
	March&nbsp;31, 2001 and December&nbsp;31, 2000
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(11,016</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(11,016</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total Stockholders&#146; Equity
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">128,707</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">121,099</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total Liabilities and Stockholders&#146; Equity
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">295,448</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">267,075</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
See accompanying notes to consolidated financial statements

<P align="center">F-17

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>MERITAGE CORPORATION AND SUBSIDIARIES</B>

<P align="center">
<B>CONSOLIDATED STATEMENTS OF EARNINGS</B>

<DIV align="center">
<B>(Unaudited)</B>
</DIV>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="72%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">Three Months Ended</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">March 31,</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">(in thousands, except</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">share data)</FONT></B></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Home sales revenue
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">116,113</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">91,653</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Land sales revenue
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">593</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">757</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">116,706</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">92,410</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cost of home sales
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(92,579</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(74,956</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cost of land sales
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(531</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(681</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(93,110</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(75,637</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Home sales gross profit
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">23,534</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">16,697</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Land sales gross profit
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">62</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">76</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">23,596</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">16,773</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Commissions and other sales costs
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(7,013</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(5,779</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">General and administrative expense
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,935</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,002</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Interest expense
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Other income, net
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">534</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">532</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Earnings before income taxes
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">12,181</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,523</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Income taxes
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,792</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,752</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net earnings
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,389</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,771</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Basic earnings per share
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.44</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">.90</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Diluted earnings per share
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.28</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">.82</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
See accompanying notes to consolidated financial statements

<P align="center">F-18

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>MERITAGE CORPORATION AND SUBSIDIARIES</B>

<P align="center">
<B>CONSOLIDATED STATEMENTS OF CASH FLOWS</B>

<DIV align="center">
<B>(Unaudited)</B>
</DIV>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="65%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">Three Months Ended</FONT></B></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">March 31,</FONT></B></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">(in thousands)</FONT></B></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Cash flows from operating activities:
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net earnings
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,389</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,771</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Adjustments to reconcile net earnings to net cash
	used in operating activities:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Depreciation and amortization
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">766</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">694</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Decrease (increase)&nbsp;in deferred tax asset
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">16</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(19</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Stock option compensation expense
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">58</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Increase in real estate under development
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(22,139</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(12,929</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Increase in deposits on real estate under option
	or contract
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,525</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,713</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Decrease (increase)&nbsp;in other receivables and
	other assets
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">268</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,060</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Decrease in accounts payable and accrued
	liabilities
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(12,214</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(5,603</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Increase in home sale deposits
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,204</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,841</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net cash used in operating activities
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(28,235</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(15,960</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Cash flows from investing activities:
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cash paid for merger/acquisition
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(5,158</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Purchases of property and equipment
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(798</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(476</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net cash used in investing activities
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(798</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(5,634</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Cash flows from financing activities:
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Borrowings
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">116,572</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">97,251</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Repayment of borrowings
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(85,795</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(83,110</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Purchase of treasury shares
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(584</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Stock options exercised
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">218</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net cash provided by financing activities
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">30,995</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13,557</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net increase (decrease)&nbsp;in cash and cash
	equivalents
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,962</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(8,037</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cash and cash equivalents at beginning of period
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,397</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13,422</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cash and cash equivalents at end of period
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,359</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,385</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
See accompanying notes to consolidated financial statements

<P align="center">F-19

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>MERITAGE CORPORATION AND SUBSIDIARIES</B>

<P align="center">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B>

<DIV align="center">
<B>(Unaudited)</B>
</DIV>

<P align="left">
<B>Note 1&nbsp;&#151; Basis of Presentation</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Basis of Presentation. </I></B>The consolidated financial
statements include the accounts of Meritage Corporation and its
subsidiaries. Intercompany balances and transactions have been
eliminated in consolidation and certain prior period amounts
have been reclassified to be consistent with current financial
statement presentation. In the opinion of management, the
unaudited consolidated financial statements reflect all
adjustments, consisting only of normal recurring adjustments,
necessary to fairly present our financial position and results
of operations for the periods presented. The results of
operations for any interim period are not necessarily indicative
of results to be expected for a full fiscal year.

<P align="left">
<B>Note 2&nbsp;&#151; Real Estate Under Development and
Capitalized Interest</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Real estate under development consisted of the following (in
thousands):

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="67%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">March 31,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">December 31,</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Homes under contract, in production
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">110,898</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">92,881</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Finished lots
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">56,060</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">60,630</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Lots under development
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">37,401</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">27,636</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Model homes and homes held for resale
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">26,179</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">26,937</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Land held for development
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,908</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,223</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">233,446</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">211,307</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We capitalize certain interest costs incurred during development
and construction. Capitalized interest is allocated to real
estate under development and charged to cost of sales when the
property is delivered. Summaries of interest capitalized and
interest expensed follow (in thousands):

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="76%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">March 31,</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Beginning unamortized capitalized interest
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,426</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,971</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Interest capitalized
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,074</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,868</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Amortization to cost of home sales
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,959</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,565</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Ending unamortized capitalized interest
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,541</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,274</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Interest incurred
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,075</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,870</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Interest capitalized
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(3,074</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,868</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Interest expense
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">F-20

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>MERITAGE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<P align="center">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>

<P align="left">
<B>Note 3&nbsp;&#151; Notes Payable</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Notes payable consisted of the following (in thousands):

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="65%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">March 31,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">December 31,</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">$100 million bank revolving construction line of
	credit, interest payable monthly approximating prime (8% at
	March 31, 2001) or LIBOR plus 1.75% (at rates ranging from
	6.810% to 7.366% at March&nbsp;31, 2001), payable at the earlier
	of close of escrow, maturity date of individual homes within the
	line or over a 24-month period beginning January&nbsp;1, 2002,
	secured by first deeds of trust on real estate
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">79,265</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">50,354</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">$65 million bank revolving construction line of
	credit, interest payable monthly approximating prime or LIBOR
	(30 day LIBOR 5.078% at March&nbsp;31, 2001) plus 2.0%, payable
	at the earlier of close of escrow, maturity date of individual
	homes within the line or July&nbsp;31, 2001, secured by first
	deeds of trust on real estate
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">19,646</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">17,269</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Acquisition and development credit facilities and
	seller carry back financing totaling $5.7 million, interest
	payable monthly, ranging from prime to prime plus .25% or at a
	fixed 10% per annum rate; payable at the earlier of funding of
	construction financing or the maturity date of the individual
	projects, secured by first deeds of trust on real estate
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,008</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,516</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Senior unsecured notes, maturing
	September&nbsp;15, 2005, annual interest of 9.1% payable
	quarterly, principal payable in three equal installments on
	September&nbsp;15, 2003, 2004 and 2005
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">15,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">15,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Other
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">116,928</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">86,152</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<B>Note 4&nbsp;&#151; Earnings Per Share</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A summary of the reconciliation from basic earnings per share to
diluted earnings per share for the three months ended
March&nbsp;31, 2001 and 2000 follows (in thousands, except per
share amounts):

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="75%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net earnings
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,389</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,771</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Basic EPS&nbsp;&#151; Weighted average shares
	outstanding
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,123</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,287</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Basic earnings per share
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.44</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">.90</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Basic EPS&nbsp;&#151; Weighted average shares
	outstanding
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,123</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,287</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Effect of dilutive securities:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Contingent shares and warrants
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">73</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Stock options
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">665</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">458</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Dilutive EPS&nbsp;&#151; Weighted average shares
	outstanding
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,788</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,818</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Diluted earnings per share
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.28</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">.82</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Antidilutive stock options not included in
	diluted EPS
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">280</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">F-21

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>MERITAGE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<P align="center">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>

<P align="left">
<B>Note 5&nbsp;&#151; Income Taxes</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Components of income tax expense at March&nbsp;31 are (in
thousands):

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="72%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Current taxes:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Federal
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,017</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,419</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">State
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">759</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">352</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,776</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,771</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Deferred taxes:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Federal
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">31</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(17</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">State
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(15</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">16</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(19</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,792</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,752</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<B>Note 6&nbsp;&#151; Segment Information</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We classify our operations into three primary geographic
segments: Texas, Arizona and California. These segments generate
revenues through the sale of homes to external customers. We are
not dependent on any one major customer.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Operational information relating to the different business
segments follows. Certain information has not been included by
segment due to the immateriality of the amount to the segment or
in total. We evaluate segment performance based on several
factors, of which the primary financial measure is earnings
before interest and taxes (EBIT). The accounting policies of the
business segments are the same as those described in notes 1 and
2. There are no significant transactions between segments.

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="72%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">Three Months Ended</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">March 31,</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">(in thousands)</FONT></B></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Home Sales Revenue:
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Texas
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">55,576</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">49,430</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Arizona
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">33,177</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">21,942</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">California
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">27,360</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">20,281</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">116,113</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">91,653</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">EBIT:
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Texas
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9,530</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,010</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Arizona
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,204</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">995</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">California
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,133</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,311</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Corporate and other
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(726</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,227</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14,141</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9,089</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">F-22

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>MERITAGE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<P align="center">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="72%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">Three Months Ended</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">March 31,</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">(in thousands)</FONT></B></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Amortization of Capitalized Interest:
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Texas
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">583</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">635</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Arizona
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">981</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">578</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">California
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">395</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">352</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,959</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,565</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="67%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">At</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">At</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">March 31,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">December 31,</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">(in thousands)</FONT></B></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Assets:
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Texas
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">110,996</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">108,238</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Arizona
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">122,181</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">102,746</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">California
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">59,921</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">53,723</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Corporate
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,350</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,368</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">295,448</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">267,075</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">F-23

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>INDEPENDENT AUDITOR&#146;S REPORT</B>

<P align="left">
To the Board of Directors

<DIV align="left">
<B>Hancock Communities Limited Liability Company</B>
</DIV>

<DIV align="left">
<B>HC Builders, Inc.</B>
</DIV>

<DIV align="left">
Phoenix, Arizona
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have audited the accompanying combined balance sheet of
Hancock Communities Limited Liability Company and HC Builders,
Inc. (subsidiaries of American West Homes, Inc.) as of
December&nbsp;31, 2000, and the related combined statements of
income, owners&#146; equity, and cash flows for the year then
ended. These financial statements are the responsibility of the
Companies&#146; management. Our responsibility is to express an
opinion on these financial statements based on our audit.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our opinion, the combined financial statements referred to
above present fairly, in all material respects, the financial
position of Hancock Communities Limited Liability Company and HC
Builders, Inc. as of December&nbsp;31, 2000, and the results of
their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="38%"></TD>
	<TD width="62%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	/s/&nbsp;&nbsp;MCGLADREY &#38; PULLEN, LLP</TD>
</TR>

</TABLE>

<P align="left">
Las Vegas, Nevada

<DIV align="left">
March&nbsp;29, 2001
</DIV>

<P align="center">F-24

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>HANCOCK COMMUNITIES LIMITED LIABILITY COMPANY</B>

<DIV align="center">
<B>HC BUILDERS, INC.</B>
</DIV>

<P align="center">
<B>COMBINED BALANCE SHEETS</B>

<DIV align="center">
<B>March&nbsp;31, 2001 and December&nbsp;31, 2000</B>
</DIV>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="63%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">March 31,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">December 31,</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">(Unaudited)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">ASSETS
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cash and cash equivalents
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,052,958</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,629,555</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Receivables
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">171,029</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">148,661</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Inventories (Notes 2 and 4)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">60,582,885</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">52,065,517</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Property and equipment, net (Note 3)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,357,799</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,108,649</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Deposits on real estate
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,798,840</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,751,660</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Deferred tax asset (Note 5)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">864,900</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">478,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Other assets
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">537,034</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">290,274</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">76,365,445</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">67,472,316</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="10"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">LIABILITIES AND OWNERS&#146; EQUITY
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Liabilities:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Accounts payable
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,656,697</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,320,148</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Accrued interest to related parties (Note&nbsp;4)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,283,787</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">806,700</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Other accrued expenses
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,810,760</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,308,053</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Due to Exeter Holding Company Limited Liability
	Company (Note&nbsp;4)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,752,940</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,781,140</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Notes payable, related parties, unsecured
	(Note&nbsp;4)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,890,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,890,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Notes payable to American West Homes, Inc.
	(Note&nbsp;4)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">36,056,967</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">28,718,741</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Income taxes payable
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">106,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">106,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Customer deposits
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,575,052</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,897,870</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">51,132,203</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">42,828,652</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Commitments and Contingencies (Note 7)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Owners&#146; Equity:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Common stock, no par value; authorized 1,000,000
	shares; issued and outstanding 1,000 shares
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Less subscriptions for 1,000 shares
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,000</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,000</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Accumulated deficit
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,445,091</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(937,258</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Members&#146; equity
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">27,678,333</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">25,580,922</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">25,233,242</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">24,643,664</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">76,365,445</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">67,472,316</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
See Notes to Combined Financial Statements.

<P align="center">F-25

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>HANCOCK COMMUNITIES LIMITED LIABILITY COMPANY</B>

<DIV align="center">
<B>HC BUILDERS, INC.</B>
</DIV>

<P align="center">
<B>COMBINED STATEMENTS OF INCOME</B>

<DIV align="center">
<B>Three Months Ended March&nbsp;31, 2001 and Year Ended
December&nbsp;31, 2000</B>
</DIV>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="63%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">March 31,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">December 31,</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">(Unaudited)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Sales of homes
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">18,481,092</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">183,651,506</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cost of sales (Note 7)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13,547,694</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">142,015,311</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Gross profit
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,933,398</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">41,636,195</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Operating expenses:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Marketing
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,299,712</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,709,211</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Warranty
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">224,328</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,776,671</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Closing costs
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">617,866</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,855,059</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">General and administrative (Note 7)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,049,818</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,228,276</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Total operating expenses
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,191,724</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">29,569,217</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Income from operations
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">741,674</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">12,066,978</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Other income (expense):
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Interest income
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">25,600</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">323,747</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Interest expense (Notes 2 and 4)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(284,510</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(620,791</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Other (Note 7)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">32,605</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">127,979</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(226,305</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(169,065</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Net income before income tax benefit
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">515,369</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,897,913</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Income tax benefit (Note 5)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">386,900</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">44,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Net income
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">902,269</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,941,913</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
See Notes to Combined Financial Statements.

<P align="center">F-26

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>HANCOCK COMMUNITIES LIMITED LIABILITY COMPANY</B>

<DIV align="center">
<B>HC BUILDERS, INC.</B>
</DIV>

<P align="center">
<B>COMBINED STATEMENTS OF OWNERS&#146; EQUITY</B>

<DIV align="center">
<B>Three Months Ended March&nbsp;31, 2001 and Year Ended
December&nbsp;31, 2000</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="27%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="2">Common Stock</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Subscriptions</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Members&#146;</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Accumulated</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Shares</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Amount</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Receivable</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Equity</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Deficit</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Total</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Balance, December&nbsp;31, 1999
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,000</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14,782,001</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(820,647</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13,961,354</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net income (loss)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">12,058,524</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(116,611</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,941,913</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Deemed contribution for bonuses
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,639,126</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,639,126</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Distributions
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(3,898,729</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(3,898,729</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Balance, December&nbsp;31, 2000
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,000</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">25,580,922</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(937,258</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">24,643,664</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net income (loss) (unaudited)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,410,102</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,507,833</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">902,269</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Deemed contribution for bonuses (unaudited)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">106,592</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">106,592</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Distributions (unaudited)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(419,283</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(419,283</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Balance, March&nbsp;31, 2001 (unaudited)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,000</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">27,678,333</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,445,091</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">25,233,242</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
See Notes to Combined Financial Statements.

<P align="center">F-27

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>HANCOCK COMMUNITIES LIMITED LIABILITY COMPANY</B>

<DIV align="center">
<B>HC BUILDERS, INC.</B>
</DIV>

<P align="center">
<B>COMBINED STATEMENTS OF CASH FLOWS</B>

<DIV align="center">
<B>Three Months Ended March&nbsp;31, 2001 and Year Ended
December&nbsp;31, 2000</B>
</DIV>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="60%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">March 31,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">December 31,</FONT></B></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">(Unaudited)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cash Flows from Operating Activities
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cash received from customers
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">19,135,907</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">183,529,239</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cash disbursed to subcontractors, suppliers and
	employees
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(25,906,285</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(176,504,473</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Interest received
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">25,600</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">323,747</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Interest paid, net of interest capitalized
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(284,510</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(620,791</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Other income received
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">32,605</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">127,979</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Net cash (used in) provided by operating
	activities
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(6,996,683</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,855,701</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cash Flows from Investing Activities
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Purchase of property and equipment
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(423,477</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(797,630</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Increase in deposits on real estate
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,047,180</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,239,160</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Net cash used in investing activities
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,470,657</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,036,790</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cash Flows from Financing Activities
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Borrowings under notes payable
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">17,054,976</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">99,161,893</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Repayments on notes payable
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(9,716,750</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(97,046,054</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Borrowings from related parties
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,290,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Payments on related party debt
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(400,000</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Due to (from)&nbsp;parent company, net
	(payments)&nbsp;receipts
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(28,200</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">592,459</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Distributions
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(419,283</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(3,898,729</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Net cash provided by financing activities
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,890,743</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">699,569</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Net (decrease)&nbsp;increase in cash and cash
	equivalents
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,576,597</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,518,480</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cash and Cash Equivalents, beginning
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,629,555</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">111,075</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cash and Cash Equivalents, ending
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,052,958</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,629,555</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Reconciliation of Net Income to Net Cash
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">(Used in) Provided by Operating Activities:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net income
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">902,269</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,941,913</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Loss on abandonment of lease (Note&nbsp;7)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">276,145</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Depreciation expense
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">174,327</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">577,067</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Bonuses recorded by parent
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">106,592</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,639,126</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Changes in assets and liabilities:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Increase (decrease)&nbsp;in receivables
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(22,368</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">725,053</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">(Increase) in inventories
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(8,517,368</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(9,685,465</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">(Increase) in other assets
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(246,760</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(97,615</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">(Increase) in deferred tax assets
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(386,900</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(150,000</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Increase in accounts payable and accrued expenses
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">316,343</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,370,797</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Increase (decrease)&nbsp;in customer deposits
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">677,182</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(847,320</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Increase in taxes payable
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">106,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Net cash (used in) provided by operating
	activities
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(6,996,683</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,855,701</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Supplemental Disclosure of Noncash Investing and
	Financing Activities Seller-financed purchase of inventory
	(Note&nbsp;4)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,290,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
See Notes to Combined Financial Statements.

<P align="center">F-28

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>HANCOCK COMMUNITIES LIMITED LIABILITY COMPANY</B>

<DIV align="center">
<B>HC BUILDERS, INC.</B>
</DIV>

<P align="center">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS</B>

<DIV align="center">
<B>Information with Respect to March&nbsp;31, 2001 and the Three
Months then Ended is Unaudited</B>
</DIV>

<P align="left">
<B>Note&nbsp;1.&nbsp; Nature of Business and Summary of
Significant Accounting Policies</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Hancock Communities Limited Liability Company and HC Builders,
Inc. (the Companies) are primarily engaged in the development,
construction and sale of single-family homes in Phoenix,
Arizona. Segment information is not presented since all of the
Companies&#146; revenue is attributed to a single reportable
segment.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A summary of the Companies&#146; significant accounting policies
follows:

<P align="left">
<B>&nbsp;&nbsp;</B><I>Basis of presentation</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The accompanying unaudited interim financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information. Accordingly, they
do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In management&#146;s opinion, the accompanying financial
statements reflect all material adjustments (consisting only of
normal recurring accruals) necessary for a fair statement of the
results for the interim period presented. The results for the
interim period are not necessarily indicative of the results
which will be reported for the entire year.

<P align="left">
<B>&nbsp;&nbsp;</B><I>Use of estimates in the preparation of
financial statements</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities, such as the allocation of lot
development costs and warranty costs, and disclosures of
contingent assets and liabilities at the date of the financial
statement and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.

<P align="left">
<B>&nbsp;&nbsp;</B><I>Principles of combination</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The combined financial statements include HC Builders, Inc., a
wholly owned subsidiary of Exeter Holding Company Limited
Liability Company (Exeter) and Hancock Communities Limited
Liability Company, a 99% owned subsidiary of Exeter, which is a
55% owned subsidiary of American West Homes, Inc. (American
West).

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Hancock Communities Limited Liability Company (Hancock) makes
distributions of cash to Exeter, a portion of which is then used
to pay bonuses to certain key employees of Hancock. Accordingly,
bonuses of $106,592 and $2,639,126 have been recorded as general
and administrative expense and as contributions from Exeter in
the accompanying financial statements for the three months ended
March&nbsp;31, 2001 (unaudited)&nbsp;and the year ended
December&nbsp;31, 2000, respectively. In addition, Exeter owes
approximately $7,500,000 to American West Homes, Inc. which is
not reflected in these financial statements, but which may be
satisfied only by distribution from the Companies.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All material intercompany accounts and transactions are
eliminated in combination.

<P align="left">
<B>&nbsp;&nbsp;</B><I>Balance sheet preparation</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The operations of the Companies involve a variety of real estate
transactions and it is not possible to precisely measure the
operating cycle of the Companies. The combined balance sheets of
the Companies have been prepared on an unclassified basis in
accordance with real estate industry practice.

<P align="center">F-29

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>HANCOCK COMMUNITIES LIMITED LIABILITY COMPANY</B>
</DIV>

<DIV align="center">
<B>HC BUILDERS, INC.</B>
</DIV>

<P align="center">
<B>NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>

<P align="left">
<B>&nbsp;&nbsp;</B><I>Cash and cash equivalents</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For purposes of the balance sheets and the statements of cash
flows, the Companies consider all cash accounts, none of which
are subject to withdrawal restrictions or penalties, commercial
paper with original maturities less than 90&nbsp;days and money
market accounts to be cash equivalents. The Companies maintain
cash balances in excess of insured amounts at financial
institutions.

<P align="left">
<B>&nbsp;&nbsp;</B><I>Inventories</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Inventories are carried at the lower of cost or fair value less
estimated disposal costs. During the three months ended
March&nbsp;31, 2001 (unaudited)&nbsp;and the year ended
December&nbsp;31, 2000, no adjustments to reduce cost to fair
value less estimated disposal costs were required. Inventory
costs include preacquisition costs, property taxes, interest and
insurance incurred during development and construction as well
as direct and indirect project costs. Capitalized costs
associated with an abandoned project are charged to expense when
the project abandonment occurs. The Companies allocate land,
land improvements, acquisition and carrying costs using the
relative area method. Construction costs are generally allocated
using the specific identification method. Capitalized model
costs are maintained separately for each subdivision and are
expensed on a per unit basis as closings occur.

<P align="left">
<B>&nbsp;&nbsp;</B><I>Property and equipment</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Office equipment, furniture and leasehold improvements are
stated at cost, net of depreciation and amortization.
Depreciation is computed primarily on the straight-line method.
Office equipment and furniture are primarily depreciated over
5&nbsp;years. Leasehold improvements are amortized over the
shorter of the estimated useful lives of the asset or the term
of the lease.

<P align="left">
<B>&nbsp;&nbsp;</B><I>Advertising expense</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Companies expense advertising as incurred. Advertising
expense for the three months ended March&nbsp;31, 2001 and the
year ended December&nbsp;31, 2000 was $484,301
(unaudited)&nbsp;and $1,583,451, respectively.

<P align="left">
<B>&nbsp;&nbsp;</B><I>Revenue recognition</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Revenue from home and property sales is recognized when a
closing occurs, which is when payment has been received and
title, possession, and other attributes of ownership have been
transferred to the buyer and the Companies are not obligated to
perform significant activities after the sale. Payments received
from customers prior to closing are recorded as deposits.

<P align="left">
<B>&nbsp;&nbsp;</B><I>Income taxes</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Hancock, with the consent of its members, has elected to be
taxed under sections of the federal tax law, which provide that,
in lieu of corporation income taxes, the members separately
account for the Company&#146;s items of income, deduction,
losses, and credits. Therefore, these statements do not include
any provision for corporation income taxes for Hancock. Also, no
provision has been made for any amounts which may be advanced or
paid as dividends to the members to assist in paying personal
income taxes on the income of the Company. However, such
distributions are likely in the future.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Deferred taxes for HC Builders, Inc. are provided on a liability
method whereby deferred tax assets are recognized for deductible
temporary differences and operating loss and tax credit
carryforwards and deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets

<P align="center">F-30

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>HANCOCK COMMUNITIES LIMITED LIABILITY COMPANY</B>
</DIV>

<DIV align="center">
<B>HC BUILDERS, INC.</B>
</DIV>

<P align="center">
<B>NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>

<P align="left">
are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized. Deferred tax
assets and liabilities are adjusted for the effects of changes
in tax laws and rates on the date of enactment.

<P align="left">
<B>&nbsp;&nbsp;</B><I>Fair value of financial instruments</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The carrying amounts of financial instruments including cash and
cash equivalents, receivables and accounts payable and accrued
expenses approximate fair value because of their short maturity.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The fair value of the related party notes payable and amounts
due to Exeter Holding Company Limited Liability Company at
March&nbsp;31, 2001 (unaudited) and December&nbsp;31, 2000
approximate their carrying values because of their short
maturities.

<P align="left">
<B>Note 2.&nbsp; Inventories</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Inventories consisted of the following at:

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="64%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">March 31,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">December 31,</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">(Unaudited)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Land under development
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">27,175,904</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">22,267,562</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Finished lots
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,720,005</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,977,925</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cost of construction and models
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">24,686,976</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">17,820,030</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">60,582,885</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">52,065,517</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Interest capitalized and expensed is as follows:

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="64%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">March 31,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">December 31,</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">(Unaudited)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Capitalized interest, beginning
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">666,718</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">738,664</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Interest capitalized
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">758,362</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,762,167</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Amortization to cost of home sales
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(416,182</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(3,834,113</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Capitalized interest, ending
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,008,898</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">666,718</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total interest incurred
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,042,872</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,382,958</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Interest capitalized
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(758,362</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(3,762,167</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Interest expense
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">284,510</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">620,791</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">F-31

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>HANCOCK COMMUNITIES LIMITED LIABILITY COMPANY</B>
</DIV>

<DIV align="center">
<B>HC BUILDERS, INC.</B>
</DIV>

<P align="center">
<B>NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>

<P align="left">
<B>Note 3.&nbsp; Property and Equipment</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Property and equipment consisted of the following at:

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="65%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">March 31,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">December 31,</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">(Unaudited)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Office equipment
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,929,380</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,953,267</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Leasehold improvements
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">296,847</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Furniture and fixtures
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">331,407</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">287,626</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,557,634</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,240,893</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Less: accumulated depreciation
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,199,835</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,132,244</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,357,799</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,108,649</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<B>Note 4.&nbsp; Transactions with Related Parties</B>

<P align="left">
<B>&nbsp;&nbsp;</B><I>Notes Payable, Related Parties</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In September&nbsp;2000, the Companies purchased land for
$2,290,000 from parties related to the minority member of
Hancock. The purchase was financed with a promissory note
payable to the seller with a balance outstanding of $1,890,000
at March&nbsp;31, 2001 (unaudited)&nbsp;and December&nbsp;31,
2000. The note is due in annual installments of $400,000 plus
interest at 9% with the remaining balance due
November&nbsp;2003. The note is secured by land. Interest
incurred in connection with this note was approximately $42,500
(unaudited) and $50,000 for the three months ended
March&nbsp;31, 2001 and the year ending December&nbsp;31, 2000,
respectively.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Companies have a demand note payable to American West with
March&nbsp;31, 2001 and December&nbsp;31, 2000 balances of
$31,168,470 (unaudited) and $24,581,130, respectively. The note
bears interest at 11% and is secured by land under development
and finished lots. The Companies also have unsecured notes
payable to American West with a total outstanding balance at
March&nbsp;31, 2001 and December&nbsp;31, 2000 of $4,888,497
(unaudited) and $4,137,611, respectively. These notes bear
interest at 15%, and mature at various dates through October
2001. Interest incurred in connection with these notes was
approximately $944,000 (unaudited)&nbsp;for the three months
ended March&nbsp;31, 2001 and $4,168,000 for the year ended
December&nbsp;31, 2000.

<P align="left">
<B>&nbsp;&nbsp;</B><I>Due to Exeter</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The amount due to Exeter is unsecured, due on demand and bears
interest at 8%. Interest for the three months ended
March&nbsp;31, 2001 and the year ended December&nbsp;31, 2000 in
connection with this obligation was $56,200 (unaudited) and
$164,500, respectively.

<P align="left">
<B>Note 5.&nbsp; Income Taxes</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the three months ended March&nbsp;31, 2001 and the year
ended December&nbsp;31, 2000, HC Builders, Inc. had a net loss
of $992,175 (unaudited)&nbsp;and $116,611, respectively.

<P align="center">F-32

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>HANCOCK COMMUNITIES LIMITED LIABILITY COMPANY</B>
</DIV>

<DIV align="center">
<B>HC BUILDERS, INC.</B>
</DIV>

<P align="center">
<B>NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The income tax benefit recorded as a result of continuing
operations of HC Builders, Inc. for the three months ended
March&nbsp;31, 2001 (unaudited)&nbsp;and the year ended
December&nbsp;31, 2000 was as follows:

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="62%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">March 31,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">December 31,</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">(Unaudited)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Current payable (benefit):
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">U.S. Federal
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">84,200</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">State and local
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">21,800</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">106,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Deferred:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">U.S. Federal
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(282,100</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(119,300</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">State and local
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(104,800</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(30,700</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(386,900</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(150,000</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(386,900</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(44,000</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Deferred tax assets consist of the following components at
March&nbsp;31, 2001 and December&nbsp;31, 2000.

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="66%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">March 31,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">December 31,</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">(Unaudited)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Warranty reserve
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">353,900</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">478,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Loss carryforwards
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">511,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">864,900</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">478,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Management believes it is more likely than not that future
operating results will generate sufficient taxable income to
realize the deferred tax assets.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The provision for income taxes for the three months ended
March&nbsp;31, 2001 and the year ended December&nbsp;31, 2000
differs from the amount obtained by applying the U.S. federal
income tax rate to pretax income due to the following:

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="65%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">March 31,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">December 31,</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">2000</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">(Unaudited)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Computed &#147;expected&#148; tax expense
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">180,400</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,164,000</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Income of LLC not subject to corporate tax
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(527,600</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,205,000</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">State taxes, net
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(51,600</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(6,100</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Nondeductible expenses and other
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,900</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,100</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Income tax benefit
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(386,900</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(44,000</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<B>Note 6.&nbsp; Employee Benefit Plan</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Hancock established a 401(k) Plan which covers all qualified
employees. Participants may elect to defer from 1% to 15% of
their annual compensation up to $10,500. Hancock, at its
discretion, may make a matching contribution based on the
participant&#146;s deferral in a percentage set by Hancock prior
to the end of each plan year. There was no contribution for the
three months ended March 31, 2001 (unaudited)&nbsp;and the year
ended December&nbsp;31, 2000.

<P align="center">F-33

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>HANCOCK COMMUNITIES LIMITED LIABILITY COMPANY</B>
</DIV>

<DIV align="center">
<B>HC BUILDERS, INC.</B>
</DIV>

<P align="center">
<B>NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>

<P align="left">
<B>Note 7.&nbsp; Commitments and Contingencies</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the normal course of business, the Companies enter into
options to purchase land for future developments and finished
lots. At March&nbsp;31, 2001 (unaudited)&nbsp;and
December&nbsp;31, 2000, the Companies have multiple outstanding
options that expire at various dates through November&nbsp;2002.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Companies are defendants in various lawsuits in the ordinary
course of business including alleged construction defects. In
the opinion of management, these matters are not expected to
have a significant effect on the Companies&#146; financial
position or results of operations.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
HC Builders, Inc.&#146;s federal income tax returns for the
years ended December&nbsp;31, 1998 and 1999 are currently being
examined by the Internal Revenue Service. The results of this
examination cannot be determined at this time, but are not
expected to have a material affect on the Companies&#146;
financial statements.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Companies lease facilities under noncancelable agreements
which expire through December&nbsp;2006.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the year ended December&nbsp;31, 2000 the Companies
entered into a new facility lease agreement that is effective
March&nbsp;2001. The lease requires monthly lease payments of
approximately $34,000 through February&nbsp;2006. A $276,145
abandonment loss was recorded during the year ended
December&nbsp;31, 2000 representing the estimated cost of
terminating the previous lease agreement.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The minimum rental commitment as of December&nbsp;31, 2000 is as
follows:

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="84%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">2001
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">811,346</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">2002
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">552,245</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">2003
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">454,459</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">2004
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">455,697</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">2005
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">456,935</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Thereafter
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">76,190</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,806,872</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Total rent expense incurred during the three months ended
March&nbsp;31, 2001 and the year ended December&nbsp;31, 2000
was $277,010 (unaudited)&nbsp;and $864,599, respectively.

<P align="center">F-34

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
 <HR size="1" width="100%" align="center" noshade>
</DIV>

<DIV align="center">
<HR size="1" width="100%" align="center" noshade>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">We have not authorized any dealer, salesperson
or other person to give any information or to make any
representations to you other than the information contained in
this prospectus. You must not rely on unauthorized information
or repre-sentations.
</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">This prospectus does not offer to sell or
solicit an offer to buy any of these notes in any jurisdiction
where, or to any person whom, it is unlawful to make such offer
or solicitation.
</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">The information contained in this prospectus
is current only as of the date on the cover page. We do not
imply that there has been no change in the information contained
in this prospectus or in our affairs since that date by
delivering this prospectus.
</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Until
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2001,
all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required
to deliver a prospectus. This is in addition to the
dealers&#146; obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or
subscriptions.
</FONT></B>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="center">
<B>Table of Contents</B>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="93%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Prospectus Summary
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Risk Factors
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">The Hancock Acquisition
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">20</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Use of Proceeds
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">22</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Capitalization
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">23</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Unaudited Pro Forma Combined Financial Statements
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">24</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Selected Historical Financial Data
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">32</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Management&#146;s Discussion and Analysis of
	Financial Condition and Results of Operations
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">35</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Market Overview
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">42</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Business
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">44</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Management
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">53</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Certain Relationships and Related Transactions
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">54</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Principal Stockholders
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">55</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Description of Certain Existing Indebtedness
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">57</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Description of the Exchange Notes
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">59</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">The Exchange Offer
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">98</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Certain United States Federal Income Tax
	Considerations
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">104</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Plan of Distribution
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">110</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Legal Matters
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">110</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Experts
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">111</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Available Information
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">111</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Incorporation of Certain Information by Reference
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">112</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Subsidiary Guarantors
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">112</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Index to Financial Statements
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">F-1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
<HR size="1" width="100%" align="center" noshade>

<DIV align="center">
<HR size="1" width="100%" align="center" noshade>
</DIV>

<DIV align="center">
<HR size="1" width="100%" align="center" noshade>
</DIV>

<DIV align="center">
<HR size="1" width="100%" align="center" noshade>
</DIV>

<P align="center">
<B><FONT size="4">$165,000,000
</FONT></B>

<P align="center">
<B><FONT size="4">[MERITAGE CORPORATION LOGO]
</FONT></B>

<P align="center">
<B><FONT size="4">9&nbsp;3/4% Senior Notes due 2011
</FONT></B>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="center">
<B>PROSPECTUS</B>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="center">


<DIV align="center">
<HR size="1" width="100%" align="center" noshade>
</DIV>

<DIV align="center">
<HR size="1" width="100%" align="center" noshade>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>PART II</B>

<P align="center">
<B>INFORMATION NOT REQUIRED IN PROSPECTUS</B>

<P align="left">
<B>Item&nbsp;20.&nbsp;&nbsp;<I>Indemnification of Directors and
Officers</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the provisions of the Maryland General Corporation Law, a
corporation&#146;s articles may, with certain exceptions,
include any provision expanding or limiting the liability of its
directors and officers to the corporation or its stockholders
for money damages, but may not include any provision that
restricts or limits the liability of its directors or officers
to the corporation or its stockholders to the extent that
(i)&nbsp;it is proved that the person actually received an
improper benefit or profit in money, property, or services for
the amount of the benefit or profit in money, property, or
services actually received; or (ii)&nbsp;a judgment or other
final adjudication adverse to the person is entered in a
proceeding based on a finding in the proceeding that the
person&#146;s action, or failure to act, was the result of
active and deliberate dishonesty and was material to the cause
of action adjudicated in the proceeding. Meritage&#146;s charter
contains a provision limiting the personal liability of officers
and directors to Meritage and its stockholders to the fullest
extent permitted under Maryland law.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, the provisions of the Maryland General Corporation
Law permit a corporation to indemnify its present and former
directors and officers, among others, against liability
incurred, unless it is established that (i)&nbsp;the act or
omission of the director or officer was material to the matter
giving rise to the proceeding and was committed in bad faith or
was the result of active and deliberate dishonesty, or
(ii)&nbsp;the director or officer actually received an improper
personal benefit in money, property, or services, or
(iii)&nbsp;in the case of any criminal proceeding, the director
or officer had reasonable cause to believe that the act or
omission was unlawful. Meritage&#146;s charter provides that it
will indemnify its directors, officers, and others so designated
by the Board of Directors to the full extent allowed under
Maryland law.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Insofar as indemnification for liability arising under the
Securities Act may be permitted to directors, officers, or
persons controlling Meritage pursuant to the foregoing
provisions, Meritage has been informed that in the opinion of
the Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.

<P align="left">
<B>Item&nbsp;21.&nbsp;&nbsp;<I>Exhibits and Financial Statement
Schedules</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(a)&nbsp; Exhibits:

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Exhibit</FONT></B></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Number</FONT></B></TD>
	<TD></TD>
	<TD align="center" nowrap><B><FONT size="2">Description</FONT></B></TD>
	<TD></TD>
	<TD align="center" nowrap><B><FONT size="2">Page or Method of Filing</FONT></B></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">2.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Agreement and Plan of Reorganization, dated as of
	September&nbsp;13, 1996, by and among Homeplex, the Monterey
	Merging Companies and the Monterey Stockholders
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;2 of
	Form&nbsp; S-4 Registration Statement No.&nbsp;333-15937
	(&#147;S-4 #333-15937&#148;).
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">2.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Agreement of Purchase and Sale of Assets, dated
	as of May&nbsp;20, 1997, by and among Monterey, Legacy Homes,
	Ltd., Legacy Enterprises, Inc., and John and Eleanor Landon
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;2 of
	Form&nbsp; 8-K/A dated June&nbsp;18, 1997.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">2.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Agreement of Purchase and Sale of Assets, dated
	as of June&nbsp;15, 1998, by and among the Company, Sterling
	Communities, S.H.&nbsp;Capital, Inc., Sterling Financial
	Investments, Inc., Steve Hafener, and W.&nbsp;Leon Pyle
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;2.2 of
	Form&nbsp;10-Q for the quarterly period ended June&nbsp; 30,
	1998.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">2.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Master Transaction Agreement (with Exhibits),
	dated May&nbsp;7, 2001, by and among Meritage Corporation,
	Hancock-MTH Builders, Inc., Hancock-MTH Communities, Inc.,
	HC&nbsp;Builders, Inc. and Hancock Communities, L.L.C.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;2.1 of
	Form&nbsp;8-K filed May&nbsp;10, 2001.
	</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">II-1

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="45%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="41%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Exhibit</FONT></B></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Number</FONT></B></TD>
	<TD></TD>
	<TD align="center" nowrap><B><FONT size="2">Description</FONT></B></TD>
	<TD></TD>
	<TD align="center" nowrap><B><FONT size="2">Page or Method of Filing</FONT></B></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">2.4.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Amendment No.&nbsp;1 to Master Transaction
	Agreement and Agreement of Purchase and Sale of Assets, dated
	May&nbsp;30, 2001, by and among Meritage Corporation,
	Hancock-MTH Builders, Inc., Hancock-MTH Communities, Inc.,
	HC&nbsp;Builders, Inc. and Hancock Communities, L.L.C. and
	American West Homes, Incorporated
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;2.1 of
	Form&nbsp;8-K filed June&nbsp;6, 2001.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Restated Articles of Incorporation of the Company
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;3.2 of
	Form&nbsp;10-Q for the quarterly period ended September&nbsp;30,
	1998.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Amendment to Articles of Incorporation
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;3.1 of
	Form&nbsp;10-Q for the quarterly period ended September&nbsp;30,
	1998.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Amended and Restated Bylaws of the Company
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;3.3 of
	Form&nbsp;S-3 #333-58793.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Articles of Incorporation of Monterey Homes
	Arizona, Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">By-Laws of Monterey Homes Arizona, Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.6</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Articles of Organization of Meritage Paseo
	Crossing, LLC
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.7</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Articles of Incorporation of Monterey Homes
	Construction, Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">By-Laws of Monterey Homes Construction, Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.9</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Articles of Organization of Meritage Paseo
	Construction, LLC
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.9.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Amendment to Articles of Organization of Meritage
	Paseo Construction, LLC
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.10</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Articles of Incorporation of Meritage Homes of
	Arizona, Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.11</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">By-Laws of Meritage Homes of Arizona, Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.12</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Articles of Incorporation of MTH-Texas GP, Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.13</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Bylaws of MTH-Texas GP, Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.14</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Articles of Incorporation of MTH-Texas LP, Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.15</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Bylaws of MTH-Texas LP, Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith..
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.16</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Certificate of Limited Partnership of Legacy/
	Monterey Homes L.P.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.16.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Amendment to Certificate of Limited Partnership
	of Legacy/ Monterey Homes L.P.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.17</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Articles of Incorporation of Meritage Homes of
	Northern California, Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.18</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Bylaws of Meritage Homes of Northern California,
	Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.19</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Articles of Incorporation of Hancock-MTH
	Builders, Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.20</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Bylaws of Hancock-MTH Builders, Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.21</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Articles of Incorporation of Hancock-MTH
	Communities, Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.22</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Bylaws of MTH-Communities, Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">II-2

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Exhibit</FONT></B></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Number</FONT></B></TD>
	<TD></TD>
	<TD align="center" nowrap><B><FONT size="2">Description</FONT></B></TD>
	<TD></TD>
	<TD align="center" nowrap><B><FONT size="2">Page or Method of Filing</FONT></B></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.23</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Certificate of Limited Partnership for Legacy
	Operating Company, L.P.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.24</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Articles of Incorporation of Meritage Homes
	Construction, Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.25</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">By-Laws of Meritage Homes Construction, Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">4.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Specimen of Common Stock Certificate
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;4 to
	the Form&nbsp;10-K for the year ended December&nbsp;31, 1996.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">4.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Indenture dated as of May&nbsp;30, 2001, by and
	among Meritage Corporation, the Guarantors named therein and
	Wells Fargo Bank, National Association
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;4.1 of
	Form&nbsp;8-K filed June&nbsp;6, 2001.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">4.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Form of 9&nbsp;3/4% Senior Note due June&nbsp;1,
	2011
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;A to
	Exhibit&nbsp;4.1 of Form&nbsp;8-K filed June&nbsp;6, 2001.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">5.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Form of Opinion for Snell&nbsp;&#38; Wilmer
	L.L.P. regarding the legality of the securities being registered
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">$70 Million Borrowing Base Loan Agreement by and
	among the Company, Norwest Bank, Arizona, N.A. and California
	Bank and Trust, dated as of September&nbsp;15, 1999
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.4 to
	the Form&nbsp;10-K for the year ended December&nbsp;31, 1999.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.1.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Modification to Loan Agreement with Wells Fargo
	Bank, Arizona, N.A. and California Bank and Trust, dated as of
	May&nbsp;16, 2000
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.1 to
	the Form&nbsp;10-Q for the quarterly period ended June&nbsp;30,
	2000.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.1.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Second Modification to Loan Agreement with Wells
	Fargo Bank, Arizona, National Association and California Bank
	and Trust, dated as of June&nbsp;1, 2001
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Modification to Guaranty Bank Loan, dated as of
	May&nbsp;19, 1998
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.1 of
	Form&nbsp;10-Q for the quarterly period ended June&nbsp; 30,
	1998.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.2.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Modification to Guaranty Bank Loan, dated as of
	July&nbsp;31, 1999.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.4 of
	Form&nbsp;10-K for the quarterly period ended December&nbsp;31,
	1999.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.2.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Modification to Guaranty Bank Loan, dated as of
	March&nbsp;29, 2000
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.1 of
	Form&nbsp;10-Q for the quarterly period ended March&nbsp; 31,
	2000.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.2.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Extension of Guaranty Bank Loan, dated as of
	July&nbsp;31, 2000
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.2 of
	Form&nbsp;10-Q for the quarterly period ended June&nbsp; 30,
	2000.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.2.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Modification to Guaranty Bank Loan, dated as of
	July&nbsp;31, 2000
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.1 of
	Form&nbsp;10-Q for the quarterly period ended September&nbsp;30,
	2000.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.2.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Modification to Guaranty Bank Loan, dated as of
	May&nbsp;29, 2001.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">$3.3 Million Construction Loan Agreement by and
	between the Company and Compass Bank, dated as of
	February&nbsp;10, 2000
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.2 of
	Form&nbsp;10-Q for the quarterly period ended March&nbsp; 31,
	2000.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Amended 1997 Stock Option Plan
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;4.1 of
	Registration Statement No.&nbsp;333-39036, filed on
	June&nbsp;12, 2000.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Employment Agreement between the Company and
	William&nbsp;W. Cleverly
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.10
	to the Form&nbsp;10-K for the year ended December&nbsp;31, 1996.
	</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">II-3
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Exhibit</FONT></B></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Number</FONT></B></TD>
	<TD></TD>
	<TD align="center" nowrap><B><FONT size="2">Description</FONT></B></TD>
	<TD></TD>
	<TD align="center" nowrap><B><FONT size="2">Page or Method of Filing</FONT></B></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.6</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Separation and Consulting Agreement between the
	Company and William&nbsp;W. Cleverly
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;C of
	the Form&nbsp;8-K filed on March&nbsp;23, 1999.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.7</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Employment Agreement between the Company and
	Steven&nbsp;J. Hilton
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.11
	to the Form&nbsp;10-K for the year ended December&nbsp;31, 1996.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Employment Agreement between the Company and
	John&nbsp;R. Landon
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;C of
	the Form&nbsp;8-K filed on June&nbsp;18, 1997.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.9</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Stock Option Agreement between the Company and
	William&nbsp;W. Cleverly
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.12
	of the Form&nbsp;10-K for the year ended December&nbsp;31, 1996.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.10</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Stock Option Agreement between the Company and
	Steven&nbsp;J. Hilton
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.13
	of the Form&nbsp;10-K for the year ended December&nbsp;31, 1996.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.11</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Stock Option Agreement between the Company and
	John&nbsp;R. Landon
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;C of
	the Form&nbsp;8-K filed on June&nbsp;18, 1997.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.12</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Registration Rights Agreement between the Company
	and William&nbsp;W. Cleverly
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.14
	to the Form&nbsp;10-K for the year ended December&nbsp;31, 1996.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.13</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Registration Rights Agreement between the Company
	and Steven&nbsp;J. Hilton
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.15
	of the Form&nbsp;10-K for the year ended December&nbsp;31, 1996.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.14</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Registration Rights Agreement between the Company
	and John&nbsp;R. Landon
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;C of
	the Form&nbsp;8-K filed on June&nbsp;18, 1997.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.15</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Escrow and Contingent Stock Agreement
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.16
	of the Form&nbsp;10-K for the year ended December&nbsp;31, 1996.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.16</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Employment Agreement between the Company and
	Larry&nbsp;W. Seay
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.2 of
	Form&nbsp;10-Q for the quarterly period ended June&nbsp; 30,
	1998.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.16.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Amendment to Employment Agreement between the
	Company and Larry&nbsp;W. Seay
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.19.1
	to the Form 10-K for the year ended December&nbsp;31, 2000.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.17</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Change of Control Agreement between the Company
	and Steven&nbsp;J. Hilton
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.3 of
	Form&nbsp;10-Q for the quarterly period ended March&nbsp; 30,
	2000.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.18</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Change of Control Agreement between the Company
	and John&nbsp;R. Landon
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.4 of
	Form&nbsp;10-Q for the quarterly period ended March&nbsp; 30,
	2000.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.19</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Change of Control Agreement between the Company
	and Larry&nbsp;W. Seay
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.5 of
	Form&nbsp;10-Q for the quarterly period ended March&nbsp; 30,
	2000.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.20</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Change of Control Agreement between the Company
	and Richard&nbsp;T. Morgan
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.6 of
	Form&nbsp;10-Q for the quarterly period ended March&nbsp; 30,
	2000.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.21</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Registration Rights Agreement, dated as of
	May&nbsp; 30, 2001 by and among Meritage Corporation, the
	Guarantors named therein and UBS Warburg LLC and Deutsche Bank
	Alex. Brown Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.1 of
	Form&nbsp;8-K filed June&nbsp;6, 2001.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.22</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Employment Agreement, dated as of May&nbsp;30,
	2001, by and among Meritage Corporation, Hancock-MTH Builders,
	Inc., Hancock-MTH Communities, Inc. and Greg Hancock
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.2 of
	Form&nbsp;8-K filed June&nbsp;6, 2001.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">12.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Computation of Ratio of Earnings to Fixed Charges
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">21.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Subsidiaries of Registrant
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">23.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Consent of KPMG LLP
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">23.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Consent of McGladrey &#38; Pullen, LLP
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">II-4

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="45%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="41%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Exhibit</FONT></B></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Number</FONT></B></TD>
	<TD></TD>
	<TD align="center" nowrap><B><FONT size="2">Description</FONT></B></TD>
	<TD></TD>
	<TD align="center" nowrap><B><FONT size="2">Page or Method of Filing</FONT></B></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">23.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Consent of Snell &#38; Wilmer L.L.P.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Contained in Exhibit&nbsp;5.1.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">24.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Powers of Attorney
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">See signature page of Registration Statement.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">25.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Statement of Eligibility under the Trust
	Indenture Act of 1939 on Form&nbsp;T-1 of Wells Fargo Bank
	Minnesota, National Association
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">99.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Letter of Transmittal and related documents with
	respect to the Exchange Offer
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(b)&nbsp; Financial Statement Schedules:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	Computation of Ratio of Earnings to Fixed Charges filed at
	Exhibit&nbsp;12.1.</TD>
</TR>

</TABLE>

<P align="left">
<B>Item&nbsp;22.&nbsp;&nbsp;<I>Undertakings</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The undersigned registrants hereby undertake:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(a)&nbsp; (1)&nbsp;To file, during any period in which offers or
	sales are being made, a post-effective amendment to this
	registration statement:</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="94%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(i)&nbsp; To include any prospectus required by section 10(a)(3)
	of the Securities Act of 1933;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(ii)&nbsp; To reflect in the prospectus any facts or events
	arising after the effective date of the registration statement
	(or the most recent post-effective amendment thereof) which,
	individually or in the aggregate, represent a fundamental change
	in the information set forth in the registration statement.
	Notwithstanding the foregoing, any increase or decrease in
	volume of securities offered (if the total dollar value of
	securities offered would not exceed that which was registered)
	and any deviation from the low or high end of the estimated
	maximum offering range may be reflected in the form of
	prospectus filed with the Commission pursuant to
	Rule&nbsp;424(b) if, in the aggregate, the changes in volume and
	price represent no more than a 20&nbsp;percent change in the
	maximum aggregate offering price set forth in the
	&#147;Calculation of Registration Fee&#148; table in the
	effective registration statement.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(iii)&nbsp; To include any material information with respect to
	the plan of distribution not previously disclosed in the
	registration statement or any material change to such
	information in the registration statement;</TD>
</TR>

</TABLE>

<P align="left">
provided, however, that paragraphs&nbsp;(a)(1)(i) and (a)(1)(ii)
above do not apply if the registration statement is on
Form&nbsp;S-3, Form&nbsp;S-8 or Form&nbsp;F-3, and the
information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports
filed with or furnished to the Commission by the registrant
pursuant to section&nbsp;13 or section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="94%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; That, for the purpose of determining any liability
	under the Securities Act of 1933, each such post-effective
	amendment shall be deemed to be a new registration statement
	relating to the securities offered therein, and the offering of
	such securities at that time shall be deemed to be the initial
	bona fide offering thereof.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(3)&nbsp; To remove from registration by means of a
	post-effective amendment any of the securities being registered
	which remain unsold at the termination of the offering.</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(b)&nbsp; That, for purposes of determining any liability under
	the Securities Act of 1933, each filing of the registrant&#146;s
	annual report pursuant to Section&nbsp;13(a) or 15(d) of the
	Securities Exchange Act of 1934 (and, where applicable, each
	filing of an employee benefit plan&#146;s annual report pursuant
	to section&nbsp;15(d) of the Securities Exchange Act of 1934)
	that is incorporated by reference in the registration statement
	shall be deemed to be a new registration statement relating to
	the securities</TD>
</TR>

</TABLE>

<P align="center">II-5
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	offered therein, and the offering of such securities at that
	time shall be deemed to be the initial bona fide offering
	thereof.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(c)&nbsp; Insofar as indemnification for liabilities arising
	under the Securities Act of 1933 may be permitted to directors,
	officers and controlling persons of the registrant pursuant to
	the foregoing provisions, or otherwise, the registrant has been
	advised that in the opinion of the Securities and Exchange
	Commission, such indemnification is against public policy as
	expressed in the Securities Act and is, therefore,
	unenforceable. In the event that a claim for indemnification
	against such liabilities (other than the payment by the
	registrant of expenses incurred or paid by a director, officer
	or controlling person of the registrant in the successful
	defense of any action, suit or proceeding) is asserted by such
	director, officer or controlling person in connection with the
	securities being registered, the registrant will, unless in the
	opinion of its counsel the matter has been settled by
	controlling precedent, submit to a court of appropriate
	jurisdiction the question of whether such indemnification by it
	is against public policy as expressed in the Securities Act and
	will be governed by the final adjudication of such issue.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(d)&nbsp; (1)&nbsp;That prior to any public reoffering of the
	securities registered hereunder through use of a prospectus
	which is a part of this registration statement, by any person or
	party who is deemed to be an underwriter within the meaning of
	Rule&nbsp;415(c), the issuer undertakes that such reoffering
	prospectus will contain the information called for by the
	applicable registration form with respect to reofferings by
	persons who may be deemed underwriters, in addition to the
	information called for by the other items of the applicable form.</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="94%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(2)&nbsp; That every prospectus: (i)&nbsp;that is filed pursuant
	to paragraph&nbsp;(1) immediately preceding, or (ii)&nbsp;that
	purports to meet the requirements of Section&nbsp;10(a)(3) of
	the Securities Act and is used in connection with the offering
	of securities subject to Rule&nbsp;415, will be filed as a part
	of an amendment to the registration statement and will not be
	used until such amendment is effective, and that, for purposes
	of determining any liability under the Securities Act, each such
	post-effective amendment shall be deemed to be a new
	registration statement relating to the securities offered
	therein, and the offering of such securities at that time shall
	be deemed to be the initial bona fide offering thereof.</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(e)&nbsp; To respond to requests for information that is
	incorporated by reference into the prospectus pursuant to
	Items&nbsp;4, 10(b), 11, or 13 of this form, within one business
	day of receipt of such request, and to send the incorporated
	documents by first class mail or other equally prompt means.
	This includes information contained in documents filed
	subsequent to the effective date of the registration statement
	through the date of responding to the request.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	(f)&nbsp; To supply by means of a post-effective amendment all
	information concerning a transaction, and the company being
	acquired involved therein, that was not the subject of and
	included in this registration statement when it became effective.</TD>
</TR>

</TABLE>

<P align="center">II-6

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>SIGNATURES</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the requirements of the Securities Act of 1933, the
undersigned registrant has duly caused this registration
statement on Form&nbsp;S-4 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of
Scottsdale, State of Arizona, on July&nbsp;2, 2001.
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="38%"></TD>
	<TD width="62%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	MERITAGE CORPORATION</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="38%"></TD>
	<TD width="2%"></TD>
	<TD width="60%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>By:&nbsp;</TD>
	<TD align="left">
	/s/ Larry&nbsp;W. Seay</TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="38%"></TD>
	<TD width="62%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	<HR size="1" align="left" noshade></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	Larry W. Seay</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	Chief Financial Officer and</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	Vice President&nbsp;&#150; Finance</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following direct and indirect subsidiaries of the registrant
will guarantee the debt securities and are co-registrants under
this registration statement.

<P align="left">
<B>Name of Co-Registrant</B>

<P align="left">
Monterey Homes Arizona, Inc.

<DIV align="left">
Meritage Paseo Crossing, LLC (1)
</DIV>

<DIV align="left">
Monterey Homes Construction, Inc.
</DIV>

<DIV align="left">
Meritage Paseo Construction, LLC (2)
</DIV>

<DIV align="left">
Meritage Homes of Arizona, Inc.
</DIV>

<DIV align="left">
Meritage Homes Construction, Inc.
</DIV>

<DIV align="left">
MTH-Texas GP, Inc.
</DIV>

<DIV align="left">
MTH-Texas LP, Inc.
</DIV>

<DIV align="left">
Legacy/ Monterey Homes L.P. (3)
</DIV>

<DIV align="left">
Meritage Homes of Northern California, Inc.
</DIV>

<DIV align="left">
Hancock-MTH Builders, Inc.
</DIV>

<DIV align="left">
Hancock-MTH Communities, Inc.
</DIV>

<DIV align="left">
Legacy Operating Company, L.P. (3)
</DIV>

<DIV align="left">
<HR size="1" width="18%" align="left" noshade>
</DIV>

<DIV align="left">
(1)&nbsp;Executed by Monterey Homes Arizona, Inc., as sole member
</DIV>

<P align="left">
(2)&nbsp;Executed by Monterey Homes Construction, Inc., as sole
member

<P align="left">
(3)&nbsp;Executed by MTH-Texas GP, Inc., as general partner
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="38%"></TD>
	<TD width="62%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	as Guarantors</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="38%"></TD>
	<TD width="2%"></TD>
	<TD width="60%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>By:&nbsp;</TD>
	<TD align="left">
	/s/ Larry W. Seay</TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="38%"></TD>
	<TD width="62%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	<HR size="1" align="left" noshade></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	Larry W. Seay</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	Chief Financial Officer and</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	Vice President&nbsp;&#150; Finance</TD>
</TR>

</TABLE>

<P align="center">II-7

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>POWER OF ATTORNEY</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Steven&nbsp;J. Hilton,
John&nbsp;R. Landon and Larry&nbsp;W. Seay, and each of them,
his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any
and all amendments to this registration statement, and to file
the same, with all exhibits thereto, and other documents in
connection therewith with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in
and about the premises, as fully and to all intents and purposes
as he might or could do in person hereby ratifying and
confirming all that said attorneys-in-fact and agents, or his
substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the requirements of the Securities Act of 1933, this
registration statement on Form&nbsp;S-4 has been signed by the
following persons in the capacities and on the dates indicated.

<P align="left">
ON BEHALF OF MERITAGE CORPORATION:

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="32%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="13%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap><B><FONT size="2">Title</FONT></B></TD>
	<TD></TD>
	<TD align="center" nowrap><B><FONT size="2">Date</FONT></B></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Signature</FONT></B></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<FONT size="2">By:
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="center" valign="top">
	<FONT size="2">/s/ Steven J. Hilton<BR>
	<HR size="1" noshade>Steven J. Hilton
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Co-Chairman, Co-Chief Executive Officer and
	Director
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top">
	<FONT size="2">July&nbsp;2, 2001
	</FONT></TD>
</TR>

<TR>
	<TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">By:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="center" valign="top">
	<FONT size="2">/s/ John R. Landon<BR>
	<HR size="1" noshade>John R. Landon
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Co-Chairman, Co-Chief Executive Officer and
	Director
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top">
	<FONT size="2">July&nbsp;2, 2001
	</FONT></TD>
</TR>

<TR>
	<TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">By:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="center" valign="top">
	<FONT size="2">/s/ Larry W. Seay<BR>
	<HR size="1" noshade>Larry W. Seay
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Chief Financial Officer and Vice
	President&nbsp;&#150; Finance (Principal Financial Officer and
	Principal Accounting Officer)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top">
	<FONT size="2">July&nbsp;2, 2001
	</FONT></TD>
</TR>

<TR>
	<TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">By:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="center" valign="top">
	<FONT size="2">/s/ Richard T. Morgan<BR>
	<HR size="1" noshade>Richard T. Morgan
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Vice President
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top">
	<FONT size="2">July&nbsp;2, 2001
	</FONT></TD>
</TR>

<TR>
	<TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">By:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="center" valign="top">
	<FONT size="2">/s/ William W. Cleverly<BR>
	<HR size="1" noshade>William W. Cleverly
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Director
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top">
	<FONT size="2">July&nbsp;2, 2001
	</FONT></TD>
</TR>

<TR>
	<TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">By:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="center" valign="top">
	<FONT size="2">/s/ Robert G. Sarver<BR>
	<HR size="1" noshade>Robert G. Sarver
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Director
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top">
	<FONT size="2">July&nbsp;2, 2001
	</FONT></TD>
</TR>

<TR>
	<TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">By:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="center" valign="top">
	<FONT size="2">/s/ C. Timothy White<BR>
	<HR size="1" noshade>C. Timothy White
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Director
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top">
	<FONT size="2">July&nbsp;2, 2001
	</FONT></TD>
</TR>

<TR>
	<TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">By:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="center" valign="top">
	<FONT size="2">/s/ Raymond Oppel<BR>
	<HR size="1" noshade>Raymond Oppel
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Director
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top">
	<FONT size="2">July&nbsp;2, 2001
	</FONT></TD>
</TR>

<TR>
	<TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">By:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="center" valign="top">
	<BR>
	<HR size="1" noshade><FONT size="2">Peter L. Ax
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Director
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top">
	<FONT size="2">July&nbsp;2, 2001
	</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">II-8
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">
ON BEHALF OF THE FOLLOWING LISTED CO-REGISTRANTS:

<P align="left">
Name of Co-Registrant:

<P align="left">
Monterey Homes Arizona, Inc.

<DIV align="left">
Monterey Homes Construction, Inc.
</DIV>

<DIV align="left">
Meritage Homes of Arizona, Inc.
</DIV>

<DIV align="left">
Meritage Homes Construction, Inc.
</DIV>

<DIV align="left">
Meritage Homes of Northern California, Inc.
</DIV>

<DIV align="left">
Hancock-MTH Builders, Inc.
</DIV>

<DIV align="left">
Hancock-MTH Communities, Inc.
</DIV>

<DIV align="left">
MTH-Texas GP, Inc.
</DIV>

<DIV align="left">
MTH-Texas LP, Inc.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="32%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="13%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap><B><FONT size="2">Title</FONT></B></TD>
	<TD></TD>
	<TD align="center" nowrap><B><FONT size="2">Date</FONT></B></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Signature</FONT></B></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">By:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="center" valign="top">
	<FONT size="2">/s/ Steven J. Hilton<BR>
	<HR size="1" noshade>Steven J. Hilton
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Co-Chairman, Co-Chief Executive Officer and
	Director (Principal Executive Officer)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top">
	<FONT size="2">July&nbsp;2, 2001
	</FONT></TD>
</TR>

<TR>
	<TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">By:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="center" valign="top">
	<FONT size="2">/s/ John R. Landon<BR>
	<HR size="1" noshade>John R. Landon
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Co-Chairman, Co-Chief Executive Officer and
	Director (Principal Executive Officer)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top">
	<FONT size="2">July&nbsp;2, 2001
	</FONT></TD>
</TR>

<TR>
	<TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">By:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="center" valign="top">
	<FONT size="2">/s/ Larry W. Seay<BR>
	<HR size="1" noshade>Larry W. Seay
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Chief Financial Officer and Vice
	President&nbsp;&#150; Finance (Principal Financial Officer and
	Principal Accounting Officer)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top">
	<FONT size="2">July&nbsp;2, 2001
	</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">II-9

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">
ON BEHALF OF THE FOLLOWING LIMITED PARTNERSHIP AND LIMITED
LIABILITY COMPANY CO-REGISTRANTS:

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="50%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="47%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">Name of Co-Registrant
	</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<B><FONT size="2">General Partner or Sole Member of Co-Registrant
	</FONT></B></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Meritage Paseo Crossing, LLC
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Monterey Homes Arizona, Inc.
	</FONT></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Meritage Paseo Construction, LLC
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Monterey Homes Construction, Inc.
	</FONT></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Legacy/ Monterey Homes L.P.
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">MTH-Texas GP, Inc.
	</FONT></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Legacy Operating Company, L.P.
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">MTH-Texas GP, Inc.
	</FONT></TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="32%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="13%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap><B><FONT size="2">Title</FONT></B></TD>
	<TD></TD>
	<TD align="center" nowrap><B><FONT size="2">Date</FONT></B></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Signature</FONT></B></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">By:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="center" valign="top">
	<FONT size="2">/s/ Steven J. Hilton<BR>
	<HR size="1" noshade>Steven J. Hilton
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Co-Chairman, Co-Chief Executive Officer and
	Director of each: Meritage Homes Arizona, Inc., Monterey Homes
	Construction, Inc. and MTH-Texas GP, Inc.
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top">
	<FONT size="2">July&nbsp;2, 2001
	</FONT></TD>
</TR>

<TR>
	<TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">By:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="center" valign="top">
	<FONT size="2">/s/ John R. Landon<BR>
	<HR size="1" noshade>John R. Landon
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Co-Chairman, Co-Chief Executive Officer and
	Director of each: Meritage Homes, Arizona, Inc., Monterey Homes
	Construction, Inc. and MTH-Texas GP, Inc.
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top">
	<FONT size="2">July&nbsp;2, 2001
	</FONT></TD>
</TR>

<TR>
	<TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">By:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="center" valign="top">
	<FONT size="2">/s/ Larry W. Seay<BR>
	<HR size="1" noshade>Larry W. Seay
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Chief Financial Officer and Vice
	President&nbsp;&#150; Finance of each: Meritage Homes, Arizona,
	Inc., Monterey Homes Construction, Inc. and MTH-Texas GP, Inc.
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top">
	<FONT size="2">July&nbsp;2, 2001
	</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">II-10

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>INDEX OF EXHIBITS</B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Exhibit</FONT></B></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Number</FONT></B></TD>
	<TD></TD>
	<TD align="center" nowrap><B><FONT size="2">Description</FONT></B></TD>
	<TD></TD>
	<TD align="center" nowrap><B><FONT size="2">Page or Method of Filing</FONT></B></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">2.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Agreement and Plan of Reorganization, dated as of
	September&nbsp;13, 1996, by and among Homeplex, the Monterey
	Merging Companies and the Monterey Stockholders
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;2 of
	Form&nbsp; S-4 Registration Statement No.&nbsp;333-15937
	(&#147;S-4 #333-15937&#148;).
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">2.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Agreement of Purchase and Sale of Assets, dated
	as of May&nbsp;20, 1997, by and among Monterey, Legacy Homes,
	Ltd., Legacy Enterprises, Inc., and John and Eleanor Landon
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;2 of
	Form&nbsp; 8-K/A dated June&nbsp;18, 1997.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">2.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Agreement of Purchase and Sale of Assets, dated
	as of June&nbsp;15, 1998, by and among the Company, Sterling
	Communities, S.H.&nbsp;Capital, Inc., Sterling Financial
	Investments, Inc., Steve Hafener, and W.&nbsp;Leon Pyle
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;2.2 of
	Form&nbsp;10-Q for the quarterly period ended June&nbsp; 30,
	1998.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">2.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Master Transaction Agreement (with Exhibits),
	dated May&nbsp;7, 2001, by and among Meritage Corporation,
	Hancock-MTH Builders, Inc., Hancock-MTH Communities, Inc.,
	HC&nbsp;Builders, Inc. and Hancock Communities, L.L.C.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;2.1 of
	Form&nbsp;8-K filed May&nbsp;10, 2001.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">2.4.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Amendment No.&nbsp;1 to Master Transaction
	Agreement and Agreement of Purchase and Sale of Assets, dated
	May&nbsp;30, 2001, by and among Meritage Corporation,
	Hancock-MTH Builders, Inc., Hancock-MTH Communities, Inc.,
	HC&nbsp;Builders, Inc. and Hancock Communities, L.L.C. and
	American West Homes, Incorporated
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;2.1 of
	Form&nbsp;8-K filed June&nbsp;6, 2001.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Restated Articles of Incorporation of the Company
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;3.2 of
	Form&nbsp;10-Q for the quarterly period ended September&nbsp;30,
	1998.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Amendment to Articles of Incorporation
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;3.1 of
	Form&nbsp;10-Q for the quarterly period ended September&nbsp;30,
	1998.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Amended and Restated Bylaws of the Company
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;3.3 of
	Form&nbsp;S-3 #333-58793.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Articles of Incorporation of Monterey Homes
	Arizona, Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Bylaws of Monterey Homes Arizona, Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.6</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Articles of Organization of Meritage Paseo
	Crossing, LLC
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.7</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Articles of Incorporation of Monterey Homes
	Construction, Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Bylaws of Monterey Homes Construction, Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.9</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Articles of Organization of Meritage Paseo
	Construction, LLC
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.9.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Amendment to Articles of Organization of Meritage
	Paseo Construction, LLC
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.10</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Articles of Incorporation of Meritage Homes of
	Arizona, Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.11</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Bylaws of Meritage Homes of Arizona, Inc
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

</TABLE>
</CENTER>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="44%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="42%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Exhibit</FONT></B></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Number</FONT></B></TD>
	<TD></TD>
	<TD align="center" nowrap><B><FONT size="2">Description</FONT></B></TD>
	<TD></TD>
	<TD align="center" nowrap><B><FONT size="2">Page or Method of Filing</FONT></B></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.12</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Articles of Incorporation of MTH-Texas GP, Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.13</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Bylaws of MTH-Texas GP, Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.14</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Articles of Incorporation of MTH-Texas LP, Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.15</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Bylaws of MTH-Texas LP, Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.16</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Certificate of Limited Partnership of Legacy/
	Monterey Homes L.P
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.16.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Amendment to Certificate of Limited Partnership
	of Legacy/ Monterey Homes L.P
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.17</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Articles of Incorporation of Meritage Homes of
	Northern California, Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.18</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Bylaws of Meritage Homes of Northern California,
	Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.19</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Articles of Incorporation of Hancock-MTH
	Builders, Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.20</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Bylaws of Hancock-MTH Builders, Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.21</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Articles of Incorporation of Hancock-MTH
	Communities, Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.22</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Bylaws of MTH-Communities, Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.23</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Certificate of Limited Partnership for Legacy
	Operating Company, L.P.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.24</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Articles of Incorporation of Meritage Homes
	Construction, Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.25</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">By-Laws of Meritage Homes Construction, Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">4.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Specimen of Common Stock Certificate
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;4 to
	the Form&nbsp;10-K for the year ended December&nbsp;31, 1996.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">4.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Indenture dated as of May&nbsp;30, 2001, by and
	among Meritage Corporation, the Guarantors named therein and
	Wells Fargo Bank, National Association
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;4.1 of
	Form&nbsp;8-K filed June&nbsp;6, 2001.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">4.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Form of 9&nbsp;3/4% Senior Note due June&nbsp;1,
	2011
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;A to
	Exhibit&nbsp;4.1 of Form&nbsp;8-K filed June&nbsp;6, 2001.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">5.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Form of Opinion for Snell &#38; Wilmer L.L.P.
	regarding the legality of the securities being registered
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">$70 Million Borrowing Base Loan Agreement by and
	among the Company, Norwest Bank, Arizona, N.A. and California
	Bank and Trust, dated as of September&nbsp;15, 1999
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.4 to
	the Form&nbsp;10-K for the year ended December&nbsp;31, 1999.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.1.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Modification to Loan Agreement with Wells Fargo
	Bank, Arizona, N.A. and California Bank and Trust, dated as of
	May&nbsp;16, 2000
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.1 to
	the Form&nbsp;10-Q for the quarterly period ended June&nbsp;30,
	2000.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.1.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Second Modification to Loan Agreement with Wells
	Fargo Bank, Arizona, National Association and California Bank
	and Trust, dated as of June&nbsp;1, 2001
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Modification to Guaranty Bank Loan, dated as of
	May&nbsp;19, 1998
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.1 of
	Form&nbsp;10-Q for the quarterly period ended June&nbsp; 30,
	1998.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.2.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Modification to Guaranty Bank Loan, dated as of
	July&nbsp;31, 1999.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.4 of
	Form&nbsp;10-K for the quarterly period ended December&nbsp;31,
	1999.
	</FONT></TD>
</TR>

</TABLE>
</CENTER>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Exhibit</FONT></B></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Number</FONT></B></TD>
	<TD></TD>
	<TD align="center" nowrap><B><FONT size="2">Description</FONT></B></TD>
	<TD></TD>
	<TD align="center" nowrap><B><FONT size="2">Page or Method of Filing</FONT></B></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.2.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Modification to Guaranty Bank Loan, dated as of
	March&nbsp;29, 2000
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.1 of
	Form&nbsp;10-Q for the quarterly period ended March&nbsp; 31,
	2000.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.2.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Extension of Guaranty Bank Loan, dated as of
	July&nbsp;31, 2000
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.2 of
	Form&nbsp;10-Q for the quarterly period ended June&nbsp; 30,
	2000.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.2.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Modification to Guaranty Bank Loan, dated as of
	July&nbsp;31, 2000
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.1 of
	Form&nbsp;10-Q for the quarterly period ended September&nbsp;30,
	2000.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.2.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Modification to Guaranty Bank Loan, dated as of
	May&nbsp;29, 2001.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">$3.3 Million Construction Loan Agreement by and
	between the Company and Compass Bank, dated as of
	February&nbsp;10, 2000
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.2 of
	Form&nbsp;10-Q for the quarterly period ended March&nbsp; 31,
	2000.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Amended 1997 Stock Option Plan
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;4.1 of
	Registration Statement No.&nbsp;333-39036, filed on
	June&nbsp;12, 2000.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Employment Agreement between the Company and
	William W. Cleverly
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.10
	to the Form&nbsp;10-K for the year ended December&nbsp;31, 1996.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.6</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Separation and Consulting Agreement between the
	Company and William&nbsp;W. Cleverly
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;C of
	the Form&nbsp;8-K filed on March&nbsp;23, 1999.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.7</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Employment Agreement between the Company and
	Steven&nbsp;J. Hilton
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.11
	to the Form&nbsp;10-K for the year ended December&nbsp;31, 1996.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Employment Agreement between the Company and
	John&nbsp;R. Landon
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;C of
	the Form&nbsp;8-K filed on June&nbsp;18, 1997.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.9</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Stock Option Agreement between the Company and
	William&nbsp;W. Cleverly
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.12
	of the Form&nbsp;10-K for the year ended December&nbsp;31, 1996.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.10</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Stock Option Agreement between the Company and
	Steven&nbsp;J. Hilton
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.13
	of the Form&nbsp;10-K for the year ended December&nbsp;31, 1996.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.11</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Stock Option Agreement between the Company and
	John&nbsp;R. Landon
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;C of
	the Form&nbsp;8-K filed on June&nbsp;18, 1997.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.12</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Registration Rights Agreement between the Company
	and William&nbsp;W. Cleverly
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.14
	to the Form&nbsp;10-K for the year ended December&nbsp;31, 1996.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.13</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Registration Rights Agreement between the Company
	and Steven&nbsp;J. Hilton
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.15
	of the Form&nbsp;10-K for the year ended December&nbsp;31, 1996.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.14</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Registration Rights Agreement between the Company
	and John&nbsp;R. Landon
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;C of
	the Form&nbsp;8-K filed on June&nbsp;18, 1997.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.15</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Escrow and Contingent Stock Agreement
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.16
	of the Form&nbsp;10-K for the year ended December&nbsp;31, 1996.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.16</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Employment Agreement between the Company and
	Larry&nbsp;W. Seay
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.2 of
	Form&nbsp;10-Q for the quarterly period ended June&nbsp; 30,
	1998.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.16.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Amendment to Employment Agreement between the
	Company and Larry&nbsp;W. Seay
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.19.1
	to the Form&nbsp;10-K for the year ended December&nbsp;31, 2000.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.17</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Change of Control Agreement between the Company
	and Steven&nbsp;J. Hilton
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.3 of
	Form&nbsp;10-Q for the quarterly period ended March&nbsp; 30,
	2000.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.18</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Change of Control Agreement between the Company
	and John&nbsp;R. Landon
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.4 of
	Form&nbsp;10-Q for the quarterly period ended March&nbsp; 30,
	2000.
	</FONT></TD>
</TR>

</TABLE>
</CENTER>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Exhibit</FONT></B></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><B><FONT size="2">Number</FONT></B></TD>
	<TD></TD>
	<TD align="center" nowrap><B><FONT size="2">Description</FONT></B></TD>
	<TD></TD>
	<TD align="center" nowrap><B><FONT size="2">Page or Method of Filing</FONT></B></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.19</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Change of Control Agreement between the Company
	and Larry&nbsp;W. Seay
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.5 of
	Form&nbsp;10-Q for the quarterly period ended March&nbsp; 30,
	2000.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.20</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Change of Control Agreement between the Company
	and Richard&nbsp;T. Morgan
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.6 of
	Form&nbsp;10-Q for the quarterly period ended March&nbsp; 30,
	2000.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.21</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Registration Rights Agreement, dated as of
	May&nbsp; 30, 2001 by and among Meritage Corporation, the
	Guarantors named therein and UBS Warburg LLC and Deutsche Bank
	Alex. Brown Inc.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.1 of
	Form&nbsp;8-K filed June&nbsp;6, 2001.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.22</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Employment Agreement, dated as of May&nbsp;30,
	2001, by and among Meritage Corporation, Hancock-MTH Builders,
	Inc., Hancock-MTH Communities, Inc. and Greg Hancock
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Incorporated by reference to Exhibit&nbsp;10.2 of
	Form&nbsp;8-K filed June&nbsp;6, 2001.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">12.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Computation of Ratio of Earnings to Fixed Charges
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">21.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Subsidiaries of Registrant
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">23.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Consent of KPMG LLP
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">23.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Consent of McGladrey &#38; Pullen, LLP
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">23.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Consent of Snell &#38; Wilmer L.L.P.
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Contained in Exhibit&nbsp;5.1.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">24.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Powers of Attorney
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">See signature page of Registration Statement.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">25.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Statement of Eligibility under the Trust
	Indenture Act of 1939 on Form&nbsp;T-1 of Wells Fargo Bank
	Minnesota, National Association
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">99.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Letter of Transmittal and related documents with
	respect to the Exchange Offer
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Filed herewith.
	</FONT></TD>
</TR>

</TABLE>
</CENTER>
</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.4
<SEQUENCE>2
<FILENAME>p65173ex3-4.txt
<DESCRIPTION>EX-3.4
<TEXT>

<PAGE>   1
                                                                     Exhibit 3.4

                            ARTICLES OF INCORPORATION
                                       OF
                          MONTEREY HOMES ARIZONA, INC.


         FIRST: The name of this corporation is MONTEREY HOMES ARIZONA, INC.

         SECOND: The purpose for which the corporation is organized is the
transaction of any and all lawful business for which corporations may be
incorporated under the laws of the State of Arizona, as they may be amended from
time to time. The character of business which the corporation initially intends
actually to conduct in the State of Arizona is the sale of homes.

         THIRD: The aggregate number of shares that the corporation shall have
authority to issue is one thousand (1000) common shares, all of which shares
shall be of a single class.

         FOURTH: The name and address of the initial statutory agent of the
corporation is C T Corporation System, 3225 N. Central Avenue, Suite 1601,
Phoenix, Arizona 85012. The street address of the initial known place of
business of the corporation in Arizona is 6613 N. Scottsdale Road, Suite 200,
Scottsdale, Arizona 85250.

         FIFTH: The number of directors constituting the initial board of
directors of the corporation is four (4). The names and addresses of the persons
who are to serve as directors until the first annual meeting of shareholders, or
until their successors are elected and qualified, are:

<TABLE>
<CAPTION>
                  Name                                                 Address
                  ----                                                 -------
<S>                                                           <C>
                  William W. Cleverly                         6613 North Scottsdale Road, Suite 200
                                                              Scottsdale, Arizona 85250

                  Steven J. Hilton                            6613 North Scottsdale Road, Suite 200
                                                              Scottsdale, Arizona 85250

                  Robert Sarver                               402 W. Broadway, Suite 1290
                                                              San Diego, California 92101

                  C. Timothy White                            500 Viad Tower
                                                              1850 N. Central Avenue
                                                              Phoenix, Arizona 85004
</TABLE>

                                      -1-
<PAGE>   2

The number of persons to serve on the board of directors thereafter shall be
fixed by the bylaws of the corporation.

         SIXTH: The name and address of the incorporator is Larry W. Seay, 6613
N. Scottsdale Road, Suite 200, Scottsdale, Arizona 85250.

         SEVENTH: The liability of a director or former director to the
corporation or its shareholders shall be eliminated to the fullest extent
permitted by Section 10-202.B.1 of the Arizona Revised Statutes.

         If the Arizona Business Corporation Act is amended to authorize
corporate action further eliminating or limiting the liability of directors, the
liability of a director of the corporation shall be eliminated or limited to the
fullest extent permitted by Arizona Business Corporation Act, as amended.

         Any repeal or modification of this Article Seventh shall not adversely
affect any right or protection of a director of the corporation existing
hereunder with respect to any act or omission occurring prior to or at the time
of such repeal or modification.

         The provisions of this Article Seventh shall not be deemed to limit or
preclude indemnification of a director by the corporation for any liability of a
director which has not been eliminated by the provisions of this Article
Seventh.

DATED: March 13, 1997




                                     -----------------------------------------
                                     Larry W. Seay, Incorporator



                                       -2-
<PAGE>   3


                                STATE OF ARIZONA
                            ACCEPTANCE OF APPOINTMENT
                               AS STATUTORY AGENT
                                       OF
                          MONTEREY HOMES ARIZONA, INC.,
                             AN ARIZONA CORPORATION




To:      Arizona Corporation Commission
         Incorporating Division
         1300 West Washington
         Phoenix, Arizona  85007


                  Please be advised that C T Corporation System, a Delaware
corporation doing business in Arizona, and located at 3225 N. Central Avenue,
Suite 1601, Phoenix, Arizona 85012, hereby accepts and acknowledges its
appointment as statutory agent for service of process upon Monterey Homes
Arizona, Inc., an Arizona corporation, and consents to act in that capacity
until removal or resignation.

                  The undersigned hereby certifies that it has been a
corporation in good standing in the State of Arizona for a period in excess of
three years.

                  DATED this          day of March, 1997.
                             --------


                                          C T CORPORATION SYSTEM



                                          By
                                            -----------------------------------

                                          Its
                                             ----------------------------------






</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.5
<SEQUENCE>3
<FILENAME>p65173ex3-5.txt
<DESCRIPTION>EX-3.5
<TEXT>

<PAGE>   1
                                                                     Exhibit 3.5

                                     BY-LAWS
                                       OF
                          MONTEREY HOMES ARIZONA, INC.


         I. REFERENCES TO CERTAIN TERMS AND CONSTRUCTION

         1.01 CERTAIN REFERENCES. Any reference herein made to law will be
deemed to refer to the law of the State of Arizona, including any applicable
provision of Chapters 1 through 17 of Title 10 of the Arizona Revised Statutes,
or any successor statute, as from time to time amended and in effect (sometimes
referred to herein as the "Arizona Business Corporation Act"). Any reference
herein made to the corporation's Articles will be deemed to refer to its
Articles of Incorporation and all amendments thereto as at any given time on
file with the Arizona Corporation Commission. Except as otherwise required by
law and subject to any procedures established by the corporation pursuant to
Arizona Revised Statutes Section 10-723, the term "shareholder as used herein
shall mean one who is a holder of record of shares of the corporation.
References to specific sections of law herein made shall be deemed to refer to
such sections, or any comparable successor provisions, as from time to time
amended and in effect.

         1.02 SENIORITY. The law and the Articles (in that order of precedence)
will in all respects be considered senior and superior to these Bylaws, with any
inconsistency to be resolved in favor of the law and such Articles (in that
order of precedence), and with these Bylaws to be deemed automatically amended
from time to time to eliminate any such inconsistency which may then exist.

         1.03 COMPUTATION OF TIME. The time during which an act is required to
be done, including the time for the giving of any required notice herein, shall
be computed by excluding the first day or hour, as the case may be, and
including the last day or hour.

                                   II. OFFICES


         2.01 PRINCIPAL OFFICE. The principal office of the corporation shall be
located at any place either within or outside the State of Arizona as designed
in the corporation's most current Annual Report filed with the Arizona
Corporation Commission or in any other document executed and delivered to the
Arizona Corporation Commission for filing. If a principal office is not so
designated, the principal office of the corporation shall mean the known place
of business of the corporation. The corporation may have such other offices,
either within or without the State of Arizona, as the Board of Directors may
designate or as the business of the corporation may require from time to time.

         2.02 KNOWN PLACE OF BUSINESS. A known place of business of the
corporation shall be located within the State of Arizona and may be, but need
not be, the address of the statutory agent of the corporation. The corporation
may change its known place of



<PAGE>   2

business from time to time in accordance with the relevant provisions of the
Arizona Business Corporation Act.


                                III. SHAREHOLDERS

         3.01 ANNUAL SHAREHOLDER MEETING. The annual meeting of the shareholders
shall be held on such date within the month of June (or at such other date
within each calendar year) as may be fixed from time to time by the Board of
Directors for the purpose of electing directors and for the transaction of such
other business as may properly come before the meeting.

         3.02 SPECIAL SHAREHOLDER MEETINGS. Special meetings of the shareholders
may be held whenever and wherever, either within or without the State of
Arizona, called for by or at the direction of the Chairman of the Board, the
President or the Board of Directors.

         3.03     NOTICE OF SHAREHOLDERS MEETINGS.

                  (a) REQUIRED NOTICE. Notice stating the place, day and hour of
any annual or special shareholders meeting shall be given not less than ten (10)
nor more than sixty (60) days before the date of the meeting by or at the
direction of the person or persons calling the meeting, to each shareholder
entitled to vote at such meeting and to any other shareholder entitled to
receive notice of the meeting by law or the Articles. Notices to shareholders
shall be given in accordance with, and shall be deemed to be effective at the
time and in the manner described in, Section 10-141 of the Arizona Revised
Statutes. If no designation is made of the place at which an annual or special
meeting will be held in the notice for such meeting, the place of the meeting
will be at the principal place of business of the corporation.

                  (b) ADJOURNED MEETING. If any shareholders meeting is
adjourned to a different date, time or place, notice need not be given of the
new date, time and place if the new date, time and place are announced at the
meeting before adjournment. But if a new record date for the adjourned meeting
is fixed or must be fixed in accordance with law or these Bylaws, then notice of
the adjourned meeting shall be given to those persons who are shareholders as of
the new record date and who are entitled to such notice pursuant to Section
3.03(a) above.

                  (c) WAIVER OF NOTICE. Any shareholder may waive notice of a
meeting (or any notice of any other action required to be given by the Arizona
Business Corporation Act, the corporation's Articles or these Bylaws) at any
time before, during or after the meeting or other action, by a writing signed by
the shareholder entitled to the notice. Each such waiver shall be delivered to
the corporation for inclusion in the minutes or filing with

                                      -2-
<PAGE>   3
the corporate records. Under certain circumstances, a shareholder's attendance
at a meeting may constitute a waiver of notice, unless the shareholder takes
certain actions to preserve his/her objections as described in the Arizona
Business Corporation Act.

                  (d) CONTENTS OF NOTICE. The notice of each special
shareholders meeting shall include a description of the purpose or purposes for
which the meeting is called. Except as required by law or the corporation's
Articles, the notice of an annual shareholders meeting need not include a
description of the purpose or purposes for which the meeting is called.

         3.04 FIXING OF RECORD DATE. For the purpose of determining shareholders
of any voting group entitled to notice of or to vote at any meeting of
shareholders, or shareholders entitled to receive any distribution or dividend,
or in order to make a determination of shareholders for any other proper
purpose, the Board of Directors may fix in advance a date as the record date.
Such record date shall not be more than seventy (70) days prior to the date on
which the particular action requiring such determination of shareholders is to
be taken. If no record date is so fixed by the Board of Directors, the record
date for the determination of shareholders shall be as provided in the Arizona
Business Corporation Act.

                  When a determination of shareholders entitled to notice of or
to vote at any meeting of shareholders has been made as provided in this
Section, such determination shall apply to any adjournment thereof, unless the
Board of Directors fixes a new record date, which it must do if the meeting is
adjourned to a date more than one hundred twenty (120) days after the date fixed
for the original meeting.

         3.05 SHAREHOLDER LIST. The corporation shall make a complete record of
the shareholders entitled to notice of each meeting of shareholders thereof,
arranged in alphabetical order, listing the address and the number of shares
held by each. The list shall be arranged by voting group and within each voting
group by class or series of shares. The shareholder list shall be available for
inspection by any shareholder, beginning two (2) business days after notice of
the meeting is given for which the list was prepared and continuing through the
meeting. The list shall be available at the corporation's principal office or at
another place identified in the meeting notice in the city where the meeting is
to be held. Failure to comply with this section shall not affect the validity of
any action taken at the meeting.

         3.06     SHAREHOLDER QUORUM AND VOTING REQUIREMENTS.

                  (a) If the Articles or the Arizona Business Corporation Act
provide for voting by a single voting group on a matter, action on that matter
is taken when voted upon by that voting group.

                                      -3-
<PAGE>   4
                  (b) If the Articles or the Arizona Business Corporation Act
provide for voting by two (2) or more voting groups on a matter, action on that
matter is taken when voted upon by each of those voting groups counted
separately.

                  (c) Shares entitled to vote as a separate voting group may
take action on a matter at a meeting only if a quorum of those shares exists
with respect to that matter. Unless the Articles or the Arizona Business
Corporation Act provide otherwise, a majority of the votes entitled to be cast
on the matter by the voting group constitutes a quorum of that voting group for
action on that matter.

                  (d) Once a share is represented for any purpose at a meeting,
it is deemed present for quorum purposes for the remainder of the meeting and
for any adjournment of that meeting, unless a new record date is or must be set
for that adjourned meeting.

                  (e) If a quorum exists, action on a matter (other than the
election of directors) by a voting group is approved if the votes cast within
the voting group favoring the action exceed the votes cast opposing the action,
unless the Articles or the Arizona Business Corporation Act require a greater
number of affirmative votes.

                  (f) Voting will be by ballot on any question as to which a
ballot vote is demanded prior to the time the voting begins by any person
entitled to vote on such question; otherwise, a voice vote will suffice. No
ballot or change of vote will be accepted after the polls have been declared
closed following the ending of the announced time for voting.

         3.07 PROXIES. At all meetings of shareholders, a shareholder may vote
in person or by proxy duly executed in writing by the shareholder or the
shareholder's duly authorized attorney-in-fact. Such proxy shall comply with law
and shall be filed with the Secretary of the corporation or other person
authorized to tabulate votes before or at the time of the meeting. No proxy
shall be valid after eleven (11) months from the date of its execution unless
otherwise provided in the proxy. The burden of proving the validity of any
undated, irrevocable or otherwise contested proxy at a meeting of the
shareholders will rest with the person seeking to exercise the same. A facsimile
appearing to have been transmitted by a shareholder or by such shareholder's
duly authorized attorney-in-fact may be accepted as a sufficiently written and
executed proxy.

         3.08 VOTING OF SHARES. Unless otherwise provided in the Articles or the
Arizona Business Corporation Act, each outstanding share entitled to vote shall
be entitled to one (1) vote upon each matter submitted to a vote at a meeting of
shareholders.

         3.09 CUMULATIVE VOTING. At all elections for directors, each
shareholder shall be entitled to as many votes as shall equal the number of its
shares of stock multiplied by the

                                      -4-
<PAGE>   5
number of directors to be elected, and it may cast all of such votes for a
single director or may distribute them among the number to be voted for, or any
two or more of them, as it may see fit.

         3.10 ELECTION INSPECTORS. The Board of Directors, in advance of any
meeting of the shareholders, may appoint an election inspector or inspectors to
act at such meeting (and at any adjournment thereof). If an election inspector
or inspectors are not so appointed, the chairman of the meeting may, or upon
request of any person entitled to vote at the meeting will, make such
appointment. If any person appointed as an inspector fails to appear or to act,
a substitute may be appointed by the chairman of the meeting. If appointed, the
election inspector or inspectors (acting through a majority of them if there be
more than one) will determine the number of shares outstanding, the
authenticity, validity and effect of proxies and the number of shares
represented at the meeting in person and by proxy; will receive and count votes,
ballots and consents and announce the results thereof; will hear and determine
all challenges and questions pertaining to proxies and voting; and, in general,
will perform such acts as may be proper to conduct elections and voting with
complete fairness to all shareholders. No such election inspector need be a
shareholder of the corporation.

         3.11 ORGANIZATION AND CONDUCT OF MEETINGS. Each meeting of the
shareholders will be called to order and thereafter chaired by the Chairman of
the Board of Directors if there is one, or, if not or if the Chairman of the
Board is absent or so requests, then by the President, or if both the Chairman
and the President are unavailable, then by such officer of the corporation or
such shareholder as may be appointed by the Board of Directors. The
corporation's Secretary or, in his or her absence, an Assistant Secretary will
act as secretary of each meeting of the shareholders. If neither the Secretary
nor an Assistant Secretary is in attendance, the chairman of the meeting may
appoint any person (whether a shareholder or not) to act as secretary for the
meeting. After calling a meeting to order, the chairman thereof may require the
registration of all shareholders intending to vote in person and the filing of
all proxies with the election inspector or inspectors, if one or more have been
appointed (or, if not, with the secretary of the meeting). After the announced
time for such filing of proxies has ended, no further proxies or changes,
substitutions or revocations of proxies will be accepted. If directors are to be
elected, a tabulation of the proxies so filed will, if any person entitled to
vote in such election so requests, be announced at the meeting (or adjournment
thereof) prior to the closing of the election polls. Absent a showing of bad
faith on his or her part, the chairman of a meeting will, among other things,
have absolute authority to fix the period of time allowed for the registration
of shareholders and the filing of proxies, to determine the order of business to
be conducted at such meeting and to establish reasonable rules for expediting
the business of the meeting and preserving the orderly conduct thereof
(including any informal or question and answer portions thereof).

                                      -5-
<PAGE>   6
         3.12 SHAREHOLDER APPROVAL OR RATIFICATION. The Board of Directors may
submit any contract or act for approval or ratification of the shareholders at a
duly constituted meeting of the shareholders. Except as otherwise required by
law, if any contract or act so submitted is approved or ratified by a majority
of the votes cast thereon at such meeting, the same will be valid and as binding
upon the corporation and all of its shareholders as it would be if it were the
act of its shareholders.

         3.13 INFORMALITIES AND IRREGULARITIES. All informalities or
irregularities in any call or notice of a meeting of the shareholders or in the
areas of credentials, proxies, quorums, voting and similar matters will be
deemed waived if no objection is made at the meeting.

         3.14 SHAREHOLDER ACTION BY WRITTEN CONSENT. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if one (1) or more consents in writing, setting forth the action so
taken shall be signed by all of the shareholders entitled to vote with respect
to the subject matter thereof. The consents shall be delivered to the
corporation for inclusion in the minutes or filing with the corporate record.
Action taken by consent is effective when the last shareholder signs the consent
unless the consent specifies a different effective date, except that if, by law,
the action to be taken requires that notice be given to shareholders who are not
entitled to vote on the matter, the effective date shall not be prior to ten
(10) days after which the corporation shall give such shareholders written
notice of the proposed action, which notice shall contain or be accompanied by
the same material that would have been required if a formal meeting had been
called to consider the action. A consent signed under this section has the
effect of a meeting vote and may be described as such in any document.

                             IV. BOARD OF DIRECTORS

         4.01 GENERAL POWERS. All corporate powers shall be exercised by or
under the authority of, and the business and affairs of the corporation shall be
managed under the direction of, the Board of Directors.

         4.02 NUMBER, TENURE AND QUALIFICATION OF DIRECTORS. Unless otherwise
provided in the Articles of Incorporation, the authorized number of directors
shall be not less than one (1) nor more than five (5). The number of directors
in office from time to time shall be within the limits specified above, as
prescribed from time to time by resolution adopted by either the shareholders or
the Board of Directors. The directors will regularly be elected at each annual
meeting of the shareholders, but directors may be elected at any other meeting
of the shareholders. Each director shall hold office until the annual meeting of
shareholders following his/her election, subject to his/her earlier resignation
or removal. However, if a director's term expires, he/she shall continue to
serve until his/her successor shall have been elected and qualified, until
his/her resignation or removal or until there

                                      -6-
<PAGE>   7
is a decrease in the number of directors. Unless required by the Articles,
directors do not need to be residents of the State of Arizona or shareholders of
the corporation.

         4.03 REGULAR MEETINGS OF THE BOARD OF DIRECTORS. A regular annual
meeting of the Board of Directors is to be held as soon as practicable after the
adjournment of each annual meeting of the shareholders, either at the place of
the shareholders meeting or at such other place as the directors elected at the
shareholders meeting may have been informed of at or prior to the time of their
election. Additional regular meetings may be held at regular intervals at such
places and at such times as the Board of Directors may determine.

         4.04 SPECIAL MEETINGS OF THE BOARD OF DIRECTORS. Special meetings of
the Board of Directors may be held whenever and wherever called for by the
Chairman of the Board, the President or the number of directors that would be
required to constitute a quorum.

         4.05 NOTICE OF AND WAIVER OF NOTICE FOR DIRECTORS MEETINGS. No notice
need be given of regular meetings of the Board of Directors. Notice of the time
and place of any special directors meeting shall be given at least forty-eight
(48) hours prior thereto. Notice shall be given in accordance with and shall be
deemed to be effective at the time and in the manner described in Arizona
Revised Statutes Section 10-141. Any director may give notice of any meeting and
any adjournment thereof at any time before, during or after it is held. Except
as provided in the next sentence below, the waiver must be in writing, signed by
the director entitled to the notice and filed with the minutes or corporate
records. The attendance of a director at or participation of a director in a
meeting shall constitute a waiver of notice of such meeting, unless the director
at the beginning of the meeting (or promptly upon his/her arrival) objects to
holding the meeting or transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting.

         4.06 DIRECTOR QUORUM. A majority of the number of directors prescribed
according to Section 4.02 above or, if no number is so prescribed, the number in
office immediately before the meeting begins, shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors unless the
Articles require a greater number.

         4.07 DIRECTORS, MANNER OF ACTING.

              (a) If a quorum is present when a vote is taken, the affirmative
vote of a majority of the directors present shall be the act of the Board of
Directors unless the Articles require a greater percentage.

                                      -7-
<PAGE>   8

              (b) Unless the Articles provide otherwise, any or all directors
may participate in a regular or special meeting by, or conduct the meeting
through the use of, any means of communication by which all directors
participating may simultaneously hear each other during the meeting, in which
case, any required notice of the meeting may generally describe the arrangements
(rather than or in addition to the place) for the holding thereof. A director
participating in a meeting by this means is deemed to be present in person at
the meeting.

              (c) A director who is present at a meeting of the Board of
Directors or a committee of the Board of Directors when corporate action is
taken is deemed to have assented to the action taken unless: (1) the director
objects at the beginning of the meeting (or promptly upon his/her arrival) to
holding it or transacting business at the meeting; or (2) his/her dissent or
abstention from the action taken is entered in the minutes of the meeting; or
(3) he/she delivers written notice of his/her dissent or abstention to the
presiding officer of the meeting before its adjournment or to the corporation
before 5:00 pm. on the next business day after the meeting. The right of dissent
or abstention is not available to a director who votes in favor of the action
taken.

         4.08 DIRECTOR ACTION WITHOUT A MEETING. Unless the Articles provide
otherwise, any action required or permitted to be taken by the Board of
Directors at a meeting may be taken without a meeting if the action is taken by
unanimous written consent of the Board of Directors as evidenced by one (1) or
more written consents describing the action taken, signed by each director and
filed with the minutes or corporate records. Action taken by consent is
effective when the last director signs the consent, unless the consent specifies
a different effective date. A signed consent has the effect of a meeting vote
and may be described as such in any document.

         4.09 REMOVAL OF DIRECTORS BY SHAREHOLDERS. The shareholders may remove
one (1) or more directors at a meeting called for that purpose if notice has
been given that a purpose of the meeting is such removal. The removal may be
with or without cause unless the Articles provide that directors may only be
removed with cause. If a director is elected by a voting group of shareholders,
only the shareholders of that voting group may participate in a shareholder vote
to remove him/her. If less than the entire Board of Directors is to be removed,
a director may not be removed if the number of votes sufficient to elect the
director under cumulative voting is voted against the director's removal.

         4.10     BOARD OF DIRECTORS.

              (a) Unless the Articles provide otherwise, if a vacancy occurs on
the Board of Directors, including a vacancy resulting from an increase in the
number of directors, either the shareholders or the Board of Directors may fill
the vacancy.

                                      -8-
<PAGE>   9

                  (b) If the vacant office was held by a director elected by a
voting group of shareholders, only the holders of that voting group are entitled
to vote to fill the vacancy if it is filled by the shareholders.

                  (c) A vacancy that will occur at a specific later date (by
reason of resignation effective at a later date) may be filled before the
vacancy occurs, but the new director may not take office until the vacancy
occurs.

                  (d) The term of a director elected to fill a vacancy expires
at the next shareholders meeting at which directors are elected.

         4.11 DIRECTOR COMPENSATION. Unless otherwise provided in the Articles
by resolution of the Board of Directors, each director may be paid his/her
expenses, if any, of attendance at each meeting of the Board of Directors or any
committee thereof, and may be paid a stated salary as director or a fixed sum
for attendance at each meeting of the Board of Directors or any committee
thereof, or both. No such payment shall preclude any director from serving the
corporation in any capacity and receiving compensation therefor.

         4.12 DIRECTOR COMMITTEES.

              (a) CREATION OF COMMITTEES. Unless the Articles provide otherwise,
the Board of Directors may create one (1) or more committees and appoint members
of the Board of Directors to serve on them. Each committee shall have one (1) or
more members, who serve at the pleasure of the Board of Directors.

              (b) SELECTION OF MEMBERS. The creation of a committee and
appointment of members to it shall be approved by the greater of (1) a majority
of all the directors in office when the action is taken or (2) the number of
directors required by the Articles to take such action.

              (c) REQUIRED PROCEDURES. Sections 4.03 through 4.08 of this
Article IV, which govern meetings, action without meetings, notice and waiver of
notice and quorum and voting requirements of the Board of Directors, apply to
committees and their members.

              (d) AUTHORITY. Unless limited by the Articles, each committee may
exercise those aspects of the authority of the Board of Directors which the
Board of Directors confers upon such committee in the resolution creating the
committee; provided, however, that a committee may not: (1) authorize
distributions; (2) approve or propose to shareholders action that requires
shareholder approval under the Arizona Business Corporation Act; (3) fill
vacancies on the Board of Directors or on any of its committees; (4) amend the
Articles of Incorporation without shareholder action as provided by law; (5)

                                      -9-
<PAGE>   10
adopt, amend or repeal these Bylaws; (6) approve a plan of merger not requiring
shareholder approval; (7) authorize or approve reacquisition of shares, except
according to a formula or method prescribed by the Board of Directors; (8)
authorize or approve the issuance or sale or contract for sale of shares or
determine the designation and relative rights, preferences and limitations of a
class or series of shares except within limits specifically prescribed by the
Board of Directors; or (9) fix the compensation of directors for serving on the
Board of Directors or any committee of the Board of Directors.

         4.13 DIRECTOR RESIGNATIONS. Any director or committee may resign from
his or her office at any time by written notice delivered to the Board of
Directors, the Chairman of the Board or the corporation at its known place of
business. Any such resignation will be effective upon its receipt unless some
later time is therein fixed, and then from that time. The acceptance of a
resignation will not be required to make it effective.




                                   V. OFFICERS

         5.01 NUMBER OF OFFICERS. The officers of the corporation shall be a
President, a Secretary and a Treasurer, each of whom shall be appointed by the
Board of Directors. Such other officers and assistant officers as may be deemed
necessary, including any Vice Presidents, may be appointed by the Board of
Directors. If specifically authorized by the Board of Directors, an officer may
appoint one (1) or more other officers or assistant officers. The same
individual may simultaneously hold more than one (1) office in the corporation.

         5.02 APPOINTMENT AND TERM OF OFFICE. The officers of the corporation
shall be appointed by the Board of Directors for a term as determined by the
Board of Directors. The designation of a specified term grants to the officer no
contract rights, and the Board of Directors can remove the officer at any time
prior to the termination of such term. If no term is specified, an officer of
the corporation shall hold office until her or she resigns or dies or until he
or she is removed in the manner provided by law or in Section 5.03 of this
Article V. The regular election or appointment of officers will take place at
each annual meeting of the Board of Directors, but elections of officers may be
held at any other meeting of the Board.

         5.03 RESIGNATION AND REMOVAL OF OFFICERS. An officer may resign at any
time by delivering written notice to the corporation at its known place of
business. A resignation is effective when the notice is delivered unless the
notice specifies a later effective date or event. Any officer may be removed by
the Board of Directors at any time, with or without

                                      -10-
<PAGE>   11
cause. Such removal shall be without prejudice to the contract rights, if any,
of the person so removed. Appointment of an officer shall not of itself create
contract rights.

         5.04 DUTIES OF OFFICERS. Officers of the corporation shall have
authority to perform such duties as may be prescribed from time to time by law,
in these Bylaws or by the Board of Directors, the President or the superior
officer of any such officer. Each officer of the corporation (in the order
designated herein or by the Board) will be vested with all of the powers and
charged with all of the duties of his or her superior officer in the event of
such superior officer's absence, death or disability.

         5.05 BONDS AND OTHER REQUIREMENTS. The Board of Directors may require
any officer to give bond to the corporation (with sufficient surety and
conditioned for the faithful performance of the duties of his or her office) and
to comply with such other conditions as may from time to time be required of him
or her by the Board of Directors.

         5.06 PRESIDENT. Unless otherwise specified by resolution of the Board
of Directors, the President shall be the principal executive officer of the
corporation and, subject to the control of the Board of Directors, shall
supervise and control all of the business and affairs of the corporation and the
performance by all of its other officers of their respective duties
and in general shall perform all duties incident to the office of President and
such other duties as may be prescribed by the Board of Directors from time to
time. The President shall, when present and in the absence of a Chairman of the
Board, preside at all meetings of shareholders and of the Board of Directors.
The President will be a proper officer to sign on behalf of the corporation any
deed, bill of sale, assignment, option, mortgage, pledge, note, bond, evidence
of indebtedness, application, consent (to service of process or otherwise),
agreement, indenture, contract or other instrument, except in each such case
where the signing and execution thereof shall be expressly delegated by the
Board of Directors or by these Bylaws to some other officer or agent of the
corporation, or shall be required by law to be otherwise signed or executed. The
President may represent the corporation at any meeting of the shareholders or
members of any other corporation, association, partnership, joint venture or
other entity in which the corporation then holds shares of capital stock or has
an interest and may vote such shares of capital stock or other interest in
person or by proxy appointed by him or her, provided that the Board of Directors
may from time to time confer the foregoing authority upon any other person or
persons.

         5.07 VICE-PRESIDENT. If appointed, in the absence of the President or
in the event of his/her death or disability, the Vice-President (or in the event
there be more than one Vice-President, the Vice-Presidents in the order
designated at the time of their election, or in the absence of any such
designation, then in the order of their appointment) shall perform the duties of
the President, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the President. If there is no Vice-President or in
the

                                      -11-
<PAGE>   12
event of the death or disability of all Vice-Presidents, then the Treasurer
shall perform such duties of the President in the event of his or her absence,
death or disability. Each Vice-President will be a proper officer to sign on
behalf of the corporation any deed, bill of sale, assignment, option, mortgage,
pledge, note, bond, evidence of indebtedness, application, consent (to service
of process or otherwise), agreement, indenture, contract or other instrument,
except in each such case where the signing and execution thereof shall be
expressly delegated by the Board of Directors or by these Bylaws to some other
officer or agent of the corporation, or shall be required by law to be otherwise
signed or executed. Any Vice-President may represent the corporation at any
meeting of the shareholders or members of any other corporation, association,
partnership, joint venture or other entity in which the corporation then holds
shares of capital stock or has an interest and may vote such shares of capital
stock or other interest in person or by proxy appointed by him or her, provided
that the Board of Directors may from time to time confer the foregoing authority
upon any other person or persons. A Vice-President shall perform such other
duties as from time to time may be assigned to him/her by the President or the
Board of Directors.

         5.08 SECRETARY. The Secretary shall: (a) keep the minutes of the
proceedings of the shareholders and of the Board of Directors and any committee
of the Board of Directors and all unanimous written consents of the
shareholders, Board of Directors and any committee of the Board of Directors in
one (1) or more books provided for that purpose; (b) see that all notices are
duly given in accordance with the provisions of these Bylaws or as required
by law; (c) be custodian of the corporate records and of any seal of the
corporation; (d) when requested or required, authenticate any records of the
corporation; (e) keep a register of the address of each shareholder which shall
be furnished to the Secretary by such shareholder; and (f) in general perform
all duties assigned to him/her by the President or by the Board of Directors.
Except as may otherwise be specifically provided in a resolution of the Board of
Directors, the Secretary will be a proper officer to take charge of the
corporation's stock transfer books and to compile the voting record pursuant to
Section 3.05 above, and to impress the corporation's seal, if any, on any
instrument signed by the President, any Vice-President or any other duly
authorized person, and to attest to the same.
In the absence of the Secretary, a secretary pro tempore may be chosen by the
director or shareholders, as appropriate, to perform the duties of the
Secretary.

         5.09 TREASURER. The Treasurer shall: (a) have charge and custody of and
be responsible for all funds and securities of the corporation; (b) receive and
give receipts for moneys due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the corporation in such
bank, trust companies or other depositories as shall be selected by the Board of
Directors or any proper officer; (c) keep full and accurate accounts of receipts
and disbursements in books and records of the corporation; and (d) in general
perform all of the duties incident to the office of Treasurer and such other
duties as from time to time may be assigned to him/her by the President

                                      -12-
<PAGE>   13
or by the Board of Directors. The Treasurer will render to the President, the
directors and the shareholders at proper times an account of all of his or her
transactions as Treasurer and of the financial condition of the corporation. The
Treasurer shall be responsible for preparing and filing such financial reports,
financial statements and returns as may be required by law.

         5.10 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The Assistant
Secretaries and the Assistant Treasurers, when authorized by the Board of
Directors, may sign with the President or a Vice-President certificates for
shares of the corporation, the issuance of which shall have been authorized by a
resolution of the Board of Directors. The Assistant Secretaries and Assistant
Treasurers, in general, shall perform such duties as shall be assigned to them
by the Secretary or the Treasurer, respectively, or by the President or the
Board of Directors.

         5.11 CHAIRMAN OF THE BOARD. The Board of Directors may elect a Chairman
to serve as a general executive officer of the corporation and, if specifically
designated as such by the Board of Directors, as the chief executive officer of
the corporation. If elected, the Chairman will preside at all meetings of the
Board of Directors and be vested with such other powers and duties as the Board
of Directors may from time to time delegate to him or her.

         5.12 SALARIES. The salaries of the officers of the corporation may be
fixed from time to time by the Board of Directors or (except as to the
President's own) left to the discretion of the President. No officer will be
prevented from receiving a salary by reason of the fact that he or she is also a
director of the corporation.
         5.13 ADDITIONAL APPOINTMENTS. In addition to the officers contemplated
in this Article V, the Board of Directors may appoint other agents of the
corporation with such authority to perform such duties as may be prescribed from
time to time by the Board of Directors.

VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER

         6.01     CERTIFICATES FOR SHARES.

                  (a) CONTENT. Certificates representing shares of the
corporation shall, at a minimum, state on their face the name of the issuing
corporation and that it is formed under the laws of the State of Arizona, the
name of the person to whom issued, and the number and class of shares and the
designation of the series, if any, the certificate represents. Such certificates
shall be signed (either manually or by facsimile to the extent

                                      -13-
<PAGE>   14
allowable by law) by one or more officers of the corporation as determined by
the Board of Directors or, if no such determination is made, by any of the
Chairman of the Board (if any), the President, any Vice-President, the Secretary
or the Treasurer of the corporation, and may be sealed with a corporate seal or
a facsimile thereof, if any. Each certificate for shares shall be consecutively
numbered or otherwise identified and will exhibit such information as may be
required by law. If a supply of unissued certificates bearing the facsimile
signature of a person remains when that person ceases to hold the office of the
corporation indicated on such certificates or ceases to be the transfer agent or
registrar of the corporation, they may still be issued by the corporation and
countersigned, registered, issued and delivered by the corporation's transfer
agent and/or registrar thereafter, as though such person had continued to hold
the office indicated on such certificate.

                  (b) LEGEND AS TO CLASS OR SERIES. If the corporation is
authorized to issue different classes of shares or different series within a
class, the designations, relative rights, preferences and limitations applicable
to each class and the variations in rights, preferences and limitations
determined for each series (and the authority of the Board of Directors to
determine variations for future series) shall be summarized on the front or back
of each certificate. Alternatively, each certificate may state conspicuously on
its front or back that the corporation will furnish a shareholder this
information upon request in writing and without charge.


                  (c) SHAREHOLDER LIST. The name and address of the person to
whom shares are issued, with the number of shares and date of issue, shall be
entered on the stock transfer books of the corporation.

                  (d) LOST CERTIFICATES. In the event of the loss, theft or
destruction of any certificate representing shares of the corporation or of any
predecessor corporation, the corporation may issue (or, in the case of any such
shares as to which a transfer agent and/or registrar have been appointed, may
direct such transfer agent and/or registrar to countersign, register and issue)
a new certificate, and cause the same to be delivered to the registered owner of
the shares represented thereby; provided that such owner shall have submitted
such evidence showing the circumstances of the alleged loss, theft or
destruction and his, her or its ownership of the certificate as the corporation
considers satisfactory, together with any other facts that the corporation
considers pertinent; and further provided that, if so required by the
corporation, the owner shall provide a bond or other indemnity in form and
amount satisfactory to the corporation (and to its transfer agent and/or
registrar, if applicable).

         6.02 REGISTRATION OF THE TRANSFER OF SHARES. Registration of the
transfer of shares of the corporation shall be made only on the stock transfer
books of the corporation. In order to register a transfer, the record owner
shall surrender the shares to the corporation

                                      -14-
<PAGE>   15
for cancellation, properly endorsed by the appropriate person or persons with
reasonable assurances that the endorsements are genuine and effective. Unless
the corporation has established a procedure by which a beneficial owner of
shares held by a nominee is to be recognized by the corporation as the owner,
the corporation will be entitled to treat the registered owner of any share of
the capital stock of the corporation as the absolute owner thereof and,
accordingly, will not be bound to recognize any beneficial, equitable or other
claim to, or interest in, such share on the part of any other person, whether or
not it has notice thereof, except as may expressly be provided by applicable
law.

         6.03 SHARES WITHOUT CERTIFICATES. The Board of Directors may authorize
the issuance of uncertificated shares by the corporation and may prescribe
procedures for the issuance and registration of transfer thereof and with
respect to such other matters as the Board of Directors shall deem necessary or
appropriate.

                               VII. DISTRIBUTIONS

         Subject to such restrictions or requirements as may be imposed by
applicable law or the corporation's Articles or as may otherwise be binding upon
the corporation, the Board of Directors may from time to time declare, and the
corporation may pay or make, dividends or other distributions to its
shareholders.

                              VIII. CORPORATE SEAL

         The Board of Directors may provide for a corporate seal of the
corporation that will have inscribed thereon any designation, including the name
of the corporation, Arizona as the state of incorporation, the year of
incorporation and the words "Corporate Seal".




                                 IX. AMENDMENTS

         The corporation's Board of Directors may amend or repeal the
corporation's Bylaws unless:

                  (a)      The Articles or the Arizona Business Corporation Act
                           reserve this power exclusively to the shareholders in
                           whole or part; or

                  (b)      The shareholders, in adopting, amending or repealing
                           a particular bylaw, provide expressly that the Board
                           of Directors may not amend or repeal that bylaw.

                                      -15-
<PAGE>   16

The corporation's shareholders may amend or repeal the corporation's Bylaws even
though the Bylaws may also be amended or repealed by its Board of Directors.


                                    * * * * *

                                  CERTIFICATION

                  The undersigned Secretary of Monterey Homes Arizona, Inc.
hereby certifies that the foregoing Bylaws of the Corporation were duly adopted
pursuant to the Action by Unanimous Consent of the Board of Directors in Lieu of
First Meeting dated March   , 1997.



                                  -----------------------------------
                                  Larry W. Seay



                                      -16-


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.6
<SEQUENCE>4
<FILENAME>p65173ex3-6.txt
<DESCRIPTION>EX-3.6
<TEXT>

<PAGE>   1

                                                                     Exhibit 3.6

                            ARTICLES OF ORGANIZATION
                                       OF
                          MERITAGE PASEO CROSSING, LLC
                      AN ARIZONA LIMITED LIABILITY COMPANY


         The undersigned has executed this document for the purpose of forming a
limited liability company under the laws of Arizona and adopts the following
Articles of Organization.

         1. NAME. The name of the Company is: MERITAGE PASEO CROSSING, LLC

         2. PURPOSE AND POWERS. The Company is organized for the transaction of
any and all lawful business for which a limited liability company may be formed
under the laws of the State of Arizona, including, but not limited to, the
acquisition, marketing and sale of new homes.

         3. REGISTERED OFFICE. The Company's registered office is: 6613 N.
Scottsdale Road, Suite 200, Scottsdale, Arizona 85250.

         4. STATUTORY AGENT. The name and address of the agent for service of
process is: C. Timothy White, Esq., 1850 North Central Avenue, Suite 500,
Phoenix, Arizona 85004.

                  The agent, by signing the attached document, accepts the
appointment as agent.

         5. DURATION. The latest date the Company can dissolve is December 31,
2035.

         6. MEMBERS. The name and mailing address of the sole member of the
Company is:

                  Monterey Homes Arizona, Inc.
                  6613 N. Scottsdale Road, Suite 200
                  Scottsdale, AZ 85250

         7. MANAGEMENT. Management of the Company is reserved to its sole
member.


         DATED this 28th day of September, 2000.




                                           ------------------------------------
                                           John P. Moroney
<PAGE>   2
                                STATE OF ARIZONA
                  ACCEPTANCE OF APPOINTMENT AS STATUTORY AGENT
                                       OF
                          MERITAGE PASEO CROSSING, LLC,
                      AN ARIZONA LIMITED LIABILITY COMPANY



To:      Arizona Corporation Commission
         Incorporating Division
         1300 West Washington
         Phoenix, Arizona  85007


         Please be advised that C. Timothy White, Esq., hereby accepts and
acknowledges appointment as statutory agent for service of process upon Meritage
Paseo Crossing, LLC, an Arizona limited liability company, and consents to act
in that capacity until his removal or resignation.

         DATED this 28th day of September, 2000.



                                           ------------------------------------
                                           C. TIMOTHY WHITE


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.7
<SEQUENCE>5
<FILENAME>p65173ex3-7.txt
<DESCRIPTION>EX-3.7
<TEXT>

<PAGE>   1

                                                                     Exhibit 3.7



                            ARTICLES OF INCORPORATION

                                       OF

                        MONTEREY HOMES CONSTRUCTION, INC.

         FIRST:   The name of this corporation is MONTEREY HOMES
CONSTRUCTION, INC.

         SECOND: The purpose for which the corporation is organized is the
transaction of any and all lawful business for which corporations may be
incorporated under the laws of the State of Arizona, as they may be amended from
time to time. The character of business which the corporation initially intends
actually to conduct in the State of Arizona is the acquisition of real property
and development of real property as homes and residential communities.

         THIRD: The aggregate number of shares that the corporation shall have
authority to issue is one thousand (1000) common shares, all of which shares
shall be of a single class.

         FOURTH: The name and address of the initial statutory agent of the
corporation is C T Corporation System, 3225 N. Central Avenue, Suite 1601,
Phoenix, Arizona 85012. The street address of the initial known place of
business of the corporation in Arizona is 6613 N. Scottsdale Road, Suite 200,
Scottsdale, Arizona 85250.

         FIFTH: The number of directors constituting the initial board of
directors of the corporation is four (4). The names and addresses of the persons
who are to serve as directors until the first annual meeting of shareholders, or
until their successors are elected and qualified, are:

             Name                                Address

             William W. Cleverly        6613 North Scottsdale Road, Suite 200
                                        Scottsdale, Arizona 85250

             Steven J. Hilton           6613 North Scottsdale Road, Suite 200
                                        Scottsdale, Arizona 85250

             Robert Sarver              402 W. Broadway, Suite 1290
                                        San Diego, California 92101

             C. Timothy White           500 Viad Corporate Center
                                        1850 N. Central Avenue
                                        Phoenix, Arizona 85004


                                      -1-
<PAGE>   2
The number of persons to serve on the board of directors thereafter shall be
fixed by the bylaws of the corporation.

         SIXTH: The name and address of the incorporator is Larry W. Seay, 6613
N. Scottsdale Road, Suite 200, Scottsdale, Arizona 85250.

         SEVENTH: The liability of a director or former director to the
corporation or its shareholders shall be eliminated to the fullest extent
permitted by Section 10-202.B.1 of the Arizona Revised Statutes.

         If the Arizona Business Corporation Act is amended to authorize
corporate action further eliminating or limiting the liability of directors, the
liability of a director of the corporation shall be eliminated or limited to the
fullest extent permitted by Arizona Business Corporation Act, as amended.

         Any repeal or modification of this Article Seventh shall not adversely
affect any right or protection of a director of the corporation existing
hereunder with respect to any act or omission occurring prior to or at the time
of such repeal or modification.

         The provisions of this Article Seventh shall not be deemed to limit or
preclude indemnification of a director by the corporation for any liability of a
director which has not been eliminated by the provisions of this Article
Seventh.

         DATED:            March 13, 1997



                                            ________________________________
                                            Larry W. Seay, Incorporator



                                       -2-
<PAGE>   3
                                STATE OF ARIZONA
                            ACCEPTANCE OF APPOINTMENT

                               AS STATUTORY AGENT

                                       OF

                       MONTEREY HOMES CONSTRUCTION, INC.,

                             AN ARIZONA CORPORATION

To:      Arizona Corporation Commission
         Incorporating Division
         1300 West Washington
         Phoenix, Arizona  85007

                  Please be advised that C T Corporation System, a Delaware
corporation doing business in Arizona, and located at 3225 N. Central Avenue,
Suite 1601, Phoenix, Arizona 85012, hereby accepts and acknowledges its
appointment as statutory agent for service of process upon Monterey Homes
Construction, Inc., an Arizona corporation, and consents to act in that capacity
until removal or resignation.

                  The undersigned hereby certifies that it has been a
corporation in good standing in the State of Arizona for a period in excess of
three years.

                  DATED this_________day of____________, 1997.



                                   C T CORPORATION SYSTEM



                                   By_______________________________________

                                   Its______________________________________





</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.8
<SEQUENCE>6
<FILENAME>p65173ex3-8.txt
<DESCRIPTION>EX-3.8
<TEXT>

<PAGE>   1

                                                                     Exhibit 3.8


                                     BY-LAWS

                                       OF

                        MONTEREY HOMES CONSTRUCTION, INC.

                 I. REFERENCES TO CERTAIN TERMS AND CONSTRUCTION

         1.01 CERTAIN REFERENCES. Any reference herein made to law will be
deemed to refer to the law of the State of Arizona, including any applicable
provision of Chapters 1 through 17 of Title 10 of the Arizona Revised Statutes,
or any successor statute, as from time to time amended and in effect (sometimes
referred to herein as the "Arizona Business Corporation Act"). Any reference
herein made to the corporation's Articles will be deemed to refer to its
Articles of Incorporation and all amendments thereto as at any given time on
file with the Arizona Corporation Commission. Except as otherwise required by
law and subject to any procedures established by the corporation pursuant to
Arizona Revised Statutes Section 10-723, the term "shareholder as used herein
shall mean one who is a holder of record of shares of the corporation.
References to specific sections of law herein made shall be deemed to refer to
such sections, or any comparable successor provisions, as from time to time
amended and in effect.

         1.02 SENIORITY. The law and the Articles (in that order of precedence)
will in all respects be considered senior and superior to these Bylaws, with any
inconsistency to be resolved in favor of the law and such Articles (in that
order of precedence), and with these Bylaws to be deemed automatically amended
from time to time to eliminate any such inconsistency which may then exist.

         1.03 COMPUTATION OF TIME. The time during which an act is required to
be done, including the time for the giving of any required notice herein, shall
be computed by excluding the first day or hour, as the case may be, and
including the last day or hour.

                                   II. OFFICES

         2.01 PRINCIPAL OFFICE. The principal office of the corporation shall be
located at any place either within or outside the State of Arizona as designed
in the corporation's most current Annual Report filed with the Arizona
Corporation Commission or in any other document executed and delivered to the
Arizona Corporation Commission for filing. If a principal office is not so
designated, the principal office of the corporation shall mean the known place
of business of the corporation. The corporation may have such other offices,
either within or without the State of Arizona, as the Board of Directors may
designate or as the business of the corporation may require from time to time.

         2.02 KNOWN PLACE OF BUSINESS. A known place of business of the
corporation shall be located within the State of Arizona and may be, but need
not be, the address of the statutory agent of the corporation. The corporation
may change its known place of
<PAGE>   2
business from time to time in accordance with the relevant provisions of the
Arizona Business Corporation Act.

                               III. SHAREHOLDERS

         3.01 ANNUAL SHAREHOLDER MEETING. The annual meeting of the shareholders
shall be held on such date within the month of June (or at such other date
within each calendar year) as may be fixed from time to time by the Board of
Directors for the purpose of electing directors and for the transaction of such
other business as may properly come before the meeting.

         3.02 SPECIAL SHAREHOLDER MEETINGS. Special meetings of the shareholders
may be held whenever and wherever, either within or without the State of
Arizona, called for by or at the direction of the Chairman of the Board, the
President or the Board of Directors.

         3.03     NOTICE OF SHAREHOLDERS MEETINGS.

                  (a) REQUIRED NOTICE. Notice stating the place, day and hour of
any annual or special shareholders meeting shall be given not less than ten (10)
nor more than sixty (60) days before the date of the meeting by or at the
direction of the person or persons calling the meeting, to each shareholder
entitled to vote at such meeting and to any other shareholder entitled to
receive notice of the meeting by law or the Articles. Notices to shareholders
shall be given in accordance with, and shall be deemed to be effective at the
time and in the manner described in, Section 10-141 of the Arizona Revised
Statutes. If no designation is made of the place at which an annual or special
meeting will be held in the notice for such meeting, the place of the meeting
will be at the principal place of business of the corporation.

                  (b) ADJOURNED MEETING. If any shareholders meeting is
adjourned to a different date, time or place, notice need not be given of the
new date, time and place if the new date, time and place are announced at the
meeting before adjournment. But if a new record date for the adjourned meeting
is fixed or must be fixed in accordance with law or these Bylaws, then notice of
the adjourned meeting shall be given to those persons who are shareholders as of
the new record date and who are entitled to such notice pursuant to Section
3.03(a) above.

                  (c) WAIVER OF NOTICE. Any shareholder may waive notice of a
meeting (or any notice of any other action required to be given by the Arizona
Business Corporation Act, the corporation's Articles or these Bylaws) at any
time before, during or after the meeting or other action, by a writing signed by
the shareholder entitled to the notice. Each such waiver shall be delivered to
the corporation for inclusion in the minutes or filing with


                                      -23-
<PAGE>   3
the corporate records. Under certain circumstances, a shareholder's attendance
at a meeting may constitute a waiver of notice, unless the shareholder takes
certain actions to preserve his/her objections as described in the Arizona
Business Corporation Act.

                  (d) CONTENTS OF NOTICE. The notice of each special
shareholders meeting shall include a description of the purpose or purposes for
which the meeting is called. Except as required by law or the corporation's
Articles, the notice of an annual shareholders meeting need not include a
description of the purpose or purposes for which the meeting is called.

         3.04 FIXING OF RECORD DATE. For the purpose of determining shareholders
of any voting group entitled to notice of or to vote at any meeting of
shareholders, or shareholders entitled to receive any distribution or dividend,
or in order to make a determination of shareholders for any other proper
purpose, the Board of Directors may fix in advance a date as the record date.
Such record date shall not be more than seventy (70) days prior to the date on
which the particular action requiring such determination of shareholders is to
be taken. If no record date is so fixed by the Board of Directors, the record
date for the determination of shareholders shall be as provided in the Arizona
Business Corporation Act.

                  When a determination of shareholders entitled to notice of or
to vote at any meeting of shareholders has been made as provided in this
Section, such determination shall apply to any adjournment thereof, unless the
Board of Directors fixes a new record date, which it must do if the meeting is
adjourned to a date more than one hundred twenty (120) days after the date fixed
for the original meeting.

         3.05 SHAREHOLDER LIST. The corporation shall make a complete record of
the shareholders entitled to notice of each meeting of shareholders thereof,
arranged in alphabetical order, listing the address and the number of shares
held by each. The list shall be arranged by voting group and within each voting
group by class or series of shares. The shareholder list shall be available for
inspection by any shareholder, beginning two (2) business days after notice of
the meeting is given for which the list was prepared and continuing through the
meeting. The list shall be available at the corporation's principal office or at
another place identified in the meeting notice in the city where the meeting is
to be held. Failure to comply with this section shall not affect the validity of
any action taken at the meeting.

         3.06     SHAREHOLDER QUORUM AND VOTING REQUIREMENTS.

                  (a) If the Articles or the Arizona Business Corporation Act
provide for voting by a single voting group on a matter, action on that matter
is taken when voted upon by that voting group.


                                      -3-
<PAGE>   4
                  (b) If the Articles or the Arizona Business Corporation Act
provide for voting by two (2) or more voting groups on a matter, action on that
matter is taken when voted upon by each of those voting groups counted
separately.

                  (c) Shares entitled to vote as a separate voting group may
take action on a matter at a meeting only if a quorum of those shares exists
with respect to that matter. Unless the Articles or the Arizona Business
Corporation Act provide otherwise, a majority of the votes entitled to be cast
on the matter by the voting group constitutes a quorum of that voting group for
action on that matter.

                  (d) Once a share is represented for any purpose at a meeting,
it is deemed present for quorum purposes for the remainder of the meeting and
for any adjournment of that meeting, unless a new record date is or must be set
for that adjourned meeting.

                  (e) If a quorum exists, action on a matter (other than the
election of directors) by a voting group is approved if the votes cast within
the voting group favoring the action exceed the votes cast opposing the action,
unless the Articles or the Arizona Business Corporation Act require a greater
number of affirmative votes.

                  (f) Voting will be by ballot on any question as to which a
ballot vote is demanded prior to the time the voting begins by any person
entitled to vote on such question; otherwise, a voice vote will suffice. No
ballot or change of vote will be accepted after the polls have been declared
closed following the ending of the announced time for voting.

         3.07 PROXIES. At all meetings of shareholders, a shareholder may vote
in person or by proxy duly executed in writing by the shareholder or the
shareholder's duly authorized attorney-in-fact. Such proxy shall comply with law
and shall be filed with the Secretary of the corporation or other person
authorized to tabulate votes before or at the time of the meeting. No proxy
shall be valid after eleven (11) months from the date of its execution unless
otherwise provided in the proxy. The burden of proving the validity of any
undated, irrevocable or otherwise contested proxy at a meeting of the
shareholders will rest with the person seeking to exercise the same. A facsimile
appearing to have been transmitted by a shareholder or by such shareholder's
duly authorized attorney-in-fact may be accepted as a sufficiently written and
executed proxy.

         3.08 VOTING OF SHARES. Unless otherwise provided in the Articles or the
Arizona Business Corporation Act, each outstanding share entitled to vote shall
be entitled to one (1) vote upon each matter submitted to a vote at a meeting of
shareholders.

         3.09 CUMULATIVE VOTING. At all elections for directors, each
shareholder shall be entitled to as many votes as shall equal the number of its
shares of stock multiplied by the


                                      -4-
<PAGE>   5
number of directors to be elected, and it may cast all of such votes for a
single director or may distribute them among the number to be voted for, or any
two or more of them, as it may see fit.

         3.10 ELECTION INSPECTORS. The Board of Directors, in advance of any
meeting of the shareholders, may appoint an election inspector or inspectors to
act at such meeting (and at any adjournment thereof). If an election inspector
or inspectors are not so appointed, the chairman of the meeting may, or upon
request of any person entitled to vote at the meeting will, make such
appointment. If any person appointed as an inspector fails to appear or to act,
a substitute may be appointed by the chairman of the meeting. If appointed, the
election inspector or inspectors (acting through a majority of them if there be
more than one) will determine the number of shares outstanding, the
authenticity, validity and effect of proxies and the number of shares
represented at the meeting in person and by proxy; will receive and count votes,
ballots and consents and announce the results thereof; will hear and determine
all challenges and questions pertaining to proxies and voting; and, in general,
will perform such acts as may be proper to conduct elections and voting with
complete fairness to all shareholders. No such election inspector need be a
shareholder of the corporation.

         3.11 ORGANIZATION AND CONDUCT OF MEETINGS. Each meeting of the
shareholders will be called to order and thereafter chaired by the Chairman of
the Board of Directors if there is one, or, if not or if the Chairman of the
Board is absent or so requests, then by the President, or if both the Chairman
and the President are unavailable, then by such officer of the corporation or
such shareholder as may be appointed by the Board of Directors. The
corporation's Secretary or, in his or her absence, an Assistant Secretary will
act as secretary of each meeting of the shareholders. If neither the Secretary
nor an Assistant Secretary is in attendance, the chairman of the meeting may
appoint any person (whether a shareholder or not) to act as secretary for the
meeting. After calling a meeting to order, the chairman thereof may require the
registration of all shareholders intending to vote in person and the filing of
all proxies with the election inspector or inspectors, if one or more have been
appointed (or, if not, with the secretary of the meeting). After the announced
time for such filing of proxies has ended, no further proxies or changes,
substitutions or revocations of proxies will be accepted. If directors are to be
elected, a tabulation of the proxies so filed will, if any person entitled to
vote in such election so requests, be announced at the meeting (or adjournment
thereof) prior to the closing of the election polls. Absent a showing of bad
faith on his or her part, the chairman of a meeting will, among other things,
have absolute authority to fix the period of time allowed for the registration
of shareholders and the filing of proxies, to determine the order of business to
be conducted at such meeting and to establish reasonable rules for expediting
the business of the meeting and preserving the orderly conduct thereof
(including any informal or question and answer portions thereof).


                                      -5-
<PAGE>   6
         3.12 SHAREHOLDER APPROVAL OR RATIFICATION. The Board of Directors may
submit any contract or act for approval or ratification of the shareholders at a
duly constituted meeting of the shareholders. Except as otherwise required by
law, if any contract or act so submitted is approved or ratified by a majority
of the votes cast thereon at such meeting, the same will be valid and as binding
upon the corporation and all of its shareholders as it would be if it were the
act of its shareholders.

         3.13 INFORMALITIES AND IRREGULARITIES. All informalities or
irregularities in any call or notice of a meeting of the shareholders or in the
areas of credentials, proxies, quorums, voting and similar matters will be
deemed waived if no objection is made at the meeting.

         3.14 SHAREHOLDER ACTION BY WRITTEN CONSENT. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if one (1) or more consents in writing, setting forth the action so
taken shall be signed by all of the shareholders entitled to vote with respect
to the subject matter thereof. The consents shall be delivered to the
corporation for inclusion in the minutes or filing with the corporate record.
Action taken by consent is effective when the last shareholder signs the consent
unless the consent specifies a different effective date, except that if, by law,
the action to be taken requires that notice be given to shareholders who are not
entitled to vote on the matter, the effective date shall not be prior to ten
(10) days after which the corporation shall give such shareholders written
notice of the proposed action, which notice shall contain or be accompanied by
the same material that would have been required if a formal meeting had been
called to consider the action. A consent signed under this section has the
effect of a meeting vote and may be described as such in any document.

                             IV. BOARD OF DIRECTORS

         4.01 GENERAL POWERS. All corporate powers shall be exercised by or
under the authority of, and the business and affairs of the corporation shall be
managed under the direction of, the Board of Directors.

         4.02 NUMBER, TENURE AND QUALIFICATION OF DIRECTORS. Unless otherwise
provided in the Articles of Incorporation, the authorized number of directors
shall be not less than one (1) nor more than five (5). The number of directors
in office from time to time shall be within the limits specified above, as
prescribed from time to time by resolution adopted by either the shareholders or
the Board of Directors. The directors will regularly be elected at each annual
meeting of the shareholders, but directors may be elected at any other meeting
of the shareholders. Each director shall hold office until the annual meeting of
shareholders following his/her election, subject to his/her earlier resignation
or removal. However, if a director's term expires, he/she shall continue to
serve until his/her successor shall have been elected and qualified, until
his/her resignation or removal or until there


                                      -6-
<PAGE>   7
is a decrease in the number of directors. Unless required by the Articles,
directors do not need to be residents of the State of Arizona or shareholders of
the corporation.

         4.03 REGULAR MEETINGS OF THE BOARD OF DIRECTORS. A regular annual
meeting of the Board of Directors is to be held as soon as practicable after the
adjournment of each annual meeting of the shareholders, either at the place of
the shareholders meeting or at such other place as the directors elected at the
shareholders meeting may have been informed of at or prior to the time of their
election. Additional regular meetings may be held at regular intervals at such
places and at such times as the Board of Directors may determine.

         4.04 SPECIAL MEETINGS OF THE BOARD OF DIRECTORS. Special meetings of
the Board of Directors may be held whenever and wherever called for by the
Chairman of the Board, the President or the number of directors that would be
required to constitute a quorum.

         4.05 NOTICE OF AND WAIVER OF NOTICE FOR DIRECTORS MEETINGS. No notice
need be given of regular meetings of the Board of Directors. Notice of the time
and place of any special directors meeting shall be given at least forty-eight
(48) hours prior thereto. Notice shall be given in accordance with and shall be
deemed to be effective at the time and in the manner described in Arizona
Revised Statutes Section 10-141. Any director may give notice of any meeting and
any adjournment thereof at any time before, during or after it is held. Except
as provided in the next sentence below, the waiver must be in writing, signed by
the director entitled to the notice and filed with the minutes or corporate
records. The attendance of a director at or participation of a director in a
meeting shall constitute a waiver of notice of such meeting, unless the director
at the beginning of the meeting (or promptly upon his/her arrival) objects to
holding the meeting or transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting.

         4.06 DIRECTOR QUORUM. A majority of the number of directors prescribed
according to Section 4.02 above or, if no number is so prescribed, the number in
office immediately before the meeting begins, shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors unless the
Articles require a greater number.

         4.07     DIRECTORS, MANNER OF ACTING.

                  (a) If a quorum is present when a vote is taken, the
affirmative vote of a majority of the directors present shall be the act of the
Board of Directors unless the Articles require a greater percentage.


                                      -7-
<PAGE>   8
                  (b) Unless the Articles provide otherwise, any or all
directors may participate in a regular or special meeting by, or conduct the
meeting through the use of, any means of communication by which all directors
participating may simultaneously hear each other during the meeting, in which
case, any required notice of the meeting may generally describe the arrangements
(rather than or in addition to the place) for the holding thereof. A director
participating in a meeting by this means is deemed to be present in person at
the meeting.

                  (c) A director who is present at a meeting of the Board of
Directors or a committee of the Board of Directors when corporate action is
taken is deemed to have assented to the action taken unless: (1) the director
objects at the beginning of the meeting (or promptly upon his/her arrival) to
holding it or transacting business at the meeting; or (2) his/her dissent or
abstention from the action taken is entered in the minutes of the meeting; or
(3) he/she delivers written notice of his/her dissent or abstention to the
presiding officer of the meeting before its adjournment or to the corporation
before 5:00 pm. on the next business day after the meeting. The right of dissent
or abstention is not available to a director who votes in favor of the action
taken.

         4.08 DIRECTOR ACTION WITHOUT A MEETING. Unless the Articles provide
otherwise, any action required or permitted to be taken by the Board of
Directors at a meeting may be taken without a meeting if the action is taken by
unanimous written consent of the Board of Directors as evidenced by one (1) or
more written consents describing the action taken, signed by each director and
filed with the minutes or corporate records. Action taken by consent is
effective when the last director signs the consent, unless the consent specifies
a different effective date. A signed consent has the effect of a meeting vote
and may be described as such in any document.

         4.09 REMOVAL OF DIRECTORS BY SHAREHOLDERS. The shareholders may remove
one (1) or more directors at a meeting called for that purpose if notice has
been given that a purpose of the meeting is such removal. The removal may be
with or without cause unless the Articles provide that directors may only be
removed with cause. If a director is elected by a voting group of shareholders,
only the shareholders of that voting group may participate in a shareholder vote
to remove him/her. If less than the entire Board of Directors is to be removed,
a director may not be removed if the number of votes sufficient to elect the
director under cumulative voting is voted against the director's removal.

         4.10     BOARD OF DIRECTORS.

                  (a) Unless the Articles provide otherwise, if a vacancy occurs
on the Board of Directors, including a vacancy resulting from an increase in the
number of directors, either the shareholders or the Board of Directors may fill
the vacancy.


                                      -8-
<PAGE>   9
                  (b) If the vacant office was held by a director elected by a
voting group of shareholders, only the holders of that voting group are entitled
to vote to fill the vacancy if it is filled by the shareholders.

                  (c) A vacancy that will occur at a specific later date (by
reason of resignation effective at a later date) may be filled before the
vacancy occurs, but the new director may not take office until the vacancy
occurs.

                  (d) The term of a director elected to fill a vacancy expires
at the next shareholders meeting at which directors are elected.

         4.11 DIRECTOR COMPENSATION. Unless otherwise provided in the Articles
by resolution of the Board of Directors, each director may be paid his/her
expenses, if any, of attendance at each meeting of the Board of Directors or any
committee thereof, and may be paid a stated salary as director or a fixed sum
for attendance at each meeting of the Board of Directors or any committee
thereof, or both. No such payment shall preclude any director from serving the
corporation in any capacity and receiving compensation therefor.

         4.12     DIRECTOR COMMITTEES.

                  (a) CREATION OF COMMITTEES. Unless the Articles provide
otherwise, the Board of Directors may create one (1) or more committees and
appoint members of the Board of Directors to serve on them. Each committee shall
have one (1) or more members, who serve at the pleasure of the Board of
Directors.

                  (b) SELECTION OF MEMBERS. The creation of a committee and
appointment of members to it shall be approved by the greater of (1) a majority
of all the directors in office when the action is taken or (2) the number of
directors required by the Articles to take such action.

                  (c) REQUIRED PROCEDURES. Sections 4.03 through 4.08 of this
Article IV, which govern meetings, action without meetings, notice and waiver of
notice and quorum and voting requirements of the Board of Directors, apply to
committees and their members.

                  (d) AUTHORITY. Unless limited by the Articles, each committee
may exercise those aspects of the authority of the Board of Directors which the
Board of Directors confers upon such committee in the resolution creating the
committee; provided, however, that a committee may not: (1) authorize
distributions; (2) approve or propose to shareholders action that requires
shareholder approval under the Arizona Business Corporation Act; (3) fill
vacancies on the Board of Directors or on any of its committees; (4) amend the
Articles of Incorporation without shareholder action as provided by law; (5)


                                      -9-
<PAGE>   10
adopt, amend or repeal these Bylaws; (6) approve a plan of merger not requiring
shareholder approval; (7) authorize or approve reacquisition of shares, except
according to a formula or method prescribed by the Board of Directors; (8)
authorize or approve the issuance or sale or contract for sale of shares or
determine the designation and relative rights, preferences and limitations of a
class or series of shares except within limits specifically prescribed by the
Board of Directors; or (9) fix the compensation of directors for serving on the
Board of Directors or any committee of the Board of Directors.

         4.13 DIRECTOR RESIGNATIONS. Any director or committee may resign from
his or her office at any time by written notice delivered to the Board of
Directors, the Chairman of the Board or the corporation at its known place of
business. Any such resignation will be effective upon its receipt unless some
later time is therein fixed, and then from that time. The acceptance of a
resignation will not be required to make it effective.



                                   V. OFFICERS

         5.01 NUMBER OF OFFICERS. The officers of the corporation shall be a
President, a Secretary and a Treasurer, each of whom shall be appointed by the
Board of Directors. Such other officers and assistant officers as may be deemed
necessary, including any Vice Presidents, may be appointed by the Board of
Directors. If specifically authorized by the Board of Directors, an officer may
appoint one (1) or more other officers or assistant officers. The same
individual may simultaneously hold more than one (1) office in the corporation.

         5.02 APPOINTMENT AND TERM OF OFFICE. The officers of the corporation
shall be appointed by the Board of Directors for a term as determined by the
Board of Directors. The designation of a specified term grants to the officer no
contract rights, and the Board of Directors can remove the officer at any time
prior to the termination of such term. If no term is specified, an officer of
the corporation shall hold office until her or she resigns or dies or until he
or she is removed in the manner provided by law or in Section 5.03 of this
Article V. The regular election or appointment of officers will take place at
each annual meeting of the Board of Directors, but elections of officers may be
held at any other meeting of the Board.

         5.03 RESIGNATION AND REMOVAL OF OFFICERS. An officer may resign at any
time by delivering written notice to the corporation at its known place of
business. A resignation is effective when the notice is delivered unless the
notice specifies a later effective date or event. Any officer may be removed by
the Board of Directors at any time, with or without


                                      -10-
<PAGE>   11
cause. Such removal shall be without prejudice to the contract rights, if any,
of the person so removed. Appointment of an officer shall not of itself create
contract rights.

         5.04 DUTIES OF OFFICERS. Officers of the corporation shall have
authority to perform such duties as may be prescribed from time to time by law,
in these Bylaws or by the Board of Directors, the President or the superior
officer of any such officer. Each officer of the corporation (in the order
designated herein or by the Board) will be vested with all of the powers and
charged with all of the duties of his or her superior officer in the event of
such superior officer's absence, death or disability.

         5.05 BONDS AND OTHER REQUIREMENTS. The Board of Directors may require
any officer to give bond to the corporation (with sufficient surety and
conditioned for the faithful performance of the duties of his or her office) and
to comply with such other conditions as may from time to time be required of him
or her by the Board of Directors.

         5.06 PRESIDENT. Unless otherwise specified by resolution of the Board
of Directors, the President shall be the principal executive officer of the
corporation and, subject to the control of the Board of Directors, shall
supervise and control all of the business and affairs of the corporation and the
performance by all of its other officers of their respective duties and in
general shall perform all duties incident to the office of President and such
other duties as may be prescribed by the Board of Directors from time to time.
The President shall, when present and in the absence of a Chairman of the Board,
preside at all meetings of shareholders and of the Board of Directors. The
President will be a proper officer to sign on behalf of the corporation any
deed, bill of sale, assignment, option, mortgage, pledge, note, bond, evidence
of indebtedness, application, consent (to service of process or otherwise),
agreement, indenture, contract or other instrument, except in each such case
where the signing and execution thereof shall be expressly delegated by the
Board of Directors or by these Bylaws to some other officer or agent of the
corporation, or shall be required by law to be otherwise signed or executed. The
President may represent the corporation at any meeting of the shareholders or
members of any other corporation, association, partnership, joint venture or
other entity in which the corporation then holds shares of capital stock or has
an interest and may vote such shares of capital stock or other interest in
person or by proxy appointed by him or her, provided that the Board of Directors
may from time to time confer the foregoing authority upon any other person or
persons.

         5.07 VICE-PRESIDENT. If appointed, in the absence of the President or
in the event of his/her death or disability, the Vice-President (or in the event
there be more than one Vice-President, the Vice-Presidents in the order
designated at the time of their election, or in the absence of any such
designation, then in the order of their appointment) shall perform the duties of
the President, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the President. If there is no Vice-President or in
the


                                      -11-
<PAGE>   12
event of the death or disability of all Vice-Presidents, then the Treasurer
shall perform such duties of the President in the event of his or her absence,
death or disability. Each Vice-President will be a proper officer to sign on
behalf of the corporation any deed, bill of sale, assignment, option, mortgage,
pledge, note, bond, evidence of indebtedness, application, consent (to service
of process or otherwise), agreement, indenture, contract or other instrument,
except in each such case where the signing and execution thereof shall be
expressly delegated by the Board of Directors or by these Bylaws to some other
officer or agent of the corporation, or shall be required by law to be otherwise
signed or executed. Any Vice-President may represent the corporation at any
meeting of the shareholders or members of any other corporation, association,
partnership, joint venture or other entity in which the corporation then holds
shares of capital stock or has an interest and may vote such shares of capital
stock or other interest in person or by proxy appointed by him or her, provided
that the Board of Directors may from time to time confer the foregoing authority
upon any other person or persons. A Vice-President shall perform such other
duties as from time to time may be assigned to him/her by the President or the
Board of Directors.

         5.08 SECRETARY. The Secretary shall: (a) keep the minutes of the
proceedings of the shareholders and of the Board of Directors and any committee
of the Board of Directors and all unanimous written consents of the
shareholders, Board of Directors and any committee of the Board of Directors in
one (1) or more books provided for that purpose; (b) see that all notices are
duly given in accordance with the provisions of these Bylaws or as required by
law; (c) be custodian of the corporate records and of any seal of the
corporation; (d) when requested or required, authenticate any records of the
corporation; (e) keep a register of the address of each shareholder which shall
be furnished to the Secretary by such shareholder; and (f) in general perform
all duties assigned to him/her by the President or by the Board of Directors.
Except as may otherwise be specifically provided in a resolution of the Board of
Directors, the Secretary will be a proper officer to take charge of the
corporation's stock transfer books and to compile the voting record pursuant to
Section 3.05 above, and to impress the corporation's seal, if any, on any
instrument signed by the President, any Vice-President or any other duly
authorized person, and to attest to the same. In the absence of the Secretary, a
secretary pro tempore may be chosen by the director or shareholders, as
appropriate, to perform the duties of the Secretary.

         5.09 TREASURER. The Treasurer shall: (a) have charge and custody of and
be responsible for all funds and securities of the corporation; (b) receive and
give receipts for moneys due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the corporation in such
bank, trust companies or other depositories as shall be selected by the Board of
Directors or any proper officer; (c) keep full and accurate accounts of receipts
and disbursements in books and records of the corporation; and (d) in general
perform all of the duties incident to the office of Treasurer and such other
duties as from time to time may be assigned to him/her by the President


                                      -12-
<PAGE>   13
or by the Board of Directors. The Treasurer will render to the President, the
directors and the shareholders at proper times an account of all of his or her
transactions as Treasurer and of the financial condition of the corporation. The
Treasurer shall be responsible for preparing and filing such financial reports,
financial statements and returns as may be required by law.

         5.10 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The Assistant
Secretaries and the Assistant Treasurers, when authorized by the Board of
Directors, may sign with the President or a Vice-President certificates for
shares of the corporation, the issuance of which shall have been authorized by a
resolution of the Board of Directors. The Assistant Secretaries and Assistant
Treasurers, in general, shall perform such duties as shall be assigned to them
by the Secretary or the Treasurer, respectively, or by the President or the
Board of Directors.

         5.11 CHAIRMAN OF THE BOARD. The Board of Directors may elect a Chairman
to serve as a general executive officer of the corporation and, if specifically
designated as such by the Board of Directors, as the chief executive officer of
the corporation. If elected, the Chairman will preside at all meetings of the
Board of Directors and be vested with such other powers and duties as the Board
of Directors may from time to time delegate to him or her.

         5.12 SALARIES. The salaries of the officers of the corporation may be
fixed from time to time by the Board of Directors or (except as to the
President's own) left to the discretion of the President. No officer will be
prevented from receiving a salary by reason of the fact that he or she is also a
director of the corporation.

         5.13 ADDITIONAL APPOINTMENTS. In addition to the officers contemplated
in this Article V, the Board of Directors may appoint other agents of the
corporation with such authority to perform such duties as may be prescribed from
time to time by the Board of Directors.

VI.  CERTIFICATES FOR SHARES AND THEIR TRANSFER

         6.01     CERTIFICATES FOR SHARES.

                  (a) CONTENT. Certificates representing shares of the
corporation shall, at a minimum, state on their face the name of the issuing
corporation and that it is formed under the laws of the State of Arizona, the
name of the person to whom issued, and the number and class of shares and the
designation of the series, if any, the certificate represents. Such certificates
shall be signed (either manually or by facsimile to the extent


                                      -13-
<PAGE>   14
allowable by law) by one or more officers of the corporation as determined by
the Board of Directors or, if no such determination is made, by any of the
Chairman of the Board (if any), the President, any Vice-President, the Secretary
or the Treasurer of the corporation, and may be sealed with a corporate seal or
a facsimile thereof, if any. Each certificate for shares shall be consecutively
numbered or otherwise identified and will exhibit such information as may be
required by law. If a supply of unissued certificates bearing the facsimile
signature of a person remains when that person ceases to hold the office of the
corporation indicated on such certificates or ceases to be the transfer agent or
registrar of the corporation, they may still be issued by the corporation and
countersigned, registered, issued and delivered by the corporation's transfer
agent and/or registrar thereafter, as though such person had continued to hold
the office indicated on such certificate.

                  (b) LEGEND AS TO CLASS OR SERIES. If the corporation is
authorized to issue different classes of shares or different series within a
class, the designations, relative rights, preferences and limitations applicable
to each class and the variations in rights, preferences and limitations
determined for each series (and the authority of the Board of Directors to
determine variations for future series) shall be summarized on the front or back
of each certificate. Alternatively, each certificate may state conspicuously on
its front or back that the corporation will furnish a shareholder this
information upon request in writing and without charge.

                  (c) SHAREHOLDER LIST. The name and address of the person to
whom shares are issued, with the number of shares and date of issue, shall be
entered on the stock transfer books of the corporation.

                  (d) LOST CERTIFICATES. In the event of the loss, theft or
destruction of any certificate representing shares of the corporation or of any
predecessor corporation, the corporation may issue (or, in the case of any such
shares as to which a transfer agent and/or registrar have been appointed, may
direct such transfer agent and/or registrar to countersign, register and issue)
a new certificate, and cause the same to be delivered to the registered owner of
the shares represented thereby; provided that such owner shall have submitted
such evidence showing the circumstances of the alleged loss, theft or
destruction and his, her or its ownership of the certificate as the corporation
considers satisfactory, together with any other facts that the corporation
considers pertinent; and further provided that, if so required by the
corporation, the owner shall provide a bond or other indemnity in form and
amount satisfactory to the corporation (and to its transfer agent and/or
registrar, if applicable).

         6.02 REGISTRATION OF THE TRANSFER OF SHARES. Registration of the
transfer of shares of the corporation shall be made only on the stock transfer
books of the corporation. In order to register a transfer, the record owner
shall surrender the shares to the corporation


                                      -14-
<PAGE>   15
for cancellation, properly endorsed by the appropriate person or persons with
reasonable assurances that the endorsements are genuine and effective. Unless
the corporation has established a procedure by which a beneficial owner of
shares held by a nominee is to be recognized by the corporation as the owner,
the corporation will be entitled to treat the registered owner of any share of
the capital stock of the corporation as the absolute owner thereof and,
accordingly, will not be bound to recognize any beneficial, equitable or other
claim to, or interest in, such share on the part of any other person, whether or
not it has notice thereof, except as may expressly be provided by applicable
law.

         6.03 SHARES WITHOUT CERTIFICATES. The Board of Directors may authorize
the issuance of uncertificated shares by the corporation and may prescribe
procedures for the issuance and registration of transfer thereof and with
respect to such other matters as the Board of Directors shall deem necessary or
appropriate.

                               VII. DISTRIBUTIONS

         Subject to such restrictions or requirements as may be imposed by
applicable law or the corporation's Articles or as may otherwise be binding upon
the corporation, the Board of Directors may from time to time declare, and the
corporation may pay or make, dividends or other distributions to its
shareholders.

                              VIII. CORPORATE SEAL

         The Board of Directors may provide for a corporate seal of the
corporation that will have inscribed thereon any designation, including the name
of the corporation, Arizona as the state of incorporation, the year of
incorporation and the words "Corporate Seal".

                                 IX. AMENDMENTS

         The corporation's Board of Directors may amend or repeal the
corporation's Bylaws unless:

                  (a)      The Articles or the Arizona Business Corporation Act
                           reserve this power exclusively to the shareholders in
                           whole or part; or

                  (b)      The shareholders, in adopting, amending or repealing
                           a particular bylaw, provide expressly that the Board
                           of Directors may not amend or repeal that bylaw.


                                      -15-
<PAGE>   16
The corporation's shareholders may amend or repeal the corporation's Bylaws even
though the Bylaws may also be amended or repealed by its Board of Directors.

                                    * * * * *

                                  CERTIFICATION

                  The undersigned Secretary of Monterey Homes Construction, Inc.
hereby certifies that the foregoing Bylaws of the Corporation were duly adopted
pursuant to the Action by Unanimous Consent of the Board of Directors in Lieu of
First Meeting dated March , 1997.

                                    ____________________________
                                    Larry W. Seay





                                      -16-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.9
<SEQUENCE>7
<FILENAME>p65173ex3-9.txt
<DESCRIPTION>EX-3.9
<TEXT>

<PAGE>   1

                                                                     Exhibit 3.9


                            ARTICLES OF ORGANIZATION
                                       OF
                               CHANDLER 110, LLC,
                      AN ARIZONA LIMITED LIABILITY COMPANY


         The undersigned has executed this document for the purpose of forming a
limited liability company under the laws of Arizona and adopts the following
Articles of Organization.

         1. NAME. The name of the Company is: CHANDLER 110, LLC.

         2. PURPOSE AND POWERS. The Company is organized for the transaction of
any and all lawful business for which a limited liability company may be formed
under the laws of the State of Arizona, including, but not limited to, the
acquisition, development, ownership and sale of real property.

         3. REGISTERED OFFICE. The Company's registered office is: 6613 N.
Scottsdale Road, Suite 200, Scottsdale, Arizona 85250.

         4. STATUTORY AGENT. The name and address of the agent for service of
process is: C. Timothy White, Esq., 1850 North Central Avenue, Suite 500,
Phoenix, Arizona 85004.

                  The agent, by signing the attached document, accepts the
appointment as agent.

         5. DURATION. The latest date the Company can dissolve is December 31,
2035.

         6. MEMBERS. The name and mailing address of the sole member of the
Company is:

                  Monterey Homes Construction, Inc.
                  6613 N. Scottsdale Road, Suite 200
                  Scottsdale, AZ 85250

         7. MANAGEMENT. Management of the Company is reserved to its sole
member.


         DATED this 11th day of September, 1998.




                                               ---------------------------------
                                               C. Timothy White
<PAGE>   2
                                STATE OF ARIZONA
                  ACCEPTANCE OF APPOINTMENT AS STATUTORY AGENT
                                       OF
                               CHANDLER 110, LLC,
                      AN ARIZONA LIMITED LIABILITY COMPANY



To:      Arizona Corporation Commission
         Incorporating Division
         1300 West Washington
         Phoenix, Arizona  85007


         Please be advised that C. Timothy White, Esq., hereby accepts and
acknowledges appointment as statutory agent for service of process upon Chandler
110, LLC, an Arizona limited liability company, and consents to act in that
capacity until his removal or resignation.

         DATED this 11th day of September, 1998.



                                               ---------------------------------
                                               C. Timothy White

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.9.1
<SEQUENCE>8
<FILENAME>p65173ex3-9_1.txt
<DESCRIPTION>EX-3.9.1
<TEXT>

<PAGE>   1

                                                                   Exhibit 3.9.1

                                    AMENDMENT
                                       TO
                            ARTICLES OF ORGANIZATION
                                       OF
                                CHANDLER 110, LLC


         The undersigned has executed this document for the purpose of amending
the Articles of Organization for Chandler 110, LLC, LLC pursuant to A.R.S.
Section 29-633:

         1. NAME. The name of the Company is: Chandler 110, LLC

         2. FILING DATE. The Articles of Organization were filed with the
Arizona Corporation Commission on September 11, 1998.

         3. AMENDMENT. Article 1, Name, is hereby amended in its entirety as
follows:

1.       NAME. The name of the Company is: MERITAGE PASEO CONSTRUCTION, LLC.


         DATED this 28th day of September, 2000.

                                         MONTEREY HOMES CONSTRUCTION, INC.,
                                         an Arizona corporation, Its sole Member



                                         By
                                           ------------------------------------

                                         Its
                                           ------------------------------------
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.10
<SEQUENCE>9
<FILENAME>p65173ex3-10.txt
<DESCRIPTION>EX-3.10
<TEXT>

<PAGE>   1
                                                                    Exhibit 3.10


                            ARTICLES OF INCORPORATION
                                       OF
                         MERITAGE HOMES OF ARIZONA, INC.


         FIRST: The name of this corporation is MERITAGE HOMES OF ARIZONA, INC.

         SECOND: The purpose for which the corporation is organized is the
transaction of any and all lawful business for which corporations may be
incorporated under the laws of the State of Arizona, as they may be amended from
time to time. The character of business which the corporation initially intends
actually to conduct in the State of Arizona is the sale of homes.

         THIRD: The aggregate number of shares that the corporation shall have
authority to issue is one thousand (1000) common shares, all of which shares
shall be of a single class.

         FOURTH: The name and address of the initial statutory agent of the
corporation is C T Corporation System, 3225 N. Central Avenue, Suite 1601,
Phoenix, Arizona 85012. The street address of the initial known place of
business of the corporation in Arizona is 6613 N. Scottsdale Road, Suite 200,
Scottsdale, Arizona 85250.

         FIFTH: The number of directors constituting the initial board of
directors of the corporation is two (2). The names and addresses of the persons
who are to serve as directors until the first annual meeting of shareholders, or
until their successors are elected and qualified, are:


                  Name                  Address

                  John R. Landon        4050 W. Park Boulevard
                                        Plano, TX 75093-3839

                  Steven J. Hilton      6613 North Scottsdale Road, Suite 200
                                        Scottsdale, Arizona 85250

The number of persons to serve on the board of directors thereafter shall be
fixed by the bylaws of the corporation.

         SIXTH: The name and address of the incorporator is Larry W. Seay, 6613
N. Scottsdale Road, Suite 200, Scottsdale, Arizona 85250.

         SEVENTH: The liability of a director or former director to the
corporation or its shareholders shall be eliminated to the fullest extent
permitted by Section 10-202.B.1 of the Arizona Revised Statutes.

         If the Arizona Business Corporation Act is amended to authorize
corporate action further eliminating or limiting the liability of directors, the
liability of a director of the corporation shall be eliminated or limited to the
fullest extent permitted by Arizona Business Corporation Act, as amended.


                                       -1-
<PAGE>   2
         Any repeal or modification of this Article Seventh shall not adversely
affect any right or protection of a director of the corporation existing
hereunder with respect to any act or omission occurring prior to or at the time
of such repeal or modification.

         The provisions of this Article Seventh shall not be deemed to limit or
preclude indemnification of a director by the corporation for any liability of a
director which has not been eliminated by the provisions of this Article
Seventh.

         DATED:   November ____, 2000


                                        ________________________________________
                                        Larry W. Seay, Incorporator


                                       -2-
<PAGE>   3
                                STATE OF ARIZONA
                            ACCEPTANCE OF APPOINTMENT
                               AS STATUTORY AGENT
                                       OF
                        MERITAGE HOMES OF ARIZONA, INC.,
                             AN ARIZONA CORPORATION


To:      Arizona Corporation Commission
         Incorporating Division
         1300 West Washington
         Phoenix, Arizona  85007


         Please be advised that C T Corporation System, a Delaware corporation
doing business in Arizona, and located at 3225 N. Central Avenue, Suite 1601,
Phoenix, Arizona 85012, hereby accepts and acknowledges its appointment as
statutory agent for service of process upon Meritage Homes of Arizona, Inc., an
Arizona corporation, and consents to act in that capacity until removal or
resignation.

         The undersigned hereby certifies that it has been a corporation in good
standing in the State of Arizona for a period in excess of three years.

                  DATED this _____ day of November, 2000.


                                 C T CORPORATION SYSTEM



                                 By
                                   ------------------------------------------

                                 Its
                                    -----------------------------------------

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.11
<SEQUENCE>10
<FILENAME>p65173ex3-11.txt
<DESCRIPTION>EX-3.11
<TEXT>

<PAGE>   1
                                                                    Exhibit 3.11


                                     BY-LAWS
                                       OF
                         MERITAGE HOMES OF ARIZONA, INC.


                 I. REFERENCES TO CERTAIN TERMS AND CONSTRUCTION

         1.01 CERTAIN REFERENCES. Any reference herein made to law will be
deemed to refer to the law of the State of Arizona, including any applicable
provision of Chapters 1 through 17 of Title 10 of the Arizona Revised Statutes,
or any successor statute, as from time to time amended and in effect (sometimes
referred to herein as the "Arizona Business Corporation Act"). Any reference
herein made to the corporation's Articles will be deemed to refer to its
Articles of Incorporation and all amendments thereto as at any given time on
file with the Arizona Corporation Commission. Except as otherwise required by
law and subject to any procedures established by the corporation pursuant to
Arizona Revised Statutes Section 10- 723, the term "shareholder as used herein
shall mean one who is a holder of record of shares of the corporation.
References to specific sections of law herein made shall be deemed to refer to
such sections, or any comparable successor provisions, as from time to time
amended and in effect.

         1.02 SENIORITY. The law and the Articles (in that order of precedence)
will in all respects be considered senior and superior to these Bylaws, with any
inconsistency to be resolved in favor of the law and such Articles (in that
order of precedence), and with these Bylaws to be deemed automatically amended
from time to time to eliminate any such inconsistency which may then exist.

         1.03 COMPUTATION OF TIME. The time during which an act is required to
be done, including the time for the giving of any required notice herein, shall
be computed by excluding the first day or hour, as the case may be, and
including the last day or hour.

                                   II. OFFICES

         2.01 PRINCIPAL OFFICE. The principal office of the corporation shall be
located at any place either within or outside the State of Arizona as designed
in the corporation's most current Annual Report filed with the Arizona
Corporation Commission or in any other document executed and delivered to the
Arizona Corporation Commission for filing. If a principal office is not so
designated, the principal office of the corporation shall mean the known place
of business of the corporation. The corporation may have such other offices,
either within or without the State of Arizona, as the Board of Directors may
designate or as the business of the corporation may require from time to time.

         2.02 KNOWN PLACE OF BUSINESS. A known place of business of the
corporation shall be located within the State of Arizona and may be, but need
not be, the address of the statutory agent of the corporation. The corporation
may change its known place of
<PAGE>   2
business from time to time in accordance with the relevant provisions of the
Arizona Business Corporation Act.

                                III. SHAREHOLDERS

         3.01 ANNUAL SHAREHOLDER MEETING. The annual meeting of the shareholders
shall be held on such date within the month of June (or at such other date
within each calendar year) as may be fixed from time to time by the Board of
Directors for the purpose of electing directors and for the transaction of such
other business as may properly come before the meeting.

         3.02 SPECIAL SHAREHOLDER MEETINGS. Special meetings of the shareholders
may be held whenever and wherever, either within or without the State of
Arizona, called for by or at the direction of the Chairman of the Board, the
President or the Board of Directors.

         3.03 NOTICE OF SHAREHOLDERS MEETINGS.

                  (a) REQUIRED NOTICE. Notice stating the place, day and hour of
any annual or special shareholders meeting shall be given not less than ten (10)
nor more than sixty (60) days before the date of the meeting by or at the
direction of the person or persons calling the meeting, to each shareholder
entitled to vote at such meeting and to any other shareholder entitled to
receive notice of the meeting by law or the Articles. Notices to shareholders
shall be given in accordance with, and shall be deemed to be effective at the
time and in the manner described in, Section 10-141 of the Arizona Revised
Statutes. If no designation is made of the place at which an annual or special
meeting will be held in the notice for such meeting, the place of the meeting
will be at the principal place of business of the corporation.

                  (b) ADJOURNED MEETING. If any shareholders meeting is
adjourned to a different date, time or place, notice need not be given of the
new date, time and place if the new date, time and place are announced at the
meeting before adjournment. But if a new record date for the adjourned meeting
is fixed or must be fixed in accordance with law or these Bylaws, then notice of
the adjourned meeting shall be given to those persons who are shareholders as of
the new record date and who are entitled to such notice pursuant to Section
3.03(a) above.

                  (c) WAIVER OF NOTICE. Any shareholder may waive notice of a
meeting (or any notice of any other action required to be given by the Arizona
Business Corporation Act, the corporation's Articles or these Bylaws) at any
time before, during or after the meeting or other action, by a writing signed by
the shareholder entitled to the notice. Each such waiver shall be delivered to
the corporation for inclusion in the minutes or filing with the corporate
records. Under certain circumstances, a shareholder's attendance at a


                                      -2-
<PAGE>   3
meeting may constitute a waiver of notice, unless the shareholder takes certain
actions to preserve his/her objections as described in the Arizona Business
Corporation Act.

                  (d) CONTENTS OF NOTICE. The notice of each special
shareholders meeting shall include a description of the purpose or purposes for
which the meeting is called. Except as required by law or the corporation's
Articles, the notice of an annual shareholders meeting need not include a
description of the purpose or purposes for which the meeting is called.

         3.04 FIXING OF RECORD DATE. For the purpose of determining shareholders
of any voting group entitled to notice of or to vote at any meeting of
shareholders, or shareholders entitled to receive any distribution or dividend,
or in order to make a determination of shareholders for any other proper
purpose, the Board of Directors may fix in advance a date as the record date.
Such record date shall not be more than seventy (70) days prior to the date on
which the particular action requiring such determination of shareholders is to
be taken. If no record date is so fixed by the Board of Directors, the record
date for the determination of shareholders shall be as provided in the Arizona
Business Corporation Act.

                  When a determination of shareholders entitled to notice of or
to vote at any meeting of shareholders has been made as provided in this
Section, such determination shall apply to any adjournment thereof, unless the
Board of Directors fixes a new record date, which it must do if the meeting is
adjourned to a date more than one hundred twenty (120) days after the date fixed
for the original meeting.

         3.05 SHAREHOLDER LIST. The corporation shall make a complete record of
the shareholders entitled to notice of each meeting of shareholders thereof,
arranged in alphabetical order, listing the address and the number of shares
held by each. The list shall be arranged by voting group and within each voting
group by class or series of shares. The shareholder list shall be available for
inspection by any shareholder, beginning two (2) business days after notice of
the meeting is given for which the list was prepared and continuing through the
meeting. The list shall be available at the corporation's principal office or at
another place identified in the meeting notice in the city where the meeting is
to be held. Failure to comply with this section shall not affect the validity of
any action taken at the meeting.

         3.06 SHAREHOLDER QUORUM AND VOTING REQUIREMENTS.

                  (a) If the Articles or the Arizona Business Corporation Act
provide for voting by a single voting group on a matter, action on that matter
is taken when voted upon by that voting group.


                                      -3-
<PAGE>   4
                  (b) If the Articles or the Arizona Business Corporation Act
provide for voting by two (2) or more voting groups on a matter, action on that
matter is taken when voted upon by each of those voting groups counted
separately.

                  (c) Shares entitled to vote as a separate voting group may
take action on a matter at a meeting only if a quorum of those shares exists
with respect to that matter. Unless the Articles or the Arizona Business
Corporation Act provide otherwise, a majority of the votes entitled to be cast
on the matter by the voting group constitutes a quorum of that voting group for
action on that matter.

                  (d) Once a share is represented for any purpose at a meeting,
it is deemed present for quorum purposes for the remainder of the meeting and
for any adjournment of that meeting, unless a new record date is or must be set
for that adjourned meeting.

                  (e) If a quorum exists, action on a matter (other than the
election of directors) by a voting group is approved if the votes cast within
the voting group favoring the action exceed the votes cast opposing the action,
unless the Articles or the Arizona Business Corporation Act require a greater
number of affirmative votes.

                  (f) Voting will be by ballot on any question as to which a
ballot vote is demanded prior to the time the voting begins by any person
entitled to vote on such question; otherwise, a voice vote will suffice. No
ballot or change of vote will be accepted after the polls have been declared
closed following the ending of the announced time for voting.

         3.07 PROXIES. At all meetings of shareholders, a shareholder may vote
in person or by proxy duly executed in writing by the shareholder or the
shareholder's duly authorized attorney-in-fact. Such proxy shall comply with law
and shall be filed with the Secretary of the corporation or other person
authorized to tabulate votes before or at the time of the meeting. No proxy
shall be valid after eleven (11) months from the date of its execution unless
otherwise provided in the proxy. The burden of proving the validity of any
undated, irrevocable or otherwise contested proxy at a meeting of the
shareholders will rest with the person seeking to exercise the same. A facsimile
appearing to have been transmitted by a shareholder or by such shareholder's
duly authorized attorney-in-fact may be accepted as a sufficiently written and
executed proxy.

         3.08 VOTING OF SHARES. Unless otherwise provided in the Articles or the
Arizona Business Corporation Act, each outstanding share entitled to vote shall
be entitled to one (1) vote upon each matter submitted to a vote at a meeting of
shareholders.

         3.09 CUMULATIVE VOTING. At all elections for directors, each
shareholder shall be entitled to as many votes as shall equal the number of its
shares of stock multiplied by the number of directors to be elected, and it may
cast all of such votes for a single director or


                                      -4-
<PAGE>   5
may distribute them among the number to be voted for, or any two or more of
them, as it may see fit.

         3.10 ELECTION INSPECTORS. The Board of Directors, in advance of any
meeting of the shareholders, may appoint an election inspector or inspectors to
act at such meeting (and at any adjournment thereof). If an election inspector
or inspectors are not so appointed, the chairman of the meeting may, or upon
request of any person entitled to vote at the meeting will, make such
appointment. If any person appointed as an inspector fails to appear or to act,
a substitute may be appointed by the chairman of the meeting. If appointed, the
election inspector or inspectors (acting through a majority of them if there be
more than one) will determine the number of shares outstanding, the
authenticity, validity and effect of proxies and the number of shares
represented at the meeting in person and by proxy; will receive and count votes,
ballots and consents and announce the results thereof; will hear and determine
all challenges and questions pertaining to proxies and voting; and, in general,
will perform such acts as may be proper to conduct elections and voting with
complete fairness to all shareholders. No such election inspector need be a
shareholder of the corporation.

         3.11 ORGANIZATION AND CONDUCT OF MEETINGS. Each meeting of the
shareholders will be called to order and thereafter chaired by the Chairman of
the Board of Directors if there is one, or, if not or if the Chairman of the
Board is absent or so requests, then by the President, or if both the Chairman
and the President are unavailable, then by such officer of the corporation or
such shareholder as may be appointed by the Board of Directors. The
corporation's Secretary or, in his or her absence, an Assistant Secretary will
act as secretary of each meeting of the shareholders. If neither the Secretary
nor an Assistant Secretary is in attendance, the chairman of the meeting may
appoint any person (whether a shareholder or not) to act as secretary for the
meeting. After calling a meeting to order, the chairman thereof may require the
registration of all shareholders intending to vote in person and the filing of
all proxies with the election inspector or inspectors, if one or more have been
appointed (or, if not, with the secretary of the meeting). After the announced
time for such filing of proxies has ended, no further proxies or changes,
substitutions or revocations of proxies will be accepted. If directors are to be
elected, a tabulation of the proxies so filed will, if any person entitled to
vote in such election so requests, be announced at the meeting (or adjournment
thereof) prior to the closing of the election polls. Absent a showing of bad
faith on his or her part, the chairman of a meeting will, among other things,
have absolute authority to fix the period of time allowed for the registration
of shareholders and the filing of proxies, to determine the order of business to
be conducted at such meeting and to establish reasonable rules for expediting
the business of the meeting and preserving the orderly conduct thereof
(including any informal or question and answer portions thereof).

         3.12 SHAREHOLDER APPROVAL OR RATIFICATION. The Board of Directors may
submit any contract or act for approval or ratification of the shareholders at a
duly constituted meeting of the shareholders. Except as otherwise required by
law, if any contract or act so


                                      -5-
<PAGE>   6
submitted is approved or ratified by a majority of the votes cast thereon at
such meeting, the same will be valid and as binding upon the corporation and all
of its shareholders as it would be if it were the act of its shareholders.

         3.13 INFORMALITIES AND IRREGULARITIES. All informalities or
irregularities in any call or notice of a meeting of the shareholders or in the
areas of credentials, proxies, quorums, voting and similar matters will be
deemed waived if no objection is made at the meeting.

         3.14 SHAREHOLDER ACTION BY WRITTEN CONSENT. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if one (1) or more consents in writing, setting forth the action so
taken shall be signed by all of the shareholders entitled to vote with respect
to the subject matter thereof. The consents shall be delivered to the
corporation for inclusion in the minutes or filing with the corporate record.
Action taken by consent is effective when the last shareholder signs the consent
unless the consent specifies a different effective date, except that if, by law,
the action to be taken requires that notice be given to shareholders who are not
entitled to vote on the matter, the effective date shall not be prior to ten
(10) days after which the corporation shall give such shareholders written
notice of the proposed action, which notice shall contain or be accompanied by
the same material that would have been required if a formal meeting had been
called to consider the action. A consent signed under this section has the
effect of a meeting vote and may be described as such in any document.

                             IV. BOARD OF DIRECTORS

         4.01 GENERAL POWERS. All corporate powers shall be exercised by or
under the authority of, and the business and affairs of the corporation shall be
managed under the direction of, the Board of Directors.

         4.02 NUMBER, TENURE AND QUALIFICATION OF DIRECTORS. Unless otherwise
provided in the Articles of Incorporation, the authorized number of directors
shall be not less than one (1) nor more than five (5). The number of directors
in office from time to time shall be within the limits specified above, as
prescribed from time to time by resolution adopted by either the shareholders or
the Board of Directors. The directors will regularly be elected at each annual
meeting of the shareholders, but directors may be elected at any other meeting
of the shareholders. Each director shall hold office until the annual meeting of
shareholders following his/her election, subject to his/her earlier resignation
or removal. However, if a director's term expires, he/she shall continue to
serve until his/her successor shall have been elected and qualified, until
his/her resignation or removal or until there is a decrease in the number of
directors. Unless required by the Articles, directors do not need to be
residents of the State of Arizona or shareholders of the corporation.

         4.03 REGULAR MEETINGS OF THE BOARD OF DIRECTORS. A regular annual
meeting of the Board of Directors is to be held as soon as practicable after the
adjournment of each


                                      -6-
<PAGE>   7
annual meeting of the shareholders, either at the place of the shareholders
meeting or at such other place as the directors elected at the shareholders
meeting may have been informed of at or prior to the time of their election.
Additional regular meetings may be held at regular intervals at such places and
at such times as the Board of Directors may determine.

         4.04 SPECIAL MEETINGS OF THE BOARD OF DIRECTORS. Special meetings of
the Board of Directors may be held whenever and wherever called for by the
Chairman of the Board, the President or the number of directors that would be
required to constitute a quorum.

         4.05 NOTICE OF AND WAIVER OF NOTICE FOR DIRECTORS MEETINGS. No notice
need be given of regular meetings of the Board of Directors. Notice of the time
and place of any special directors meeting shall be given at least forty-eight
(48) hours prior thereto. Notice shall be given in accordance with and shall be
deemed to be effective at the time and in the manner described in Arizona
Revised Statutes Section 10-141. Any director may give notice of any meeting and
any adjournment thereof at any time before, during or after it is held.

Except as provided in the next sentence below, the waiver must be in writing,
signed by the director entitled to the notice and filed with the minutes or
corporate records. The attendance of a director at or participation of a
director in a meeting shall constitute a waiver of notice of such meeting,
unless the director at the beginning of the meeting (or promptly upon his/her
arrival) objects to holding the meeting or transacting business at the meeting
and does not thereafter vote for or assent to action taken at the meeting.

         4.06 DIRECTOR QUORUM. A majority of the number of directors prescribed
according to Section 4.02 above or, if no number is so prescribed, the number in
office immediately before the meeting begins, shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors unless the
Articles require a greater number.

         4.07 DIRECTORS, MANNER OF ACTING.

                  (a) If a quorum is present when a vote is taken, the
affirmative vote of a majority of the directors present shall be the act of the
Board of Directors unless the Articles require a greater percentage.

                  (b) Unless the Articles provide otherwise, any or all
directors may participate in a regular or special meeting by, or conduct the
meeting through the use of, any means of communication by which all directors
participating may simultaneously hear each other during the meeting, in which
case, any required notice of the meeting may generally describe the arrangements
(rather than or in addition to the place) for the holding thereof. A director
participating in a meeting by this means is deemed to be present in person at
the meeting.


                                      -7-
<PAGE>   8
                  (c) A director who is present at a meeting of the Board of
Directors or a committee of the Board of Directors when corporate action is
taken is deemed to have assented to the action taken unless: (1) the director
objects at the beginning of the meeting (or promptly upon his/her arrival) to
holding it or transacting business at the meeting; or (2) his/her dissent or
abstention from the action taken is entered in the minutes of the meeting; or
(3) he/she delivers written notice of his/her dissent or abstention to the
presiding officer of the meeting before its adjournment or to the corporation
before 5:00 pm. on the next business day after the meeting. The right of dissent
or abstention is not available to a director who votes in favor of the action
taken.

         4.08 DIRECTOR ACTION WITHOUT A MEETING. Unless the Articles provide
otherwise, any action required or permitted to be taken by the Board of
Directors at a meeting may be taken without a meeting if the action is taken by
unanimous written consent of the Board of Directors as evidenced by one (1) or
more written consents describing the action taken, signed by each director and
filed with the minutes or corporate records. Action taken by consent is
effective when the last director signs the consent, unless the consent specifies
a different effective date. A signed consent has the effect of a meeting vote
and may be described as such in any document.

         4.09 REMOVAL OF DIRECTORS BY SHAREHOLDERS. The shareholders may remove
one (1) or more directors at a meeting called for that purpose if notice has
been given that a purpose of the meeting is such removal. The removal may be
with or without cause unless the Articles provide that directors may only be
removed with cause. If a director is elected by a voting group of shareholders,
only the shareholders of that voting group may participate in a shareholder vote
to remove him/her. If less than the entire Board of Directors is to be removed,
a director may not be removed if the number of votes sufficient to elect the
director under cumulative voting is voted against the director's removal.

         4.10 BOARD OF DIRECTORS.

                  (a) Unless the Articles provide otherwise, if a vacancy occurs
on the Board of Directors, including a vacancy resulting from an increase in the
number of directors, either the shareholders or the Board of Directors may fill
the vacancy.

                  (b) If the vacant office was held by a director elected by a
voting group of shareholders, only the holders of that voting group are entitled
to vote to fill the vacancy if it is filled by the shareholders.

                  (c) A vacancy that will occur at a specific later date (by
reason of resignation effective at a later date) may be filled before the
vacancy occurs, but the new director may not take office until the vacancy
occurs.


                                      -8-
<PAGE>   9
                  (d) The term of a director elected to fill a vacancy expires
at the next shareholders meeting at which directors are elected.

         4.11 DIRECTOR COMPENSATION. Unless otherwise provided in the Articles
by resolution of the Board of Directors, each director may be paid his/her
expenses, if any, of attendance at each meeting of the Board of Directors or any
committee thereof, and may be paid a stated salary as director or a fixed sum
for attendance at each meeting of the Board of Directors or any committee
thereof, or both. No such payment shall preclude any director from serving the
corporation in any capacity and receiving compensation therefor.

         4.12 DIRECTOR COMMITTEES.

                  (a) CREATION OF COMMITTEES. Unless the Articles provide
otherwise, the Board of Directors may create one (1) or more committees and
appoint members of the Board of Directors to serve on them. Each committee shall
have one (1) or more members, who serve at the pleasure of the Board of
Directors.

                  (b) SELECTION OF MEMBERS. The creation of a committee and
appointment of members to it shall be approved by the greater of (1) a majority
of all the directors in office when the action is taken or (2) the number of
directors required by the Articles to take such action.

                  (c) REQUIRED PROCEDURES. Sections 4.03 through 4.08 of this
Article IV, which govern meetings, action without meetings, notice and waiver of
notice and quorum and voting requirements of the Board of Directors, apply to
committees and their members.

                  (d) AUTHORITY. Unless limited by the Articles, each committee
may exercise those aspects of the authority of the Board of Directors which the
Board of Directors confers upon such committee in the resolution creating the
committee; provided, however, that a committee may not: (1) authorize
distributions; (2) approve or propose to shareholders action that requires
shareholder approval under the Arizona Business Corporation Act; (3) fill
vacancies on the Board of Directors or on any of its committees; (4) amend the
Articles of Incorporation without shareholder action as provided by law; (5)
adopt, amend or repeal these Bylaws; (6) approve a plan of merger not requiring
shareholder approval; (7) authorize or approve reacquisition of shares, except
according to a formula or method prescribed by the Board of Directors; (8)
authorize or approve the issuance or sale or contract for sale of shares or
determine the designation and relative rights, preferences and limitations of a
class or series of shares except within limits specifically prescribed by the
Board of Directors; or (9) fix the compensation of directors for serving on the
Board of Directors or any committee of the Board of Directors.

         4.13 DIRECTOR RESIGNATIONS. Any director or committee may resign from
his or her office at any time by written notice delivered to the Board of
Directors, the Chairman of the


                                      -9-
<PAGE>   10
Board or the corporation at its known place of business. Any such resignation
will be effective upon its receipt unless some later time is therein fixed, and
then from that time. The acceptance of a resignation will not be required to
make it effective.

                                   V. OFFICERS

         5.01 NUMBER OF OFFICERS. The officers of the corporation shall be a
President, a Secretary and a Treasurer, each of whom shall be appointed by the
Board of Directors. Such other officers and assistant officers as may be deemed
necessary, including any Vice Presidents, may be appointed by the Board of
Directors. If specifically authorized by the Board of Directors, an officer may
appoint one (1) or more other officers or assistant officers. The same
individual may simultaneously hold more than one (1) office in the corporation.

         5.02 APPOINTMENT AND TERM OF OFFICE. The officers of the corporation
shall be appointed by the Board of Directors for a term as determined by the
Board of Directors. The designation of a specified term grants to the officer no
contract rights, and the Board of Directors can remove the officer at any time
prior to the termination of such term. If no term is specified, an officer of
the corporation shall hold office until her or she resigns or dies or until he
or she is removed in the manner provided by law or in Section 5.03 of this
Article V. The regular election or appointment of officers will take place at
each annual meeting of the Board of Directors, but elections of officers may be
held at any other meeting of the Board.

         5.03 RESIGNATION AND REMOVAL OF OFFICERS. An officer may resign at any
time by delivering written notice to the corporation at its known place of
business. A resignation is effective when the notice is delivered unless the
notice specifies a later effective date or event. Any officer may be removed by
the Board of Directors at any time, with or without cause. Such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Appointment of an officer shall not of itself create contract rights.

         5.04 DUTIES OF OFFICERS. Officers of the corporation shall have
authority to perform such duties as may be prescribed from time to time by law,
in these Bylaws or by the Board of Directors, the President or the superior
officer of any such officer. Each officer of the corporation (in the order
designated herein or by the Board) will be vested with all of the powers and
charged with all of the duties of his or her superior officer in the event of
such superior officer's absence, death or disability.

         5.05 BONDS AND OTHER REQUIREMENTS. The Board of Directors may require
any officer to give bond to the corporation (with sufficient surety and
conditioned for the faithful performance of the duties of his or her office) and
to comply with such other conditions as may from time to time be required of him
or her by the Board of Directors.


                                      -10-
<PAGE>   11
         5.06 PRESIDENT. Unless otherwise specified by resolution of the Board
of Directors, the President shall be the principal executive officer of the
corporation and, subject to the control of the Board of Directors, shall
supervise and control all of the business and affairs of the corporation and the
performance by all of its other officers of their respective duties and in
general shall perform all duties incident to the office of President and such
other duties as may be prescribed by the Board of Directors from time to time.
The President shall, when present and in the absence of a Chairman of the Board,
preside at all meetings of shareholders and of the Board of Directors. The
President will be a proper officer to sign on behalf of the corporation any
deed, bill of sale, assignment, option, mortgage, pledge, note, bond, evidence
of indebtedness, application, consent (to service of process or otherwise),
agreement, indenture, contract or other instrument, except in each such case
where the signing and execution thereof shall be expressly delegated by the
Board of Directors or by these Bylaws to some other officer or agent of the
corporation, or shall be required by law to be otherwise signed or executed. The
President may represent the corporation at any meeting of the shareholders or
members of any other corporation, association, partnership, joint venture or
other entity in which the corporation then holds shares of capital stock or has
an interest and may vote such shares of capital stock or other interest in
person or by proxy appointed by him or her, provided that the Board of Directors
may from time to time confer the foregoing authority upon any other person or
persons.

         5.07 VICE-PRESIDENT. If appointed, in the absence of the President or
in the event of his/her death or disability, the Vice-President (or in the event
there be more than one Vice- President, the Vice-Presidents in the order
designated at the time of their election, or in the absence of any such
designation, then in the order of their appointment) shall perform the duties of
the President, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the President. If there is no Vice-President or in
the event of the death or disability of all Vice-Presidents, then the Treasurer
shall perform such duties of the President in the event of his or her absence,
death or disability. Each Vice-President will be a proper officer to sign on
behalf of the corporation any deed, bill of sale, assignment, option, mortgage,
pledge, note, bond, evidence of indebtedness, application, consent (to service
of process or otherwise), agreement, indenture, contract or other instrument,
except in each such case where the signing and execution thereof shall be
expressly delegated by the Board of Directors or by these Bylaws to some other
officer or agent of the corporation, or shall be required by law to be otherwise
signed or executed. Any Vice-President may represent the corporation at any
meeting of the shareholders or members of any other corporation, association,
partnership, joint venture or other entity in which the corporation then holds
shares of capital stock or has an interest and may vote such shares of capital
stock or other interest in person or by proxy appointed by him or her, provided
that the Board of Directors may from time to time confer the foregoing authority
upon any other person or persons. A Vice-President shall perform such other
duties as from time to time may be assigned to him/her by the President or the
Board of Directors.


                                      -11-
<PAGE>   12
         5.08 SECRETARY. The Secretary shall: (a) keep the minutes of the
proceedings of the shareholders and of the Board of Directors and any committee
of the Board of Directors and all unanimous written consents of the
shareholders, Board of Directors and any committee of the Board of Directors in
one (1) or more books provided for that purpose; (b) see that all notices are
duly given in accordance with the provisions of these Bylaws or as required by
law; (c) be custodian of the corporate records and of any seal of the
corporation; (d) when requested or required, authenticate any records of the
corporation; (e) keep a register of the address of each shareholder which shall
be furnished to the Secretary by such shareholder; and (f) in general perform
all duties assigned to him/her by the President or by the Board of Directors.
Except as may otherwise be specifically provided in a resolution of the Board of
Directors, the Secretary will be a proper officer to take charge of the
corporation's stock transfer books and to compile the voting record pursuant to
Section 3.05 above, and to impress the corporation's seal, if any, on any
instrument signed by the President, any Vice- President or any other duly
authorized person, and to attest to the same. In the absence of the Secretary, a
secretary pro tempore may be chosen by the director or shareholders, as
appropriate, to perform the duties of the Secretary.

         5.09 TREASURER. The Treasurer shall: (a) have charge and custody of and
be responsible for all funds and securities of the corporation; (b) receive and
give receipts for moneys due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the corporation in such
bank, trust companies or other depositories as shall be selected by the Board of
Directors or any proper officer; (c) keep full and accurate accounts of receipts
and disbursements in books and records of the corporation; and (d) in general
perform all of the duties incident to the office of Treasurer and such other
duties as from time to time may be assigned to him/her by the President or by
the Board of Directors. The Treasurer will render to the President, the
directors and the shareholders at proper times an account of all of his or her
transactions as Treasurer and of the financial condition of the corporation. The
Treasurer shall be responsible for preparing and filing such financial reports,
financial statements and returns as may be required by law.

         5.10 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The Assistant
Secretaries and the Assistant Treasurers, when authorized by the Board of
Directors, may sign with the President or a Vice-President certificates for
shares of the corporation, the issuance of which shall have been authorized by a
resolution of the Board of Directors. The Assistant Secretaries and Assistant
Treasurers, in general, shall perform such duties as shall be assigned to them
by the Secretary or the Treasurer, respectively, or by the President or the
Board of Directors.

         5.11 CHAIRMAN OF THE BOARD. The Board of Directors may elect a Chairman
to serve as a general executive officer of the corporation and, if specifically
designated as such by the Board of Directors, as the chief executive officer of
the corporation. If elected, the


                                      -12-
<PAGE>   13
Chairman will preside at all meetings of the Board of Directors and be vested
with such other powers and duties as the Board of Directors may from time to
time delegate to him or her.

         5.12 SALARIES. The salaries of the officers of the corporation may be
fixed from time to time by the Board of Directors or (except as to the
President's own) left to the discretion of the President. No officer will be
prevented from receiving a salary by reason of the fact that he or she is also a
director of the corporation.

         5.13 ADDITIONAL APPOINTMENTS. In addition to the officers contemplated
in this Article V, the Board of Directors may appoint other agents of the
corporation with such authority to perform such duties as may be prescribed from
time to time by the Board of Directors.

VI.  CERTIFICATES FOR SHARES AND THEIR TRANSFER

         6.01 CERTIFICATES FOR SHARES.

                  (a) CONTENT. Certificates representing shares of the
corporation shall, at a minimum, state on their face the name of the issuing
corporation and that it is formed under the laws of the State of Arizona, the
name of the person to whom issued, and the number and class of shares and the
designation of the series, if any, the certificate represents. Such certificates
shall be signed (either manually or by facsimile to the extent allowable by law)
by one or more officers of the corporation as determined by the Board of
Directors or, if no such determination is made, by any of the Chairman of the
Board (if any), the President, any Vice- President, the Secretary or the
Treasurer of the corporation, and may be sealed with a corporate seal or a
facsimile thereof, if any. Each certificate for shares shall be consecutively
numbered or otherwise identified and will exhibit such information as may be
required by law. If a supply of unissued certificates bearing the facsimile
signature of a person remains when that person ceases to hold the office of the
corporation indicated on such certificates or ceases to be the transfer agent or
registrar of the corporation, they may still be issued by the corporation and
countersigned, registered, issued and delivered by the corporation's transfer
agent and/or registrar thereafter, as though such person had continued to hold
the office indicated on such certificate.

                  (b) LEGEND AS TO CLASS OR SERIES. If the corporation is
authorized to issue different classes of shares or different series within a
class, the designations, relative rights, preferences and limitations applicable
to each class and the variations in rights, preferences and limitations
determined for each series (and the authority of the Board of Directors to
determine variations for future series) shall be summarized on the front or back
of each certificate. Alternatively, each certificate may state conspicuously on
its front or back that the corporation will furnish a shareholder this
information upon request in writing and without charge.


                                      -13-
<PAGE>   14
                  (c) SHAREHOLDER LIST. The name and address of the person to
whom shares are issued, with the number of shares and date of issue, shall be
entered on the stock transfer books of the corporation.

                  (d) LOST CERTIFICATES. In the event of the loss, theft or
destruction of any certificate representing shares of the corporation or of any
predecessor corporation, the corporation may issue (or, in the case of any such
shares as to which a transfer agent and/or registrar have been appointed, may
direct such transfer agent and/or registrar to countersign, register and issue)
a new certificate, and cause the same to be delivered to the registered owner of
the shares represented thereby; provided that such owner shall have submitted
such evidence showing the circumstances of the alleged loss, theft or
destruction and his, her or its ownership of the certificate as the corporation
considers satisfactory, together with any other facts that the corporation
considers pertinent; and further provided that, if so required by the
corporation, the owner shall provide a bond or other indemnity in form and
amount satisfactory to the corporation (and to its transfer agent and/or
registrar, if applicable).

         6.02 REGISTRATION OF THE TRANSFER OF SHARES. Registration of the
transfer of shares of the corporation shall be made only on the stock transfer
books of the corporation. In order to register a transfer, the record owner
shall surrender the shares to the corporation for cancellation, properly
endorsed by the appropriate person or persons with reasonable assurances that
the endorsements are genuine and effective. Unless the corporation has
established a procedure by which a beneficial owner of shares held by a nominee
is to be recognized by the corporation as the owner, the corporation will be
entitled to treat the registered owner of any share of the capital stock of the
corporation as the absolute owner thereof and, accordingly, will not be bound to
recognize any beneficial, equitable or other claim to, or interest in, such
share on the part of any other person, whether or not it has notice thereof,
except as may expressly be provided by applicable law.

         6.03 SHARES WITHOUT CERTIFICATES. The Board of Directors may authorize
the issuance of uncertificated shares by the corporation and may prescribe
procedures for the issuance and registration of transfer thereof and with
respect to such other matters as the Board of Directors shall deem necessary or
appropriate.

                               VII. DISTRIBUTIONS

         Subject to such restrictions or requirements as may be imposed by
applicable law or the corporation's Articles or as may otherwise be binding upon
the corporation, the Board of Directors may from time to time declare, and the
corporation may pay or make, dividends or other distributions to its
shareholders.

                              VIII. CORPORATE SEAL


                                      -14-
<PAGE>   15
         The Board of Directors may provide for a corporate seal of the
corporation that will have inscribed thereon any designation, including the name
of the corporation, Arizona as the state of incorporation, the year of
incorporation and the words "Corporate Seal".

                                 IX. AMENDMENTS

         The corporation's Board of Directors may amend or repeal the
corporation's Bylaws unless:

                  (a)      The Articles or the Arizona Business Corporation Act
                           reserve this power exclusively to the shareholders in
                           whole or part; or

                  (b)      The shareholders, in adopting, amending or repealing
                           a particular bylaw, provide expressly that the Board
                           of Directors may not amend or repeal that bylaw.

The corporation's shareholders may amend or repeal the corporation's Bylaws even
though the Bylaws may also be amended or repealed by its Board of Directors.


                                    * * * * *

                                  CERTIFICATION

                  The undersigned Secretary of Meritage Homes of Arizona, Inc.
hereby certifies that the foregoing Bylaws of the Corporation were duly adopted
pursuant to the Action by Unanimous Consent of the Board of Directors in Lieu of
First Meeting dated _____, 2000.


                                    ____________________________________________
                                    Larry W. Seay


                                      -15-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.12
<SEQUENCE>11
<FILENAME>p65173ex3-12.txt
<DESCRIPTION>EX-3.12
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 3.12


                            ARTICLES OF INCORPORATION
                                       OF
                               MTH-TEXAS GP, INC.


                  FIRST: The name of the corporation is MTH-TEXAS GP, INC.

                  SECOND: The purpose for which the corporation is organized is
the transaction of any or all lawful business for which corporations may be
incorporated under the laws of the State of Arizona, as they may be amended from
time to time. The character of business which the corporation initially intends
actually to conduct in the State of Arizona is to act as the general partner in
an Arizona limited partnership.

                  THIRD: The aggregate number of shares that the corporation
shall have authority to issue is one thousand (1,000) common shares, all of
which shares shall be of a single class, and shall be without par.

                  FOURTH: The name and street address in Arizona of the initial
statutory agent of the corporation is Larry Seay, 6613 N. Scottsdale Road, Suite
200, Scottsdale, Arizona 85250.

                  FIFTH: The number of directors constituting the initial board
of directors of the corporation is four (4). The names and addresses of the
persons who are to serve as directors until the first annual meeting of
shareholders, or until their successors are elected and qualified, are:
<TABLE>
<CAPTION>
          Name                                         Address
          ----                                         -------
    <S>                                    <C>
    William W. Cleverly                    6613 N. Scottsdale Road, Suite 200
                                           Scottsdale, AZ 85250

    Steven J. Hilton                       6613 N. Scottsdale Road, Suite 200
                                           Scottsdale, AZ 85250

    Robert Sarver                          402 W. Broadway, Suite 1290
                                           San Diego, CA 92101

    Timothy White                          1850 N. Central Avenue, Suite 500
                                           Phoenix, AZ 85004
</TABLE>

The number of persons to serve on the board of directors thereafter shall be
fixed by the bylaws of the corporation.

                  SIXTH: The name and address of the incorporator is Larry Seay,
6613 N. Scottsdale Road, Suite 200, Scottsdale, Arizona 85250.

                  SEVENTH: The liability of a director or former director to the
corporation or its shareholders shall be eliminated to the fullest extent
permitted by Section 10-202.B.1 of the Arizona Revised Statutes.
<PAGE>   2
                  If the Arizona Business Corporation Act is amended to
authorize corporate action further eliminating or limiting the liability of
directors, the liability of a director of the corporation shall be eliminated or
limited to the fullest extent permitted by the Arizona Business Corporation Act,
as amended.

                  Any repeal or modification of this Article Seventh shall not
adversely affect any right or protection of a director of the corporation
existing hereunder with respect to any act or omission occurring prior to or at
the time of such repeal or modification.

                  The provisions of this Article Seventh shall not be deemed to
limit or preclude indemnification of a director by the corporation for any
liability of a director which has not been eliminated by the provisions of this
Article Seventh.

                  DATED: June 10, 1997.

                                            /s/ Larry Seay
                                      ------------------------------------------
                                      Larry Seay, Incorporator


                                       2
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.13
<SEQUENCE>12
<FILENAME>p65173ex3-13.txt
<DESCRIPTION>EX-3.13
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 3.13

                                     BYLAWS

                                       OF

                               MTH-TEXAS GP, INC.


                I. REFERENCES TO CERTAIN TERMS AND CONSTRUCTION

                  1.01 Certain References. Any reference herein made to law will
be deemed to refer to the law of the State of Arizona, including any applicable
provision of Chapters 1 through 17 of Title 10 of the Arizona Revised Statutes,
or any successor statute, as from time to time amended and in effect (sometimes
referred to herein as the "Arizona Business Corporation Act"). Any reference
herein made to the corporation's Articles will be deemed to refer to its
Articles of Incorporation and all amendments thereto as at any given time on
file with the Arizona Corporation Commission. Except as otherwise required by
law and subject to any procedures established by the corporation pursuant to
Arizona Revised Statutes Section 723, the term "shareholder" as used herein
shall mean one who is a holder of record of shares of the corporation.
References to specific sections of law herein made shall be deemed to refer to
such sections, or any comparable successor provisions, as from time to time
amended and in effect.

                  1.02 Seniority. The law and the Articles (in that order of
precedence) will in all respects be considered senior and superior to these
Bylaws, with any inconsistency to be resolved in favor of the law and such
Articles (in that order of precedence), and with these Bylaws to be deemed
automatically amended from time to time to eliminate any such inconsistency
which may then exist.

                  1.03 Computation of Time. The time during which an act is
required to be done, including the time for the giving of any required notice
herein, shall be computed by excluding the first day or hour, as the case may
be, and including the last day or hour.

                                  II. OFFICES

                  2.01 Principal Office. The principal office of the corporation
shall be located at any place either within or outside the State of Arizona as
designated in the corporation's most current Annual Report filed with the
Arizona Corporation Commission or in any other document executed and delivered
to the Arizona Corporation Commission for filing. If a principal office is not
so designated, the principal office of the corporation shall mean the known
place of business of the corporation. The corporation may have such other
offices, either within or without the State of Arizona, as the Board of
Directors may designate or as the business of the corporation may require from
time to time.

                  2.02 Known Place of Business. A known place of business of the
corporation shall be located within the State of Arizona and may be, but need
not be, the address of the statutory agent of the corporation. The corporation
may change its known place of business from time to time in accordance with the
relevant provisions of the Arizona Business Corporation Act.
<PAGE>   2
                               III. SHAREHOLDERS

                  3.01 Annual Shareholder Meeting. The annual meeting of the
shareholders shall be held on a date and at a time and place designated by the
Board of Directors each year, beginning with the year 1998, either within or
without the State of Arizona, or, in the absence of action by the Board, as set
forth in the notice given or waiver signed with respect to such meeting pursuant
to Section 3.03 below, for the purpose of electing directors and for the
transaction of such other business as may properly come before the meeting. If
any annual meeting is for any reason not held on the date determined as
aforesaid, a deferred annual meeting may thereafter be called and held in lieu
thereof, at which the same proceedings may be conducted. If the day fixed for
the annual meeting shall be a legal holiday in the State of Arizona such meeting
shall be held on the next succeeding business day.

                  3.02 Special Shareholder Meetings. Special meetings of the
shareholders may be held whenever and wherever, either within or without the
State of Arizona, called for by or at the direction of the Chairman of the
Board, the President, or the Board of Directors.

                  3.03 Notice of Shareholders Meetings.

                           (a) Required Notice. Notice stating the place, day
and hour of any annual or special shareholders meeting shall be given not less
than ten (10) nor more than sixty (60) days before the date of the meeting by or
at the direction of the person or persons calling the meeting, to each
shareholder entitled to vote at such meeting and to any other shareholder
entitled to receive notice of the meeting by law or the Articles. Notices to
shareholders shall be given in accordance with, and shall be deemed to be
effective at the time and in the manner described in, Arizona Revised Statutes
Section 10-141. If no designation is made of the place at which an annual or
special meeting will be held in the notice for such meeting, the place of the
meeting will be at the principal place of business of the corporation.

                           (b) Adjourned Meeting. If any shareholders meeting is
adjourned to a different date, time, or place, notice need not be given of the
new date, time, and place, if the new date, time, and place are announced at the
meeting before adjournment. But if a new record date for the adjourned meeting
is fixed or must be fixed in accordance with law or these Bylaws, then notice of
the adjourned meeting shall be given to those persons who are shareholders as of
the new record date and who are entitled to such notice pursuant to Section
3.03(a) above.

                           (c) Waiver of Notice. Any shareholder may waive
notice of a meeting (or any notice of any other action required to be given by
the Arizona Business Corporation Act, the corporation's Articles, or these
Bylaws), at any time before, during, or after the meeting or other action, by a
writing signed by the shareholder entitled to the notice. Each such waiver shall
be delivered to the corporation for inclusion in the minutes or filing with the
corporate records. Under certain circumstances, a shareholder's attendance at a
meeting may constitute a waiver of notice, unless the shareholder takes certain
actions to preserve his/her objections as described in the Arizona Business
Corporation Act.

                                       2
<PAGE>   3
                           (d) Contents of Notice. The notice of each special
shareholders meeting shall include a description of the purpose or purposes for
which the meeting is called. Except as required by law or the corporation's
Articles, the notice of an annual shareholders meeting need not include a
description of the purpose or purposes for which the meeting is called.

                  3.04 Fixing of Record Date. For the purpose of determining
shareholders of any voting group entitled to notice of or to vote at any meeting
of shareholders, or shareholders entitled to receive any distribution or
dividend, or in order to make a determination of shareholders for any other
proper purpose, the Board of Directors may fix in advance a date as the record
date. Such record date shall not be more than seventy (70) days prior to the
date on which the particular action requiring such determination of shareholders
is to be taken. If no record date is so fixed by the Board of Directors, the
record date for the determination of shareholders shall be as provided in the
Arizona Business Corporation Act.

                  When a determination of shareholders entitled to notice of or
to vote at any meeting of shareholders has been made as provided in this
Section, such determination shall apply to any adjournment thereof, unless the
Board of Directors fixes a new record date, which it must do if the meeting is
adjourned to a date more than one hundred twenty (120) days after the date fixed
for the original meeting.

                  3.05 Shareholder List. The corporation shall make a complete
record of the shareholders entitled to notice of each meeting of shareholders
thereof, arranged in alphabetical order, listing the address and the number of
shares held by each. The list shall be arranged by voting group and within each
voting group by class or series of shares. The shareholder list shall be
available for inspection by any shareholder, beginning two (2) business days
after notice of the meeting is given for which the list was prepared and
continuing through the meeting. The list shall be available at the corporation's
principal office or at another place identified in the meeting notice in the
city where the meeting is to be held. Failure to comply with this section shall
not affect the validity of any action taken at the meeting.

                  3.06 Shareholder Quorum and Voting Requirements.

                           (a) If the Articles or the Arizona Business
Corporation Act provide for voting by a single voting group on a matter, action
on that matter is taken when voted upon by that voting group.

                           (b) If the Articles or the Arizona Business
Corporation Act provide for voting by two (2) or more voting groups on a matter,
action on that matter is taken only when voted upon by each of those voting
groups counted separately.

                           (c) Shares entitled to vote as a separate voting
group may take action on a matter at a meeting only if a quorum of those shares
exists with respect to that matter. Unless the Articles or the Arizona Business
Corporation Act provide otherwise, a majority of the votes entitled to be cast
on the matter by the voting group constitutes a quorum of that voting group for
action on that matter.

                                       3
<PAGE>   4
                           (d) Once a share is represented for any purpose at a
meeting, it is deemed present for quorum purposes for the remainder of the
meeting and for any adjournment of that meeting, unless a new record date is or
must be set for that adjourned meeting.

                           (e) If a quorum exists, action on a matter (other
than the election of directors) by a voting group is approved if the votes cast
within the voting group favoring the action exceed the votes cast opposing the
action, unless the Articles or the Arizona Business Corporation Act require a
greater number of affirmative votes.

                           (f) Voting will be by ballot on any question as to
which a ballot vote is demanded prior to the time the voting begins by any
person entitled to vote on such question; otherwise, a voice vote will suffice.
No ballot or change of vote will be accepted after the polls have been declared
closed following the ending of the announced time for voting.

                  3.07 Proxies. At all meetings of shareholders, a shareholder
may vote in person or by proxy duly executed in writing by the shareholder or
the shareholder's duly authorized attorney-in-fact. Such proxy shall comply with
law and shall be filed with the Secretary of the corporation or other person
authorized to tabulate votes before or at the time of the meeting. No proxy
shall be valid after eleven (11) months from the date of its execution unless
otherwise provided in the proxy. The burden of proving the validity of any
undated, irrevocable, or otherwise contested proxy at a meeting of the
shareholders will rest with the person seeking to exercise the same. A facsimile
appearing to have been transmitted by a shareholder or by such shareholder's
duly authorized attorney-in-fact may be accepted as a sufficiently written and
executed proxy.

                  3.08 Voting of Shares. Unless otherwise provided in the
Articles or the Arizona Business Corporation Act, each outstanding share
entitled to vote shall be entitled to one (1) vote upon each matter submitted to
a vote at a meeting of shareholders.

                  3.09 Voting for Directors. Unless otherwise provided in the
Articles, directors are elected by a plurality of the votes cast by the shares
entitled to vote in the election at a meeting at which a quorum is present at
the time of such vote. As provided by law, shareholders shall be entitled to
cumulative voting in the election of directors.

                  3.10 Election Inspectors. The Board of Directors, in advance
of any meeting of the shareholders, may appoint an election inspector or
inspectors to act at such meeting (and at any adjournment thereof). If an
election inspector or inspectors are not so appointed, the chairman of the
meeting may, or upon request of any person entitled to vote at the meeting will,
make such appointment. If any person appointed as an inspector fails to appear
or to act, a substitute may be appointed by the chairman of the meeting. If
appointed, the election inspector or inspectors (acting through a majority of
them if there be more than one) will determine the number of shares outstanding,
the authenticity, validity, and effect of proxies, the credentials of persons
purporting to be shareholders or persons named or referred to in proxies, and
the number of shares represented at the meeting in person and by proxy; will
receive and count votes, ballots, and consents and announce the results thereof;
will hear and determine all challenges and questions pertaining to proxies and
voting; and, in general, will perform such acts as may be proper to conduct
elections and


                                       4
<PAGE>   5
voting with complete fairness to all shareholders. No such election inspector
need be a shareholder of the corporation.

                  3.11 Organization and Conduct of Meetings. Each meeting of the
shareholders will be called to order and thereafter chaired by the Chairman of
the Board of Directors if there is one, or, if not, or if the Chairman of the
Board is absent or so requests, then by the President, or if both the Chairman
of the Board and the President are unavailable, then by such other officer of
the corporation or such shareholder as may be appointed by the Board of
Directors. The corporation's Secretary or in his or her absence, an Assistant
Secretary will act as secretary of each meeting of the shareholders. If neither
the Secretary nor an Assistant Secretary is in attendance, the chairman of the
meeting may appoint any person (whether a shareholder or not) to act as
secretary for the meeting. After calling a meeting to order, the chairman
thereof may require the registration of all shareholders intending to vote in
person and the filing of all proxies with the election inspector or inspectors,
if one or more have been appointed (or, if not, with the secretary of the
meeting). After the announced time for such filing of proxies has ended, no
further proxies or changes, substitutions, or revocations of proxies will be
accepted. If directors are to be elected, a tabulation of the proxies so filed
will, if any person entitled to vote in such election so requests, be announced
at the meeting (or adjournment thereof) prior to the closing of the election
polls. Absent a showing of bad faith on his or her part, the chairman of a
meeting will, among other things, have absolute authority to fix the period of
time allowed for the registration of shareholders and the filing of proxies, to
determine the order of business to be conducted at such meeting, and to
establish reasonable rules for expediting the business of the meeting and
preserving the orderly conduct thereof (including any informal, or question and
answer portions thereof).

                  3.12 Shareholder Approval or Ratification. The Board of
Directors may submit any contract or act for approval or ratification of the
shareholders at a duly constituted meeting of the shareholders. Except as
otherwise required by law, if any contract or act so submitted is approved or
ratified by a majority of the votes cast thereon at such meeting, the same will
be valid and as binding upon the corporation and all of its shareholders as it
would be if it were the act of its shareholders.

                  3.13 Informalities and Irregularities. All informalities or
irregularities in any call or notice of a meeting of the shareholders or in the
areas of credentials, proxies, quorums, voting, and similar matters, will be
deemed waived if no objection is made at the meeting.

                  3.14 Shareholder Action by Written Consent. Any action
required or permitted to be taken at a meeting of the shareholders may be taken
without a meeting if one (1) or more consents in writing, setting forth the
action so taken, shall be signed by all of the shareholders entitled to vote
with respect to the subject matter thereof. The consents shall be delivered to
the corporation for inclusion in the minutes or filing with the corporate
record. Action taken by consent is effective when the last shareholder signs the
consent, unless the consent specifies a different effective date, except that
if, by law, the action to be taken requires that notice be given to shareholders
who are not entitled to vote on the matter, the effective date shall not be
prior to ten (10) days after the corporation shall give such shareholders
written notice of the proposed action, which notice shall contain or be
accompanied by the same material that would have been required


                                       5
<PAGE>   6
if a formal meeting had been called to consider the action. A consent signed
under this section has the effect of a meeting vote and may be described as such
in any document.

                             IV. BOARD OF DIRECTORS

                  4.01 General Powers. All corporate powers shall be exercised
by or under the authority of, and the business and affairs of the corporation
shall be managed under the direction of, the Board of Directors.

                  4.02 Number, Tenure, and Qualification of Directors. Unless
otherwise provided in the Articles of Incorporation, the authorized number of
directors shall be not less than one nor more than ten. The number of directors
in office from time to time shall be within the limits specified above, as
prescribed from time to time by resolution adopted by either the shareholders or
the Board of Directors. The directors will regularly be elected at each annual
meeting of the shareholders, but directors may be elected at any other meeting
of the shareholders. Each director shall hold office until the annual meeting of
shareholders following his/her election, subject to his/her earlier resignation
or removal. However, if a director's term expires, he/she shall continue to
serve until his/her successor shall have been elected and qualified, until
his/her resignation or removal, or until there is a decrease in the number of
directors. Unless required by the Articles, directors do not need to be
residents of the State of Arizona or shareholders of the corporation.

                  4.03 Regular Meetings of the Board of Directors. A regular
annual meeting of the Board of Directors is to be held as soon as practicable
after the adjournment of each annual meeting of the shareholders, either at the
place of the shareholders meeting or at such other place as the directors
elected at the shareholders meeting may have been informed of at or prior to the
time of their election. Additional regular meetings may be held at regular
intervals at such places and at such times as the Board of Directors may
determine.

                  4.04 Special Meetings of the Board of Directors. Special
meetings of the Board of Directors may be held whenever and wherever called for
by the Chairman of the Board, the President, or the number of directors that
would be required to constitute a quorum.

                  4.05 Notice of, and Waiver of Notice for, Directors Meetings.
No notice need be given of regular meetings of the Board of Directors. Notice of
the time and place of any special directors meeting shall be given at least 48
hours prior thereto. Notice shall be given in accordance with and shall be
deemed to be effective at the time and in the manner described in Arizona
Revised Statutes Section 10-141. Any director may waive notice of any meeting
and any adjournment thereof at any time before, during, or after it is held.
Except as provided in the next sentence below, the waiver must be in writing,
signed by the director entitled to the notice, and filed with the minutes or
corporate records. The attendance of a director at or participation of a
director in a meeting shall constitute a waiver of notice of such meeting,
unless the director at the beginning of the meeting (or promptly upon his/her
arrival) objects to holding the meeting or transacting business at the meeting,
and does not thereafter vote for or assent to action taken at the meeting.

                                       6
<PAGE>   7
                  4.06 Director Quorum. A majority of the number of directors
prescribed according to Section 4.02 above, or if no number is so prescribed,
the number in office immediately before the meeting begins, shall constitute a
quorum for the transaction of business at any meeting of the Board of Directors,
unless the Articles require a greater number.

                  4.07 Directors, Manner of Acting.

                           (a) If a quorum is present when a vote is taken, the
affirmative vote of a majority of the directors present shall be the act of the
Board of Directors unless the Articles require a greater percentage.

                           (b) Unless the Articles provide otherwise, any or all
directors may participate in a regular or special meeting by, or conduct the
meeting through the use of, any means of communication by which all directors
participating may simultaneously hear each other during the meeting, in which
case, any required notice of the meeting may generally describe the arrangements
(rather than or in addition to the place) for the holding thereof. A director
participating in a meeting by this means is deemed to be present in person at
the meeting.

                           (c) A director who is present at a meeting of the
Board of Directors or a committee of the Board of Directors when corporate
action is taken is deemed to have assented to the action taken unless: (1) the
director objects at the beginning of the meeting (or promptly upon his/her
arrival) to holding it or transacting business at the meeting; or (2) his/her
dissent or abstention from the action taken is entered in the minutes of the
meeting; or (3) he/she delivers written notice of his/her dissent or abstention
to the presiding officer of the meeting before its adjournment or to the
corporation before 5:00 p.m. on the next business day after the meeting. The
right of dissent or abstention is not available to a director who votes in favor
of the action taken.

                  4.08 Director Action Without a Meeting. Unless the Articles
provide otherwise, any action required or permitted to be taken by the Board of
Directors at a meeting may be taken without a meeting if the action is taken by
unanimous written consent of the Board of Directors as evidenced by one (1) or
more written consents describing the action taken, signed by each director and
filed with the minutes or corporate records. Action taken by consent is
effective when the last director signs the consent, unless the consent specifies
a different effective date. A signed consent has the effect of a meeting vote
and may be described as such in any document.

                  4.09 Removal of Directors by Shareholders. The shareholders
may remove one (1) or more directors at a meeting called for that purpose if
notice has been given that a purpose of the meeting is such removal. The removal
may be with or without cause unless the Articles provide that directors may only
be removed with cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in a
shareholder vote to remove him. If less than the entire Board of Directors is to
be removed, a director may not be removed if the number of votes sufficient to
elect the director under cumulative voting is voted against the director's
removal.

                  4.10 Board of Director Vacancies.


                                       7
<PAGE>   8
                           (a) Unless the Articles provide otherwise, if a
vacancy occurs on the Board of Directors, including a vacancy resulting from an
increase in the number of directors, either the shareholders or the Board of
Directors may fill the vacancy.

                           (b) If the vacant office was held by a director
elected by a voting group of shareholders, only the holders of shares of that
voting group are entitled to vote to fill the vacancy if it is filled by the
shareholders.

                           (c) A vacancy that will occur at a specific later
date (by reason of resignation effective at a later date) may be filled before
the vacancy occurs, but the new director may not take office until the vacancy
occurs.

                           (d) The term of a director elected to fill a vacancy
expires at the next shareholders meeting at which directors are elected.

                  4.11 Director Compensation. Unless otherwise provided in the
Articles by resolution of the Board of Directors, each director may be paid
his/her expenses, if any, of attendance at each meeting of the Board of
Directors or any committee thereof, and may be paid a stated salary as director
or a fixed sum for attendance at each meeting of the Board of Directors or any
committee thereof, or both. No such payment shall preclude any director from
serving the corporation in any capacity and receiving compensation therefor.

                  4.12 Director Committees.

                           (a) Creation of Committees. Unless the Articles
provide otherwise, the Board of Directors may create one (1) or more committees
and appoint members of the Board of Directors to serve on them. Each committee
shall have one (1) or more members, who serve at the pleasure of the Board of
Directors.

                           (b) Selection of Members. The creation of a committee
and appointment of members to it shall be approved by the greater of (1) a
majority of all the directors in office when the action is taken or (2) the
number of directors required by the Articles to take such action.

                           (c) Required Procedures. Sections 4.03 through 4.08
of this Article IV, which govern meetings, action without meetings, notice and
waiver of notice, and quorum and voting requirements of the Board of Directors,
apply to committees and their members.

                           (d) Authority. Unless limited by the Articles, each
committee may exercise those aspects of the authority of the Board of Directors
which the Board of Directors confers upon such committee in the resolution
creating the committee, provided, however, that a committee may not: (1)
authorize distributions; (2) approve or propose to shareholders action that
requires shareholder approval under the Arizona Business Corporation Act; (3)
fill vacancies on the Board of Directors or on any of its committees; (4) amend
the Articles of Incorporation without shareholder action as provided by law; (5)
adopt, amend or repeal these Bylaws; (6) approve a plan of merger not requiring
shareholder approval; (7) authorize or approve reacquisition of shares, except


                                       8
<PAGE>   9
according to a formula or method prescribed by the Board of Directors; (8)
authorize or approve the issuance or sale or contract for sale of shares or
determine the designation and relative rights, preferences, and limitations of a
class or series of shares, except within limits specifically prescribed by the
Board of Directors; or (9) fix the compensation of directors for serving on the
Board of Directors or any committee of the Board of Directors.

                  4.13 Director Resignations. Any director or committee member
may resign from his or her office at any time by written notice delivered to the
Board of Directors, the Chairman of the Board, or the corporation at its known
place of business. Any such resignation will be effective upon its receipt
unless some later time is therein fixed, and then from that time. The acceptance
of a resignation will not be required to make it effective.

                                  V. OFFICERS

                  5.01 Number of Officers. The officers of the corporation shall
be a President, a Secretary, and a Treasurer, each of whom shall be appointed by
the Board of Directors. Such other officers and assistant officers as may be
deemed necessary, including any Vice Presidents, may be appointed by the Board
of Directors. If specifically authorized by the Board of Directors, an officer
may appoint one (1) or more other officers or assistant officers. The same
individual may simultaneously hold more than one (1) office in the corporation.

                  5.02 Appointment and Term of Office. The officers of the
corporation shall be appointed by the Board of Directors for a term as
determined by the Board of Directors. The designation of a specified term grants
to the officer no contract rights, and the Board of Directors can remove the
officer at any time prior to the termination of such term. If no term is
specified, an officer of the corporation shall hold office until he or she
resigns, dies, or until he or she is removed in the manner provided by law or in
Section 5.03 of this Article V. The regular election or appointment of officers
will take place at each annual meeting of the Board of Directors, but elections
of officers may be held at any other meeting of the Board.

                  5.03 Resignation and Removal of Officers. An officer may
resign at any time by delivering written notice to the corporation at its known
place of business. A resignation is effective when the notice is delivered
unless the notice specifies a later effective date or event. Any officer may be
removed by the Board of Directors at any time, with or without cause. Such
removal shall be without prejudice to the contract rights, if any, of the person
so removed. Appointment of an officer shall not of itself create contract
rights.

                  5.04 Duties of Officers. Officers of the corporation shall
have authority to perform such duties as may be prescribed from time to time by
law, in these Bylaws, or by the Board of Directors, the President, or the
superior officer of any such officer. Each officer of the corporation (in the
order designated herein or by the Board) will be vested with all of the powers
and charged with all of the duties of his or her superior officer in the event
of such superior officer's absence, death, or disability.

                                       9
<PAGE>   10
                  5.05 Bonds and Other Requirements. The Board of Directors may
require any officer to give bond to the corporation (with sufficient surety and
conditioned for the faithful performance of the duties of his or her office) and
to comply with such other conditions as may from time to time be required of him
or her by the Board of Directors.

                  5.06 President. Unless otherwise specified by resolution of
the Board of Directors, the President shall be the principal executive officer
of the corporation and, subject to the control of the Board of Directors, shall
supervise and control all of the business and affairs of the corporation and the
performance by all of its other officers of their respective duties and in
general shall perform all duties incident to the office of President and such
other duties as may be prescribed by the Board of Directors from time to time.
The President shall, when present, and in the absence of a Chairman of the
Board, preside at all meetings of the shareholders and of the Board of
Directors. The President will be a proper officer to sign on behalf of the
corporation any deed, bill of sale, assignment, option, mortgage, pledge, note,
bond, evidence of indebtedness, application, consent (to service of process or
otherwise), agreement, indenture, contract, or other instrument, except in each
such case where the signing and execution thereof shall be expressly delegated
by the Board of Directors or by these Bylaws to some other officer or agent of
the corporation, or shall be required by law to be otherwise signed or executed.
The President may represent the corporation at any meeting of the shareholders
or members of any other corporation, association, partnership, joint venture, or
other entity in which the corporation then holds shares of capital stock or has
an interest, and may vote such shares of capital stock or other interest in
person or by proxy appointed by him or her, provided that the Board of Directors
may from time to time confer the foregoing authority upon any other person or
persons.

                  5.07 The Vice-President. If appointed, in the absence of the
President or in the event of his/her death or disability, the Vice-President (or
in the event there be more than one Vice-President, the Vice-Presidents in the
order designated at the time of their election, or in the absence of any such
designation, then in the order of their appointment) shall perform the duties of
the President, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the President. If there is no Vice-President or in
the event of the death or disability of all Vice-Presidents, then the Treasurer
shall perform such duties of the President in the event of his or her absence,
death, or disability. Each Vice-President will be a proper officer to sign on
behalf of the corporation any deed, bill of sale, assignment, option, mortgage,
pledge, note, bond, evidence of indebtedness, application, consent (to service
of process or otherwise), agreement, indenture, contract, or other instrument,
except in each such case where the signing and execution thereof shall be
expressly delegated by the Board of Directors or by these Bylaws to some other
officer or agent of the corporation, or shall be required by law to be otherwise
signed or executed. Any Vice-President may represent the corporation at any
meeting of the shareholders or members of any other corporation, association,
partnership, joint venture, or other entity in which the corporation then holds
shares of capital stock or has an interest, and may vote such shares of capital
stock or other interest in person or by proxy appointed by him or her, provided
that the Board of Directors may from time to time confer the foregoing authority
upon any other person or persons. A Vice-President shall perform such other
duties as from time to time may be assigned to him/her by the President or by
the Board of Directors.

                                       10
<PAGE>   11
                  5.08 The Secretary. The Secretary shall: (a) keep the minutes
of the proceedings of the shareholders and of the Board of Directors and any
committee of the Board of Directors and all unanimous written consents of the
shareholders, Board of Directors, and any committee of the Board of Directors in
one (1) or more books provided for that purpose; (b) see that all notices are
duly given in accordance with the provisions of these Bylaws or as required by
law; (c) be custodian of the corporate records and of any seal of the
corporation; (d) when requested or required, authenticate any records of the
corporation; (e) keep a register of the address of each shareholder which shall
be furnished to the Secretary by such shareholder; and (f) in general perform
all duties incident to the office of Secretary and such other duties as from
time to time may be assigned to him/her by the President or by the Board of
Directors. Except as may otherwise be specifically provided in a resolution of
the Board of Directors, the Secretary will be a proper officer to take charge of
the corporation's stock transfer books and to compile the voting record pursuant
to Section 3.05 above, and to impress the corporation's seal, if any, on any
instrument signed by the President, any Vice President, or any other duly
authorized person, and to attest to the same. In the absence of the Secretary, a
secretary pro tempore may be chosen by the directors or shareholders as
appropriate to perform the duties of the Secretary.

                  5.09 The Treasurer. The Treasurer shall: (a) have charge and
custody of and be responsible for all funds and securities of the corporation;
(b) receive and give receipts for moneys due and payable to the corporation from
any source whatsoever, and deposit all such moneys in the name of the
corporation in such bank, trust companies, or other depositories as shall be
selected by the Board of Directors or any proper officer; (c) keep full and
accurate accounts of receipts and disbursements in books and records of the
corporation; and (d) in general perform all of the duties incident to the office
of Treasurer and such other duties as from time to time may be assigned to
him/her by the President or by the Board of Directors. The Treasurer will render
to the President, the directors, and the shareholders at proper times an account
of all his or her transactions as Treasurer and of the financial condition of
the corporation. The Treasurer shall be responsible for preparing and filing
such financial reports, financial statements, and returns as may be required by
law.

                  5.10 Assistant Secretaries and Assistant Treasurers. The
Assistant Secretaries and the Assistant Treasurers, when authorized by the Board
of Directors, may sign with the President or a Vice-President certificates for
shares of the corporation, the issuance of which shall have been authorized by a
resolution of the Board of Directors. The Assistant Secretaries and Assistant
Treasurers, in general, shall perform such duties as shall be assigned to them
by the Secretary or the Treasurer, respectively, or by the President or the
Board of Directors.

                  5.11 Chairman of the Board. The Board of Directors may elect a
Chairman to serve as a general executive officer of the corporation, and, if
specifically designated as such by the Board of Directors, as the chief
executive officer of the corporation. If elected, the Chairman will preside at
all meetings of the Board of Directors and be vested with such other powers and
duties as the Board of Directors may from time to time delegate to him or her.

                  5.12 Salaries. The salaries of the officers of the corporation
may be fixed from time to time by the Board of Directors or (except as to the
President's own) left to the discretion of


                                       11
<PAGE>   12
the President. No officer will be prevented from receiving a salary by reason of
the fact that he or she is also a director of the corporation.

                  5.13 Additional Appointments. In addition to the officers
contemplated in this Article V, the Board of Directors may appoint other agents
of the corporation with such authority to perform such duties as may be
prescribed from time to time by the Board of Directors.


                 VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER

                  6.01 Certificates for Shares.

                           (a) Content. Certificates representing shares of the
corporation shall, at a minimum, state on their face the name of the issuing
corporation and that it is formed under the laws of the State of Arizona, the
name of the person to whom issued, and the number and class of shares and the
designation of the series, if any, the certificate represents. Such certificates
shall be signed (either manually or by facsimile to the extent allowable by law)
by one or more officers of the corporation, as determined by the Board of
Directors, or, if no such determination is made, by any of the Chairman of the
Board (if any), the President, any Vice-President, the Secretary, or the
Treasurer of the corporation, and may be sealed with a corporate seal or a
facsimile thereof. Each certificate for shares shall be consecutively numbered
or otherwise identified and will exhibit such information as may be required by
law. If a supply of unissued certificates bearing the facsimile signature of a
person remains when that person ceases to hold the office of the corporation
indicated on such certificates or ceases to be the transfer agent or registrar
of the corporation, they may still be issued by the corporation and
countersigned, registered, issued, and delivered by the corporation's transfer
agent and/or registrar thereafter, as though such person had continued to hold
the office indicated on such certificate.

                           (b) Legend as to Class or Series. If the corporation
is authorized to issue different classes of shares or different series within a
class, the designations, relative rights, preferences, and limitations
applicable to each class and the variations in rights, preferences, and
limitations determined for each series (and the authority of the Board of
Directors to determine variations for future series) shall be summarized on the
front or back of each certificate. Alternatively, each certificate may state
conspicuously on its front or back that the corporation will furnish a
shareholder this information on request in writing and without charge.

                           (c) Shareholder List. The name and address of the
person to whom shares are issued, with the number of shares and date of issue,
shall be entered on the stock transfer books of the corporation.

                           (d) Lost Certificates. In the event of the loss,
theft, or destruction of any certificate representing shares of the corporation
or of any predecessor corporation, the corporation may issue (or, in the case of
any such shares as to which a transfer agent and/or registrar have been
appointed, may direct such transfer agent and/or registrar to countersign,
register, and issue) a new certificate, and cause the same to be delivered to
the registered owner of the shares represented


                                       12
<PAGE>   13
thereby; provided that such owner shall have submitted such evidence showing the
circumstances of the alleged loss, theft, or destruction, and his, her, or its
ownership of the certificate, as the corporation considers satisfactory,
together with any other facts that the corporation considers pertinent; and
further provided that, if so required by the corporation, the owner shall
provide a bond or other indemnity in form and amount satisfactory to the
corporation (and to its transfer agent and/or registrar, if applicable).

                  6.02 Registration of the Transfer of Shares. Registration of
the transfer of shares of the corporation shall be made only on the stock
transfer books of the corporation. In order to register a transfer, the record
owner shall surrender the shares to the corporation for cancellation, properly
endorsed by the appropriate person or persons with reasonable assurances that
the endorsements are genuine and effective. Unless the corporation has
established a procedure by which a beneficial owner of shares held by a nominee
is to be recognized by the corporation as the owner, the corporation will be
entitled to treat the registered owner of any share of the capital stock of the
corporation as the absolute owner thereof and, accordingly, will not be bound to
recognize any beneficial, equitable, or other claim to, or interest in, such
share on the part of any other person, whether or not it has notice thereof,
except as may expressly be provided by applicable law.

                  6.03 Shares Without Certificates. The Board of Directors may
authorize the issuance of uncertificated shares by the corporation and may
prescribe procedures for the issuance and registration of transfer thereof and
with respect to such other matters as the Board of Directors shall deem
necessary or appropriate.

                               VII. DISTRIBUTIONS

                  7.01 Distributions. Subject to such restrictions or
requirements as may be imposed by applicable law or the corporation's Articles
or as may otherwise be binding upon the corporation, the Board of Directors may
from time to time declare, and the corporation may pay or make, dividends or
other distributions to its shareholders.

                              VIII. CORPORATE SEAL

                  8.01 Corporate Seal. The Board of Directors may provide for a
corporate seal of the corporation that will have inscribed thereon any
designation including the name of the corporation, Arizona as the state of
incorporation, the year of incorporation, and the words "Corporate Seal."

                                 IX. AMENDMENTS

                  9.01 Amendments. The corporation's Board of Directors may
amend or repeal the corporation's Bylaws unless:

                           (1)      the Articles or the Arizona Business
                                    Corporation Act reserve this power
                                    exclusively to the shareholders in whole or
                                    part; or

                                       13
<PAGE>   14
                           (2)      the shareholders in adopting, amending, or
                                    repealing a particular Bylaw provide
                                    expressly that the Board of Directors may
                                    not amend or repeal that Bylaw.

                  The corporation's shareholders may amend or repeal the
corporation's Bylaws even though the Bylaws may also be amended or repealed by
its Board of Directors.










                                       14
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.14
<SEQUENCE>13
<FILENAME>p65173ex3-14.txt
<DESCRIPTION>EX-3.14
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 3.14

                            ARTICLES OF INCORPORATION
                                       OF
                               MTH-TEXAS LP, INC.


                  FIRST: The name of the corporation is MTH-TEXAS LP, INC.

                  SECOND: The purpose for which the corporation is organized is
the transaction of any or all lawful business for which corporations may be
incorporated under the laws of the State of Arizona, as they may be amended from
time to time. The character of business which the corporation initially intends
actually to conduct in the State of Arizona is to act as the limited partner in
an Arizona limited partnership.

                  THIRD: The aggregate number of shares that the corporation
shall have authority to issue is one thousand (1,000) common shares, all of
which shares shall be of a single class, and shall be without par.

                  FOURTH: The name and street address in Arizona of the initial
statutory agent of the corporation is Larry Seay, 6613 N. Scottsdale Road, Suite
200, Scottsdale, Arizona 85250.

                  FIFTH: The number of directors constituting the initial board
of directors of the corporation is four (4). The names and addresses of the
persons who are to serve as directors until the first annual meeting of
shareholders, or until their successors are elected and qualified, are:
<TABLE>
<CAPTION>
             Name                                      Address
             ----                                      -------
         <S>                               <C>
         William W. Cleverly               6613 N. Scottsdale Road, Suite 200
                                           Scottsdale, AZ 85250

         Steven J. Hilton                  6613 N. Scottsdale Road, Suite 200
                                           Scottsdale, AZ 85250

         Robert Sarver                     402 W. Broadway, Suite 1290
                                           San Diego, CA 92101

         Timothy White                     1850 N. Central Avenue, Suite 500
                                           Phoenix, AZ  85004
</TABLE>

The number of persons to serve on the board of directors thereafter shall be
fixed by the bylaws of the corporation.

                  SIXTH: The name and address of the incorporator is Larry Seay,
6613 N. Scottsdale Road, Suite 200, Scottsdale, Arizona 85250.

                  SEVENTH: The liability of a director or former director to the
corporation or its shareholders shall be eliminated to the fullest extent
permitted by Section 10-202.B.1 of the Arizona Revised Statutes.

<PAGE>   2

                  If the Arizona Business Corporation Act is amended to
authorize corporate action further eliminating or limiting the liability of
directors, the liability of a director of the corporation shall be eliminated or
limited to the fullest extent permitted by the Arizona Business Corporation Act,
as amended.

                  Any repeal or modification of this Article Seventh shall not
adversely affect any right or protection of a director of the corporation
existing hereunder with respect to any act or omission occurring prior to or at
the time of such repeal or modification.

                  The provisions of this Article Seventh shall not be deemed to
limit or preclude indemnification of a director by the corporation for any
liability of a director which has not been eliminated by the provisions of this
Article Seventh.

                  DATED: June 10, 1997.

                                              /s/ Larry Seay
                                        ----------------------------------------
                                        Larry Seay, Incorporator




                                       2
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.15
<SEQUENCE>14
<FILENAME>p65173ex3-15.txt
<DESCRIPTION>EX-3.15
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 3.15



                                     BYLAWS

                                       OF

                               MTH-TEXAS LP, INC.


                 I. REFERENCES TO CERTAIN TERMS AND CONSTRUCTION

                  1.01 Certain References. Any reference herein made to law will
be deemed to refer to the law of the State of Arizona, including any applicable
provision of Chapters 1 through 17 of Title 10 of the Arizona Revised Statutes,
or any successor statute, as from time to time amended and in effect (sometimes
referred to herein as the "Arizona Business Corporation Act"). Any reference
herein made to the corporation's Articles will be deemed to refer to its
Articles of Incorporation and all amendments thereto as at any given time on
file with the Arizona Corporation Commission. Except as otherwise required by
law and subject to any procedures established by the corporation pursuant to
Arizona Revised Statutes Section 723, the term "shareholder" as used herein
shall mean one who is a holder of record of shares of the corporation.
References to specific sections of law herein made shall be deemed to refer to
such sections, or any comparable successor provisions, as from time to time
amended and in effect.

                  1.02 Seniority. The law and the Articles (in that order of
precedence) will in all respects be considered senior and superior to these
Bylaws, with any inconsistency to be resolved in favor of the law and such
Articles (in that order of precedence), and with these Bylaws to be deemed
automatically amended from time to time to eliminate any such inconsistency
which may then exist.

                  1.03 Computation of Time. The time during which an act is
required to be done, including the time for the giving of any required notice
herein, shall be computed by excluding the first day or hour, as the case may
be, and including the last day or hour.

                                   II. OFFICES

                  2.01 Principal Office. The principal office of the corporation
shall be located at any place either within or outside the State of Arizona as
designated in the corporation's most current Annual Report filed with the
Arizona Corporation Commission or in any other document executed and delivered
to the Arizona Corporation Commission for filing. If a principal office is not
so designated, the principal office of the corporation shall mean the known
place of business of the corporation. The corporation may have such other
offices, either within or without the State of Arizona, as the Board of
Directors may designate or as the business of the corporation may require from
time to time.

                  2.02 Known Place of Business. A known place of business of the
corporation shall be located within the State of Arizona and may be, but need
not be, the address of the statutory agent of the corporation. The corporation
may change its known place of business from time to time in accordance with the
relevant provisions of the Arizona Business Corporation Act.
<PAGE>   2
                                III. SHAREHOLDERS

                  3.01 Annual Shareholder Meeting. The annual meeting of the
shareholders shall be held on a date and at a time and place designated by the
Board of Directors each year, beginning with the year 1998, either within or
without the State of Arizona, or, in the absence of action by the Board, as set
forth in the notice given or waiver signed with respect to such meeting pursuant
to Section 3.03 below, for the purpose of electing directors and for the
transaction of such other business as may properly come before the meeting. If
any annual meeting is for any reason not held on the date determined as
aforesaid, a deferred annual meeting may thereafter be called and held in lieu
thereof, at which the same proceedings may be conducted. If the day fixed for
the annual meeting shall be a legal holiday in the State of Arizona such meeting
shall be held on the next succeeding business day.

                  3.02 Special Shareholder Meetings. Special meetings of the
shareholders may be held whenever and wherever, either within or without the
State of Arizona, called for by or at the direction of the Chairman of the
Board, the President, or the Board of Directors.

                  3.03 Notice of Shareholders Meetings.

                           (a) Required Notice. Notice stating the place, day
and hour of any annual or special shareholders meeting shall be given not less
than ten (10) nor more than sixty (60) days before the date of the meeting by or
at the direction of the person or persons calling the meeting, to each
shareholder entitled to vote at such meeting and to any other shareholder
entitled to receive notice of the meeting by law or the Articles. Notices to
shareholders shall be given in accordance with, and shall be deemed to be
effective at the time and in the manner described in, Arizona Revised Statutes
Section 10-141. If no designation is made of the place at which an annual or
special meeting will be held in the notice for such meeting, the place of the
meeting will be at the principal place of business of the corporation.

                           (b) Adjourned Meeting. If any shareholders meeting is
adjourned to a different date, time, or place, notice need not be given of the
new date, time, and place, if the new date, time, and place are announced at the
meeting before adjournment. But if a new record date for the adjourned meeting
is fixed or must be fixed in accordance with law or these Bylaws, then notice of
the adjourned meeting shall be given to those persons who are shareholders as of
the new record date and who are entitled to such notice pursuant to Section
3.03(a) above.

                           (c) Waiver of Notice. Any shareholder may waive
notice of a meeting (or any notice of any other action required to be given by
the Arizona Business Corporation Act, the corporation's Articles, or these
Bylaws), at any time before, during, or after the meeting or other action, by a
writing signed by the shareholder entitled to the notice. Each such waiver shall
be delivered to the corporation for inclusion in the minutes or filing with the
corporate records. Under certain circumstances, a shareholder's attendance at a
meeting may constitute a waiver of notice, unless the shareholder takes certain
actions to preserve his/her objections as described in the Arizona Business
Corporation Act.


                                       2
<PAGE>   3
                           (d) Contents of Notice. The notice of each special
shareholders meeting shall include a description of the purpose or purposes for
which the meeting is called. Except as required by law or the corporation's
Articles, the notice of an annual shareholders meeting need not include a
description of the purpose or purposes for which the meeting is called.

                  3.04 Fixing of Record Date. For the purpose of determining
shareholders of any voting group entitled to notice of or to vote at any meeting
of shareholders, or shareholders entitled to receive any distribution or
dividend, or in order to make a determination of shareholders for any other
proper purpose, the Board of Directors may fix in advance a date as the record
date. Such record date shall not be more than seventy (70) days prior to the
date on which the particular action requiring such determination of shareholders
is to be taken. If no record date is so fixed by the Board of Directors, the
record date for the determination of shareholders shall be as provided in the
Arizona Business Corporation Act.

                  When a determination of shareholders entitled to notice of or
to vote at any meeting of shareholders has been made as provided in this
Section, such determination shall apply to any adjournment thereof, unless the
Board of Directors fixes a new record date, which it must do if the meeting is
adjourned to a date more than one hundred twenty (120) days after the date fixed
for the original meeting.

                  3.05 Shareholder List. The corporation shall make a complete
record of the shareholders entitled to notice of each meeting of shareholders
thereof, arranged in alphabetical order, listing the address and the number of
shares held by each. The list shall be arranged by voting group and within each
voting group by class or series of shares. The shareholder list shall be
available for inspection by any shareholder, beginning two (2) business days
after notice of the meeting is given for which the list was prepared and
continuing through the meeting. The list shall be available at the corporation's
principal office or at another place identified in the meeting notice in the
city where the meeting is to be held. Failure to comply with this section shall
not affect the validity of any action taken at the meeting.

                  3.06     Shareholder Quorum and Voting Requirements.

                           (a) If the Articles or the Arizona Business
Corporation Act provide for voting by a single voting group on a matter, action
on that matter is taken when voted upon by that voting group.

                           (b) If the Articles or the Arizona Business
Corporation Act provide for voting by two (2) or more voting groups on a matter,
action on that matter is taken only when voted upon by each of those voting
groups counted separately.

                           (c) Shares entitled to vote as a separate voting
group may take action on a matter at a meeting only if a quorum of those shares
exists with respect to that matter. Unless the Articles or the Arizona Business
Corporation Act provide otherwise, a majority of the votes entitled to be cast
on the matter by the voting group constitutes a quorum of that voting group for
action on that matter.


                                       3
<PAGE>   4
                           (d) Once a share is represented for any purpose at a
meeting, it is deemed present for quorum purposes for the remainder of the
meeting and for any adjournment of that meeting, unless a new record date is or
must be set for that adjourned meeting.

                           (e) If a quorum exists, action on a matter (other
than the election of directors) by a voting group is approved if the votes cast
within the voting group favoring the action exceed the votes cast opposing the
action, unless the Articles or the Arizona Business Corporation Act require a
greater number of affirmative votes.

                           (f) Voting will be by ballot on any question as to
which a ballot vote is demanded prior to the time the voting begins by any
person entitled to vote on such question; otherwise, a voice vote will suffice.
No ballot or change of vote will be accepted after the polls have been declared
closed following the ending of the announced time for voting.

                  3.07 Proxies. At all meetings of shareholders, a shareholder
may vote in person or by proxy duly executed in writing by the shareholder or
the shareholder's duly authorized attorney-in-fact. Such proxy shall comply with
law and shall be filed with the Secretary of the corporation or other person
authorized to tabulate votes before or at the time of the meeting. No proxy
shall be valid after eleven (11) months from the date of its execution unless
otherwise provided in the proxy. The burden of proving the validity of any
undated, irrevocable, or otherwise contested proxy at a meeting of the
shareholders will rest with the person seeking to exercise the same. A facsimile
appearing to have been transmitted by a shareholder or by such shareholder's
duly authorized attorney-in-fact may be accepted as a sufficiently written and
executed proxy.

                  3.08 Voting of Shares. Unless otherwise provided in the
Articles or the Arizona Business Corporation Act, each outstanding share
entitled to vote shall be entitled to one (1) vote upon each matter submitted to
a vote at a meeting of shareholders.

                  3.09 Voting for Directors. Unless otherwise provided in the
Articles, directors are elected by a plurality of the votes cast by the shares
entitled to vote in the election at a meeting at which a quorum is present at
the time of such vote. As provided by law, shareholders shall be entitled to
cumulative voting in the election of directors.

                  3.10 Election Inspectors. The Board of Directors, in advance
of any meeting of the shareholders, may appoint an election inspector or
inspectors to act at such meeting (and at any adjournment thereof). If an
election inspector or inspectors are not so appointed, the chairman of the
meeting may, or upon request of any person entitled to vote at the meeting will,
make such appointment. If any person appointed as an inspector fails to appear
or to act, a substitute may be appointed by the chairman of the meeting. If
appointed, the election inspector or inspectors (acting through a majority of
them if there be more than one) will determine the number of shares outstanding,
the authenticity, validity, and effect of proxies, the credentials of persons
purporting to be shareholders or persons named or referred to in proxies, and
the number of shares represented at the meeting in person and by proxy; will
receive and count votes, ballots, and consents and announce the results thereof;
will hear and determine all challenges and questions pertaining to proxies and
voting; and, in general, will perform such acts as may be proper to conduct
elections and


                                       4
<PAGE>   5
voting with complete fairness to all shareholders. No such election inspector
need be a shareholder of the corporation.

                  3.11 Organization and Conduct of Meetings. Each meeting of the
shareholders will be called to order and thereafter chaired by the Chairman of
the Board of Directors if there is one, or, if not, or if the Chairman of the
Board is absent or so requests, then by the President, or if both the Chairman
of the Board and the President are unavailable, then by such other officer of
the corporation or such shareholder as may be appointed by the Board of
Directors. The corporation's Secretary or in his or her absence, an Assistant
Secretary will act as secretary of each meeting of the shareholders. If neither
the Secretary nor an Assistant Secretary is in attendance, the chairman of the
meeting may appoint any person (whether a shareholder or not) to act as
secretary for the meeting. After calling a meeting to order, the chairman
thereof may require the registration of all shareholders intending to vote in
person and the filing of all proxies with the election inspector or inspectors,
if one or more have been appointed (or, if not, with the secretary of the
meeting). After the announced time for such filing of proxies has ended, no
further proxies or changes, substitutions, or revocations of proxies will be
accepted. If directors are to be elected, a tabulation of the proxies so filed
will, if any person entitled to vote in such election so requests, be announced
at the meeting (or adjournment thereof) prior to the closing of the election
polls. Absent a showing of bad faith on his or her part, the chairman of a
meeting will, among other things, have absolute authority to fix the period of
time allowed for the registration of shareholders and the filing of proxies, to
determine the order of business to be conducted at such meeting, and to
establish reasonable rules for expediting the business of the meeting and
preserving the orderly conduct thereof (including any informal, or question and
answer portions thereof).

                  3.12 Shareholder Approval or Ratification. The Board of
Directors may submit any contract or act for approval or ratification of the
shareholders at a duly constituted meeting of the shareholders. Except as
otherwise required by law, if any contract or act so submitted is approved or
ratified by a majority of the votes cast thereon at such meeting, the same will
be valid and as binding upon the corporation and all of its shareholders as it
would be if it were the act of its shareholders.

                  3.13 Informalities and Irregularities. All informalities or
irregularities in any call or notice of a meeting of the shareholders or in the
areas of credentials, proxies, quorums, voting, and similar matters, will be
deemed waived if no objection is made at the meeting.

                  3.14 Shareholder Action by Written Consent. Any action
required or permitted to be taken at a meeting of the shareholders may be taken
without a meeting if one (1) or more consents in writing, setting forth the
action so taken, shall be signed by all of the shareholders entitled to vote
with respect to the subject matter thereof. The consents shall be delivered to
the corporation for inclusion in the minutes or filing with the corporate
record. Action taken by consent is effective when the last shareholder signs the
consent, unless the consent specifies a different effective date, except that
if, by law, the action to be taken requires that notice be given to shareholders
who are not entitled to vote on the matter, the effective date shall not be
prior to ten (10) days after the corporation shall give such shareholders
written notice of the proposed action, which notice shall contain or be
accompanied by the same material that would have been required


                                       5
<PAGE>   6
if a formal meeting had been called to consider the action. A consent signed
under this section has the effect of a meeting vote and may be described as such
in any document.

                             IV. BOARD OF DIRECTORS

                  4.01 General Powers. All corporate powers shall be exercised
by or under the authority of, and the business and affairs of the corporation
shall be managed under the direction of, the Board of Directors.

                  4.02 Number, Tenure, and Qualification of Directors. Unless
otherwise provided in the Articles of Incorporation, the authorized number of
directors shall be not less than one nor more than ten. The number of directors
in office from time to time shall be within the limits specified above, as
prescribed from time to time by resolution adopted by either the shareholders or
the Board of Directors. The directors will regularly be elected at each annual
meeting of the shareholders, but directors may be elected at any other meeting
of the shareholders. Each director shall hold office until the annual meeting of
shareholders following his/her election, subject to his/her earlier resignation
or removal. However, if a director's term expires, he/she shall continue to
serve until his/her successor shall have been elected and qualified, until
his/her resignation or removal, or until there is a decrease in the number of
directors. Unless required by the Articles, directors do not need to be
residents of the State of Arizona or shareholders of the corporation.

                  4.03 Regular Meetings of the Board of Directors. A regular
annual meeting of the Board of Directors is to be held as soon as practicable
after the adjournment of each annual meeting of the shareholders, either at the
place of the shareholders meeting or at such other place as the directors
elected at the shareholders meeting may have been informed of at or prior to the
time of their election. Additional regular meetings may be held at regular
intervals at such places and at such times as the Board of Directors may
determine.

                  4.04 Special Meetings of the Board of Directors. Special
meetings of the Board of Directors may be held whenever and wherever called for
by the Chairman of the Board, the President, or the number of directors that
would be required to constitute a quorum.

                  4.05 Notice of, and Waiver of Notice for, Directors Meetings.
No notice need be given of regular meetings of the Board of Directors. Notice of
the time and place of any special directors meeting shall be given at least 48
hours prior thereto. Notice shall be given in accordance with and shall be
deemed to be effective at the time and in the manner described in Arizona
Revised Statutes Section 10-141. Any director may waive notice of any meeting
and any adjournment thereof at any time before, during, or after it is held.
Except as provided in the next sentence below, the waiver must be in writing,
signed by the director entitled to the notice, and filed with the minutes or
corporate records. The attendance of a director at or participation of a
director in a meeting shall constitute a waiver of notice of such meeting,
unless the director at the beginning of the meeting (or promptly upon his/her
arrival) objects to holding the meeting or transacting business at the meeting,
and does not thereafter vote for or assent to action taken at the meeting.


                                       6
<PAGE>   7
                  4.06 Director Quorum. A majority of the number of directors
prescribed according to Section 4.02 above, or if no number is so prescribed,
the number in office immediately before the meeting begins, shall constitute a
quorum for the transaction of business at any meeting of the Board of Directors,
unless the Articles require a greater number.

                  4.07     Directors, Manner of Acting.

                           (a) If a quorum is present when a vote is taken, the
affirmative vote of a majority of the directors present shall be the act of the
Board of Directors unless the Articles require a greater percentage.

                           (b) Unless the Articles provide otherwise, any or all
directors may participate in a regular or special meeting by, or conduct the
meeting through the use of, any means of communication by which all directors
participating may simultaneously hear each other during the meeting, in which
case, any required notice of the meeting may generally describe the arrangements
(rather than or in addition to the place) for the holding thereof. A director
participating in a meeting by this means is deemed to be present in person at
the meeting.

                           (c) A director who is present at a meeting of the
Board of Directors or a committee of the Board of Directors when corporate
action is taken is deemed to have assented to the action taken unless: (1) the
director objects at the beginning of the meeting (or promptly upon his/her
arrival) to holding it or transacting business at the meeting; or (2) his/her
dissent or abstention from the action taken is entered in the minutes of the
meeting; or (3) he/she delivers written notice of his/her dissent or abstention
to the presiding officer of the meeting before its adjournment or to the
corporation before 5:00 p.m. on the next business day after the meeting. The
right of dissent or abstention is not available to a director who votes in favor
of the action taken.

                  4.08 Director Action Without a Meeting. Unless the Articles
provide otherwise, any action required or permitted to be taken by the Board of
Directors at a meeting may be taken without a meeting if the action is taken by
unanimous written consent of the Board of Directors as evidenced by one (1) or
more written consents describing the action taken, signed by each director and
filed with the minutes or corporate records. Action taken by consent is
effective when the last director signs the consent, unless the consent specifies
a different effective date. A signed consent has the effect of a meeting vote
and may be described as such in any document.

                  4.09 Removal of Directors by Shareholders. The shareholders
may remove one (1) or more directors at a meeting called for that purpose if
notice has been given that a purpose of the meeting is such removal. The removal
may be with or without cause unless the Articles provide that directors may only
be removed with cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in a
shareholder vote to remove him. If less than the entire Board of Directors is to
be removed, a director may not be removed if the number of votes sufficient to
elect the director under cumulative voting is voted against the director's
removal.

                  4.10     Board of Director Vacancies.


                                       7
<PAGE>   8
                           (a) Unless the Articles provide otherwise, if a
vacancy occurs on the Board of Directors, including a vacancy resulting from an
increase in the number of directors, either the shareholders or the Board of
Directors may fill the vacancy.

                           (b) If the vacant office was held by a director
elected by a voting group of shareholders, only the holders of shares of that
voting group are entitled to vote to fill the vacancy if it is filled by the
shareholders.

                           (c) A vacancy that will occur at a specific later
date (by reason of resignation effective at a later date) may be filled before
the vacancy occurs, but the new director may not take office until the vacancy
occurs.

                           (d) The term of a director elected to fill a vacancy
expires at the next shareholders meeting at which directors are elected.

                  4.11 Director Compensation. Unless otherwise provided in the
Articles by resolution of the Board of Directors, each director may be paid
his/her expenses, if any, of attendance at each meeting of the Board of
Directors or any committee thereof, and may be paid a stated salary as director
or a fixed sum for attendance at each meeting of the Board of Directors or any
committee thereof, or both. No such payment shall preclude any director from
serving the corporation in any capacity and receiving compensation therefor.

                  4.12     Director Committees.

                           (a) Creation of Committees. Unless the Articles
provide otherwise, the Board of Directors may create one (1) or more committees
and appoint members of the Board of Directors to serve on them. Each committee
shall have one (1) or more members, who serve at the pleasure of the Board of
Directors.

                           (b) Selection of Members. The creation of a committee
and appointment of members to it shall be approved by the greater of (1) a
majority of all the directors in office when the action is taken or (2) the
number of directors required by the Articles to take such action.

                           (c) Required Procedures. Sections 4.03 through 4.08
of this Article IV, which govern meetings, action without meetings, notice and
waiver of notice, and quorum and voting requirements of the Board of Directors,
apply to committees and their members.

                           (d) Authority. Unless limited by the Articles, each
committee may exercise those aspects of the authority of the Board of Directors
which the Board of Directors confers upon such committee in the resolution
creating the committee, provided, however, that a committee may not: (1)
authorize distributions; (2) approve or propose to shareholders action that
requires shareholder approval under the Arizona Business Corporation Act; (3)
fill vacancies on the Board of Directors or on any of its committees; (4) amend
the Articles of Incorporation without shareholder action as provided by law; (5)
adopt, amend or repeal these Bylaws; (6) approve a plan of merger not requiring
shareholder approval; (7) authorize or approve reacquisition of shares, except


                                       8
<PAGE>   9
according to a formula or method prescribed by the Board of Directors; (8)
authorize or approve the issuance or sale or contract for sale of shares or
determine the designation and relative rights, preferences, and limitations of a
class or series of shares, except within limits specifically prescribed by the
Board of Directors; or (9) fix the compensation of directors for serving on the
Board of Directors or any committee of the Board of Directors.

                  4.13 Director Resignations. Any director or committee member
may resign from his or her office at any time by written notice delivered to the
Board of Directors, the Chairman of the Board, or the corporation at its known
place of business. Any such resignation will be effective upon its receipt
unless some later time is therein fixed, and then from that time. The acceptance
of a resignation will not be required to make it effective.

                                   V. OFFICERS

                  5.01 Number of Officers. The officers of the corporation shall
be a President, a Secretary, and a Treasurer, each of whom shall be appointed by
the Board of Directors. Such other officers and assistant officers as may be
deemed necessary, including any Vice Presidents, may be appointed by the Board
of Directors. If specifically authorized by the Board of Directors, an officer
may appoint one (1) or more other officers or assistant officers. The same
individual may simultaneously hold more than one (1) office in the corporation.

                  5.02 Appointment and Term of Office. The officers of the
corporation shall be appointed by the Board of Directors for a term as
determined by the Board of Directors. The designation of a specified term grants
to the officer no contract rights, and the Board of Directors can remove the
officer at any time prior to the termination of such term. If no term is
specified, an officer of the corporation shall hold office until he or she
resigns, dies, or until he or she is removed in the manner provided by law or in
Section 5.03 of this Article V. The regular election or appointment of officers
will take place at each annual meeting of the Board of Directors, but elections
of officers may be held at any other meeting of the Board.

                  5.03 Resignation and Removal of Officers. An officer may
resign at any time by delivering written notice to the corporation at its known
place of business. A resignation is effective when the notice is delivered
unless the notice specifies a later effective date or event. Any officer may be
removed by the Board of Directors at any time, with or without cause. Such
removal shall be without prejudice to the contract rights, if any, of the person
so removed. Appointment of an officer shall not of itself create contract
rights.

                  5.04 Duties of Officers. Officers of the corporation shall
have authority to perform such duties as may be prescribed from time to time by
law, in these Bylaws, or by the Board of Directors, the President, or the
superior officer of any such officer. Each officer of the corporation (in the
order designated herein or by the Board) will be vested with all of the powers
and charged with all of the duties of his or her superior officer in the event
of such superior officer's absence, death, or disability.


                                       9
<PAGE>   10
                  5.05 Bonds and Other Requirements. The Board of Directors may
require any officer to give bond to the corporation (with sufficient surety and
conditioned for the faithful performance of the duties of his or her office) and
to comply with such other conditions as may from time to time be required of him
or her by the Board of Directors.

                  5.06 President. Unless otherwise specified by resolution of
the Board of Directors, the President shall be the principal executive officer
of the corporation and, subject to the control of the Board of Directors, shall
supervise and control all of the business and affairs of the corporation and the
performance by all of its other officers of their respective duties and in
general shall perform all duties incident to the office of President and such
other duties as may be prescribed by the Board of Directors from time to time.
The President shall, when present, and in the absence of a Chairman of the
Board, preside at all meetings of the shareholders and of the Board of
Directors. The President will be a proper officer to sign on behalf of the
corporation any deed, bill of sale, assignment, option, mortgage, pledge, note,
bond, evidence of indebtedness, application, consent (to service of process or
otherwise), agreement, indenture, contract, or other instrument, except in each
such case where the signing and execution thereof shall be expressly delegated
by the Board of Directors or by these Bylaws to some other officer or agent of
the corporation, or shall be required by law to be otherwise signed or executed.
The President may represent the corporation at any meeting of the shareholders
or members of any other corporation, association, partnership, joint venture, or
other entity in which the corporation then holds shares of capital stock or has
an interest, and may vote such shares of capital stock or other interest in
person or by proxy appointed by him or her, provided that the Board of Directors
may from time to time confer the foregoing authority upon any other person or
persons.

                  5.07 The Vice-President. If appointed, in the absence of the
President or in the event of his/her death or disability, the Vice-President (or
in the event there be more than one Vice-President, the Vice-Presidents in the
order designated at the time of their election, or in the absence of any such
designation, then in the order of their appointment) shall perform the duties of
the President, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the President. If there is no Vice-President or in
the event of the death or disability of all Vice-Presidents, then the Treasurer
shall perform such duties of the President in the event of his or her absence,
death, or disability. Each Vice-President will be a proper officer to sign on
behalf of the corporation any deed, bill of sale, assignment, option, mortgage,
pledge, note, bond, evidence of indebtedness, application, consent (to service
of process or otherwise), agreement, indenture, contract, or other instrument,
except in each such case where the signing and execution thereof shall be
expressly delegated by the Board of Directors or by these Bylaws to some other
officer or agent of the corporation, or shall be required by law to be otherwise
signed or executed. Any Vice-President may represent the corporation at any
meeting of the shareholders or members of any other corporation, association,
partnership, joint venture, or other entity in which the corporation then holds
shares of capital stock or has an interest, and may vote such shares of capital
stock or other interest in person or by proxy appointed by him or her, provided
that the Board of Directors may from time to time confer the foregoing authority
upon any other person or persons. A Vice-President shall perform such other
duties as from time to time may be assigned to him/her by the President or by
the Board of Directors.


                                       10
<PAGE>   11
                  5.08 The Secretary. The Secretary shall: (a) keep the minutes
of the proceedings of the shareholders and of the Board of Directors and any
committee of the Board of Directors and all unanimous written consents of the
shareholders, Board of Directors, and any committee of the Board of Directors in
one (1) or more books provided for that purpose; (b) see that all notices are
duly given in accordance with the provisions of these Bylaws or as required by
law; (c) be custodian of the corporate records and of any seal of the
corporation; (d) when requested or required, authenticate any records of the
corporation; (e) keep a register of the address of each shareholder which shall
be furnished to the Secretary by such shareholder; and (f) in general perform
all duties incident to the office of Secretary and such other duties as from
time to time may be assigned to him/her by the President or by the Board of
Directors. Except as may otherwise be specifically provided in a resolution of
the Board of Directors, the Secretary will be a proper officer to take charge of
the corporation's stock transfer books and to compile the voting record pursuant
to Section 3.05 above, and to impress the corporation's seal, if any, on any
instrument signed by the President, any Vice President, or any other duly
authorized person, and to attest to the same. In the absence of the Secretary, a
secretary pro tempore may be chosen by the directors or shareholders as
appropriate to perform the duties of the Secretary.

                  5.09 The Treasurer. The Treasurer shall: (a) have charge and
custody of and be responsible for all funds and securities of the corporation;
(b) receive and give receipts for moneys due and payable to the corporation from
any source whatsoever, and deposit all such moneys in the name of the
corporation in such bank, trust companies, or other depositories as shall be
selected by the Board of Directors or any proper officer; (c) keep full and
accurate accounts of receipts and disbursements in books and records of the
corporation; and (d) in general perform all of the duties incident to the office
of Treasurer and such other duties as from time to time may be assigned to
him/her by the President or by the Board of Directors. The Treasurer will render
to the President, the directors, and the shareholders at proper times an account
of all his or her transactions as Treasurer and of the financial condition of
the corporation. The Treasurer shall be responsible for preparing and filing
such financial reports, financial statements, and returns as may be required by
law.

                  5.10 Assistant Secretaries and Assistant Treasurers. The
Assistant Secretaries and the Assistant Treasurers, when authorized by the Board
of Directors, may sign with the President or a Vice-President certificates for
shares of the corporation, the issuance of which shall have been authorized by a
resolution of the Board of Directors. The Assistant Secretaries and Assistant
Treasurers, in general, shall perform such duties as shall be assigned to them
by the Secretary or the Treasurer, respectively, or by the President or the
Board of Directors.

                  5.11 Chairman of the Board. The Board of Directors may elect a
Chairman to serve as a general executive officer of the corporation, and, if
specifically designated as such by the Board of Directors, as the chief
executive officer of the corporation. If elected, the Chairman will preside at
all meetings of the Board of Directors and be vested with such other powers and
duties as the Board of Directors may from time to time delegate to him or her.

                  5.12 Salaries. The salaries of the officers of the corporation
may be fixed from time to time by the Board of Directors or (except as to the
President's own) left to the discretion of


                                       11
<PAGE>   12
the President. No officer will be prevented from receiving a salary by reason of
the fact that he or she is also a director of the corporation.

                  5.13 Additional Appointments. In addition to the officers
contemplated in this Article V, the Board of Directors may appoint other agents
of the corporation with such authority to perform such duties as may be
prescribed from time to time by the Board of Directors.

                 VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER

                  6.01     Certificates for Shares.

                           (a) Content. Certificates representing shares of the
corporation shall, at a minimum, state on their face the name of the issuing
corporation and that it is formed under the laws of the State of Arizona, the
name of the person to whom issued, and the number and class of shares and the
designation of the series, if any, the certificate represents. Such certificates
shall be signed (either manually or by facsimile to the extent allowable by law)
by one or more officers of the corporation, as determined by the Board of
Directors, or, if no such determination is made, by any of the Chairman of the
Board (if any), the President, any Vice-President, the Secretary, or the
Treasurer of the corporation, and may be sealed with a corporate seal or a
facsimile thereof. Each certificate for shares shall be consecutively numbered
or otherwise identified and will exhibit such information as may be required by
law. If a supply of unissued certificates bearing the facsimile signature of a
person remains when that person ceases to hold the office of the corporation
indicated on such certificates or ceases to be the transfer agent or registrar
of the corporation, they may still be issued by the corporation and
countersigned, registered, issued, and delivered by the corporation's transfer
agent and/or registrar thereafter, as though such person had continued to hold
the office indicated on such certificate.

                           (b) Legend as to Class or Series. If the corporation
is authorized to issue different classes of shares or different series within a
class, the designations, relative rights, preferences, and limitations
applicable to each class and the variations in rights, preferences, and
limitations determined for each series (and the authority of the Board of
Directors to determine variations for future series) shall be summarized on the
front or back of each certificate. Alternatively, each certificate may state
conspicuously on its front or back that the corporation will furnish a
shareholder this information on request in writing and without charge.

                           (c) Shareholder List. The name and address of the
person to whom shares are issued, with the number of shares and date of issue,
shall be entered on the stock transfer books of the corporation.

                           (d) Lost Certificates. In the event of the loss,
theft, or destruction of any certificate representing shares of the corporation
or of any predecessor corporation, the corporation may issue (or, in the case of
any such shares as to which a transfer agent and/or registrar have been
appointed, may direct such transfer agent and/or registrar to countersign,
register, and issue) a new certificate, and cause the same to be delivered to
the registered owner of the shares represented thereby; provided that such owner
shall have submitted such evidence showing the circumstances


                                       12
<PAGE>   13
of the alleged loss, theft, or destruction, and his, her, or its ownership of
the certificate, as the corporation considers satisfactory, together with any
other facts that the corporation considers pertinent; and further provided that,
if so required by the corporation, the owner shall provide a bond or other
indemnity in form and amount satisfactory to the corporation (and to its
transfer agent and/or registrar, if applicable).

                  6.02 Registration of the Transfer of Shares. Registration of
the transfer of shares of the corporation shall be made only on the stock
transfer books of the corporation. In order to register a transfer, the record
owner shall surrender the shares to the corporation for cancellation, properly
endorsed by the appropriate person or persons with reasonable assurances that
the endorsements are genuine and effective. Unless the corporation has
established a procedure by which a beneficial owner of shares held by a nominee
is to be recognized by the corporation as the owner, the corporation will be
entitled to treat the registered owner of any share of the capital stock of the
corporation as the absolute owner thereof and, accordingly, will not be bound to
recognize any beneficial, equitable, or other claim to, or interest in, such
share on the part of any other person, whether or not it has notice thereof,
except as may expressly be provided by applicable law.

                  6.03 Shares Without Certificates. The Board of Directors may
authorize the issuance of uncertificated shares by the corporation and may
prescribe procedures for the issuance and registration of transfer thereof and
with respect to such other matters as the Board of Directors shall deem
necessary or appropriate.

                               VII. DISTRIBUTIONS

                  7.01 Distributions. Subject to such restrictions or
requirements as may be imposed by applicable law or the corporation's Articles
or as may otherwise be binding upon the corporation, the Board of Directors may
from time to time declare, and the corporation may pay or make, dividends or
other distributions to its shareholders.

                              VIII. CORPORATE SEAL

                  8.01 Corporate Seal. The Board of Directors may provide for a
corporate seal of the corporation that will have inscribed thereon any
designation including the name of the corporation, Arizona as the state of
incorporation, the year of incorporation, and the words "Corporate Seal."

                                 IX. AMENDMENTS

                  9.01 Amendments. The corporation's Board of Directors may
amend or repeal the corporation's Bylaws unless:

                                    (1)      the Articles or the Arizona
                                             Business Corporation Act reserve
                                             this power exclusively to the
                                             shareholders in whole or part; or


                                       13
<PAGE>   14
                                    (2)      the shareholders in adopting,
                                             amending, or repealing a particular
                                             Bylaw provide expressly that the
                                             Board of Directors may not amend or
                                             repeal that Bylaw.

                  The corporation's shareholders may amend or repeal the
corporation's Bylaws even though the Bylaws may also be amended or repealed by
its Board of Directors.


                                       14
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.16
<SEQUENCE>15
<FILENAME>p65173ex3-16.txt
<DESCRIPTION>EX-3.16
<TEXT>

<PAGE>   1
                                                                  EXHIBIT 3.16.1

Jane Dee Hull                                     Original Certificate #2014770
Secretary of State
Limited Partnership Division
1700 West Washington 7th Fl
Phoenix, AZ 85007                [SECRETARY OF STATE SEAL]

542-6187

Fee: $10.00
plus $3.00 per page
Submit in Duplicate

                           AMENDMENT NAME CHANGE FOR
                       CERTIFICATE OF LIMITED PARTNERSHIP



Name of Limited Partnership: MONTEREY/LEGACY HOMES L.P.
                             ___________________________________________________

Business Address: 6613 North Scottsdale Road #200, Scottsdale, Arizona 85250
                  ______________________________________________________________
                  Street or Box Number             City        State   Zip

Date of Original Filing: 6/13/97
                         ______________________________

The following statement(s) contained in the original application is amended as
follows:

      Limited Partnership name to be cancelled: MONTEREY/LEGACY HOMES L.P.
                                                __________________________

     Limited Partnership name to be registered: LEGACY/MONTEREY HOMES L.P.
                                                __________________________

I hereby declare that I am the person who executed the Amendment to the
Certificate of Limited Partnership, which by signing below, indicates my act
and deed.

X [SIGNATURE]                           MTH-TEXAS GP, INC.
  __________________________________    __________________________________
  Signature of General Partner          Printed Name Larry W. Seay
                                                     Vice President - Finance

State of Arizona  )
                  )                ss.
County of Maricopa)


Subscribed and sworn to before me this 19th day of June, 1997
                                       ____        ____    __ [NOTARY STAMP]
[SIGNATURE]                             05/03/00
___________________________________    ____________________________________
Notary Signature                       My commission expires
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.16.1
<SEQUENCE>16
<FILENAME>p65173ex3-16_1.txt
<DESCRIPTION>EX-3.16.1
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 3.16



Jane Dee Hull
Secretary of State
Limited Partnership Division
1700 West Washington 7th Fl
Phoenix, Arizona 85007

Fee:  $10.00 plus $3.00 per page


            CERTIFICATE OF LIMITED PARTNERSHIP (A.R.S. SECTION 29-308)
                                       OF
                           MONTEREY/LEGACY HOMES L.P.


         THIS CERTIFICATE OF LIMITED PARTNERSHIP for MONTEREY/LEGACY HOMES L.P.
is executed for the purpose of forming a limited partnership pursuant to the
Arizona Limited Partnership Act.

1.       The name of the Limited Partnership is Monterey/Legacy Homes L.P.

2.       The address of the Limited Partnership at which the records required to
         be maintained by A.R.S. 29.304 shall be kept is:

                           6613 North Scottsdale Road, Suite 200
                           Scottsdale, Arizona 85250

3.       The name and address of the registered agent for service of process
         with respect to the Limited Partnership is:

                           CT Corporation System
                           3225 N. Central Avenue
                           Phoenix, Arizona 85012

4.       The name and business addresses of the sole General Partner of the
         Limited Partnership is:

                           MTH-Texas GP, Inc.
                           6613 North Scottsdale Road, Suite 200
                           Scottsdale, Arizona 85250

5.       The latest date on which the Limited Partnership can dissolve is
         December 31, 2099.
<PAGE>   2
         IN WITNESS WHEREOF, the undersigned general partner has caused this
Certificate of Limited Partnership, which shall become effective upon filing, to
be duly executed as of this 12th day of June, 1997.


                  GENERAL PARTNER:

                  MTH-TEXAS GP, Inc., an Arizona corporation


                  By:               /s/ William W. Cleverly
                     --------------------------------------------------
                  Name:  William W. Cleverly
                  Its: Chairman and Co-Chief Executive Officer

                  and


                  By:               /s/ Steven J. Hilton
                     -----------------------------------------------------------
                  Name:  Steven J. Hilton
                  Its: President and Co-Chief Executive Officer

STATE OF ARIZONA                    )
                                    ) ss.
County of Maricopa                  )

         The foregoing instrument was acknowledged before me this 12th day of
June, 1997, by William J. Cleverly, Chairman and Co-Chief Executive Officer of
MTH-TEXAS GP, Inc., an Arizona corporation, as the General Partner of
Monterey/Legacy Homes L.P., an Arizona limited partnership, on behalf of that
limited partnership.

         IN WITNESS WHEREOF, I hereunto set my hand and official seal.


                                                /s/
                                          --------------------------------------
                                                      Notary Public

My Commission Expires:

05/03/00
----------------------


                                       2
<PAGE>   3
STATE OF ARIZONA                    )
                                    ) ss.
County of Maricopa                  )

         The foregoing instrument was acknowledged before me this 12th day of
June, 1997, by Steven J. Hilton, President and Co-Chief Executive Officer of
MTH-TEXAS GP, Inc., an Arizona corporation, as the General Partner of
Monterey/Legacy Homes L.P., an Arizona limited partnership, on behalf of that
limited partnership.

         IN WITNESS WHEREOF, I hereunto set my hand and official seal.


                                                /s/
                                          --------------------------------------
                                                      Notary Public

My Commission Expires:

05/03/00
----------------------





                                       3
<PAGE>   4
                   ACCEPTANCE OF AGENT FOR SERVICE OF PROCESS


Having been designated to act as statutory agent for Monterey/Legacy Homes L.P.,
an Arizona limited partnership, the undersigned hereby consents to act in that
capacity until resignation or removal by the partnership.

                                CT Corporation System

                                By:      /s/ William C. Bradford, Jr.
                                   ---------------------------------------------
                                         William C. Bradford, Jr.,
                                         Vice President

In the event the above designated agent for service of process resigns and a new
agent for service of process has not been filed with the Secretary of State, or
if the above named agent for service of process cannot be found or served with
reasonable diligence, then the Secretary of State is hereby appointed the agent
for service of process.







                                       4
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.17
<SEQUENCE>17
<FILENAME>p65173ex3-17.txt
<DESCRIPTION>EX-3.17
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 3.17



                            ARTICLES OF INCORPORATION

                                       OF

                   MERITAGE HOMES OF NORTHERN CALIFORNIA, INC.

                  FIRST: The name of this corporation is Meritage Homes of
Northern California, Inc.

                  SECOND: The purpose of this corporation is to engage in any
lawful act or activity for which a corporation may be organized under the
General Corporation Law of California other than the banking business, the trust
company business or the practice of a profession permitted to be incorporated by
the California Corporations Code.

                  THIRD: The name and address in this State of this
corporation's initial agent for service of process is CT Corporation System.

                  FOURTH: This corporation is authorized to issue only one class
of shares of stock, which shall be common stock, and the total number of shares
that this corporation is authorized to issue shall be 1,000.

                  FIFTH: The liability of the directors of this corporation for
monetary damages shall be eliminated to the fullest extent permissible under
California law.

                  SIXTH: This corporation is authorized to provide
indemnification of agents (as defined in Section 317 of the California
Corporations Code) through bylaw provisions, agreements with agents, vote of
shareholders or disinterested directors or otherwise, in excess of the
indemnification otherwise permitted by Section 317 of the California
Corporations Code, subject only to the applicable limits set forth in Section
204 of the California Corporations Code with respect to actions for breach of
duty to the corporation and its shareholders.

Dated: June 16, 1998


                                                     /s/ David Hinnant
                                                     David Hinnant, Incorporator
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.18
<SEQUENCE>18
<FILENAME>p65173ex3-18.txt
<DESCRIPTION>EX-3.18
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 3.18




                                     BYLAWS

                                       OF

                   MERITAGE HOMES OF NORTHERN CALIFORNIA, INC.

                            a California corporation
<PAGE>   2
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                              PAGE
                                                                                                              ----
<S>                                                                                                           <C>
ARTICLE I             CORPORATE OFFICES..........................................................................1

         Section 1.      Principal Office........................................................................1

         Section 2.      Other Offices...........................................................................1

ARTICLE II            MEETINGS OF SHAREHOLDERS...................................................................1

         Section 1.      Place of Meetings.......................................................................1

         Section 2.      Annual Meeting..........................................................................1

         Section 3.      Special Meeting.........................................................................1

         Section 4.      Notice of Shareholders; Meetings........................................................2

         Section 5.      Manner of Giving Notice; Affidavit of Notice............................................2

         Section 6.      Organization............................................................................2

         Section 7.      Quorum..................................................................................2

         Section 8.      Adjourned Meeting; Notice...............................................................2

         Section 9.      Voting; Proxies.........................................................................3

         Section 10.     Validation of Meetings; Waiver of Notice; Consent.......................................3

         Section 11.     Shareholder Action by Written Consent Without a Meeting.................................4

         Section 12.     Record Date for Shareholder Notice; Voting; Giving Consents.............................4

         Section 13.     Inspectors of Election..................................................................4

ARTICLE III           DIRECTORS..................................................................................5

         Section 1.      Powers..................................................................................5

         Section 2.      Number of Directors.....................................................................5

         Section 3.      Election and Term of Office of Directors................................................5

         Section 4.      Resignations and Vacancies..............................................................5

         Section 5.      Place of Meetings; Meetings by Telephone................................................6

         Section 6.      Organization............................................................................6

         Section 7.      Regular Meetings........................................................................6

         Section 8.      Special Meetings; Notice................................................................6

         Section 9.      Quorum..................................................................................7

         Section 10.     Waiver of Notice........................................................................7

         Section 11.     Adjournment.............................................................................7

         Section 12.     Notice of Adjournment...................................................................7
</TABLE>

                                      -i-
<PAGE>   3
                                TABLE OF CONTENTS

                                   (CONTINUED)

<TABLE>
<CAPTION>
                                                                                                              PAGE
                                                                                                              ----
<S>                                                                                                           <C>
         Section 13.     Board Action by Written Consent Without A Meeting.......................................7

         Section 14.     Fees and Compensation of Directors......................................................7

ARTICLE IV            COMMITTEES.................................................................................8

         Section 1.      Committees of Directors.................................................................8

         Section 2.      Meetings and Actions of Committees......................................................8

ARTICLE V             OFFICERS...................................................................................9

         Section 1.      Officers................................................................................9

         Section 2.      Election of Officers....................................................................9

         Section 3.      Subordinate Officers....................................................................9

         Section 4.      Removal and Resignation of Officers.....................................................9

         Section 5.      Vacancies in Office.....................................................................9

         Section 6.      Chairman of the Board...................................................................9

         Section 7.      President..............................................................................10

         Section 8.      Vice Presidents........................................................................10

         Section 9.      Secretary..............................................................................10

         Section 10.     Chief Financial Officer................................................................10

ARTICLE VI            INDEMNIFICATION OF DIRECTORS, OFFICERS, ETC...............................................11

         Section 1.      Indemnification of Directors and Officers..............................................11

         Section 2.      Indemnification of Others..............................................................11

         Section 3.      Payment of Expenses in Advance.........................................................12

         Section 4.      Procedure for Effecting Indemnification................................................12

         Section 5.      Indemnity Not Exclusive................................................................12

         Section 6.      Insurance Indemnification..............................................................12

         Section 7.      Conflicts..............................................................................13

ARTICLE VII           RECORDS AND REPORTS.......................................................................13

         Section 1.      Inspection of Share Register...........................................................13

         Section 2.      Maintenance and Inspection of Bylaws...................................................13

         Section 3.      Maintenance and Inspection of Other Corporate Records..................................13

         Section 4.      Inspection by Directors................................................................14

         Section 5.      Annual Report to Shareholders; Waiver..................................................14
</TABLE>

                                      -ii-
<PAGE>   4
                                TABLE OF CONTENTS

                                   (CONTINUED)

<TABLE>
<CAPTION>
                                                                                                              PAGE
                                                                                                              ----
<S>                                                                                                           <C>
         Section 6.      Financial Statements...................................................................14

         Section 7.      Representation of Shares of Other Corporations.........................................15

ARTICLE VIII          GENERAL MATTERS...........................................................................15

         Section 1.      Record Date for Purposes Other Than Notice and Voting..................................15

         Section 2.      Checks; Drafts; Evidences of Indebtedness..............................................15

         Section 3.      Corporate Contracts and Instruments; How Executed......................................15

         Section 4.      Certificates for Shares................................................................16

         Section 5.      Lost Certificates......................................................................16

         Section 6.      Construction; Definitions..............................................................16

ARTICLE IX            AMENDMENTS................................................................................16

         Section 1.      Amendment By Shareholders..............................................................16

         Section 2.      Amendment By Directors.................................................................16
</TABLE>

                                     -iii-
<PAGE>   5
                                     BYLAWS

                                       OF

                   MERITAGE HOMES OF NORTHERN CALIFORNIA, INC.

                           ARTICLE I CORPORATE OFFICES

         Section 1. Principal Office. The corporation may have its principal
executive office at such place within or outside of the State of California as
the Board of Directors may from time to time fix or the business of the
corporation may require. If the principal executive office is located outside of
such state and the corporation has one or more business offices in such state,
then the Board of Directors shall fix and designate a principal business office
in the State of California.

         Section 2. Other Offices. The Board of Directors may at any time
establish, or may designate an officer of the corporation to establish, branch
or subordinate offices at any place or places where the corporation is qualified
to do business.

                       ARTICLE II MEETINGS OF SHAREHOLDERS

         Section 1. Place of Meetings. Meetings of the shareholders shall be
held at any place within or outside of the State of California designated by the
Board of Directors. In the absence of any such designation, shareholders'
meetings shall be held at the principal executive office of the corporation.

         Section 2. Annual Meeting. The annual meeting of shareholders shall be
held each year on a date and at a time designated by the Board of Directors. At
the annual meeting, the stockholders then entitled to vote shall elect the
directors of the corporation and transact such other business as may properly be
brought before the meeting.

         Section 3. Special Meeting. A special meeting of the shareholders of
the corporation for any purpose or purposes for which meetings may lawfully be
called, may be called at any time for any purpose or purposes by the Board of
Directors or by any person or committee expressly so authorized by the Board of
Directors, or by the Chairman of the Board or the President, or by the holders
of shares entitled to cast not less than ten percent of the votes at the meeting
and by no other person or persons.

         At any time, upon written request of any person or persons who have
duly called a special meeting, which written request shall state the purpose or
purposes of the meeting, it shall be the duty of the Secretary to fix the date
of the meeting to be held at such date and time as the Secretary may fix, not
less than ten nor more than sixty days after the receipt of the request, and to
give due notice thereof. If the Secretary shall neglect or refuse to fix the
time and date of such meeting and give notice thereof, the person or persons
calling the meeting may do so.


                                       1
<PAGE>   6
         Section 4. Notice of Shareholders' Meetings. Written notice of the
place, date and hour of every meeting of the stockholders, whether annual or
special, shall be given not less than ten nor more than sixty days before the
date of the meeting to each stockholder of record entitled to vote at the
meeting. Every notice of a special meeting shall state the purpose or purposes
thereof.

         Section 5. Manner of Giving Notice; Affidavit of Notice. Written notice
of any meeting of shareholders shall be given either (i) personally or (ii) by
first-class mail or (iii) by third-class mail but only if the corporation has
outstanding shares held of record by 500 or more persons (determined as provided
in Section 605 of the General Corporation Law of the State of California) on the
record date for the shareholders' meeting, or (iv) by telegraphic or other
written communication. Notices not personally delivered shall be sent charges
prepaid and shall be addressed to the shareholder at the address of that
shareholder appearing on the books of the corporation or given by the
shareholder to the corporation for the purpose of notice. If no such address
appears on the corporation's books or is given, notice shall be deemed to have
been given if sent to that shareholder by mail or telegraphic or other written
communication to the corporation's principal executive office, or if published
at least once in a newspaper of general circulation in the county where that
office is located. Notice shall be deemed to have been given at the time when
delivered personally or deposited in the mail or sent by telegram or other means
of written communication.

         If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the shareholder
at that address, then all future notices or reports shall be deemed to have been
duly given without further mailing if the same shall be available to the
shareholder on written demand of the shareholder at the principal executive
office of the corporation for a period of one year from the date of the giving
of the notice.

         An affidavit of the mailing or other means of giving any notice of any
shareholders' meeting, executed by the Secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.

         Section 6. Organization. At every meeting of the stockholders, the
Chairman of the Board, or in the case of vacancy in office or absence of the
Chairman of the Board, such person as may be designated by the Board of
Directors, shall act as Chairman of such meeting, and the Secretary, or, in his
absence, an assistant secretary, or in the absence of both the Secretary and the
assistant secretaries, a person appointed by the Chairman of the Meeting shall
act as Secretary.

         Section 7. Quorum. The presence in person or by proxy of the holders of
a majority of the shares entitled to vote thereat constitutes a quorum for the
transaction of business at all meetings of shareholders. The shareholders
present at a duly called or held meeting at which a quorum is present may
continue to do business until adjournment, notwithstanding the withdrawal of
enough shareholders to leave less than a quorum, if any action taken (other than
adjournment) is approved by at least a majority of the shares required to
constitute a quorum.

         Section 8. Adjourned Meeting; Notice. Any shareholders' meeting, annual
or special, whether or not a quorum is present, may be adjourned from time to
time by the vote of the majority


                                       2
<PAGE>   7
of the shares represented at that meeting, either in person or by proxy. In the
absence of a quorum, no other business may be transacted at that meeting except
as provided in Section 7 of this Article II of these Bylaws.

         When any meeting or shareholders, annual or special, is adjourned to
another time or place, notice need not be given of the adjourned meeting if the
time and place are announced at the meeting at which the adjournment is taken.
However, if a new record date for the adjourned meeting is fixed or if the
adjournment is for more than forty-five days from the date set for the original
meeting, then notice of the adjourned meeting shall be given. Notice of any such
adjourned meeting shall be given to each shareholder of record entitled to vote
at the adjourned meeting in accordance with the provisions of Sections 4 and 5
of this Article II of these Bylaws. At any adjourned meeting the corporation may
transact any business which might have been transacted at the original meeting.

         Section 9. Voting; Proxies. The shareholders entitled to vote at any
meeting of shareholders shall be determined in accordance with the provisions of
Section 12 of this Article II of these Bylaws, subject to the provisions of
Sections 702 through 704 of the General Corporation Law of the State of
California (relating to voting shares held by a fiduciary, in the name of a
corporation or in joint ownership).

         Each shareholder shall at every meeting of the shareholders be entitled
to one vote in person or by proxy for each share of common stock and the number
of votes per share as designated in the designation of rights adopted with
respect to each share of preferred stock registered in his name on the books of
the corporation on the record date for such meeting. The vote upon any other
matter need not be by ballot. No proxy shall be voted after three years from its
date, unless the proxy provides for a longer period. Every proxy shall be
executed in writing by the shareholder or by his duly authorized
attorney-in-fact and filed with the Secretary of the corporation. A proxy,
unless coupled with an interest, shall be revocable at will, notwithstanding any
other agreement or any provisions in the proxy to the contrary, but the
revocation of a proxy shall not be effective until notice thereof has been given
to the Secretary of the corporation. A duly executed proxy shall be irrevocable
if it states that it is irrevocable and if, and only as long as, it is coupled
with an interest sufficient in law to support an irrevocable power. A proxy may
be made irrevocable regardless of whether the interest with which it is coupled
is an interest in the stock itself or an interest in the corporation generally.
A proxy shall not be revoked by the death or incapacity of the maker unless,
before the vote is counted or the authority is exercised, written notice of such
death or incapacity is given to the Secretary of the corporation.

         If a quorum is present, the affirmative vote of the majority of the
shares represented and voting at a duly held meeting (which shares voting
affirmatively also constitute at least a majority of the required quorum) shall
be the act of the shareholders, unless the vote of a greater number or a vote by
classes is required by the General Corporation Law of the State of California or
by the Articles of Incorporation of the corporation, as then in effect.

         Section 10. Validation of Meetings; Waiver of Notice; Consent. The
transactions of any meeting of shareholders, either annual or special, however
called and noticed, and wherever held, shall be as valid as though they had been
taken at a meeting duly held after regular call and notice if a quorum be
present either in person or by proxy, and if, either before or after the
meeting, each


                                       3
<PAGE>   8
person entitled to vote, who was not present in person or by proxy, signs a
written waiver of notice or consent to the holding of the meeting or an approval
of the minutes thereof. The waiver of notice or consent or approval need not
specify either the business to be transacted or the purpose of any annual or
special meeting of shareholders, except that if action is taken or proposed to
be taken for approval of any of those matters specified in the second paragraph
of Section 4 of this Article II of these Bylaws, the waiver of notice or consent
or approval shall state the general nature of the proposal. All such waivers,
consents and approvals shall be filed with the corporate records or made a part
of the minutes of the meeting.

         Attendance by a person at a meeting shall also constitute a waiver of
notice of and presence at that meeting, except when the person objects at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened. Attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by the General
Corporation Law of the State of California to be included in the notice of the
meeting, but only if that objection is expressly made at the meeting.

         Section 11. Shareholder Action by Written Consent Without a Meeting.
Unless otherwise provided in the Articles of Incorporation, any action which may
be taken at any annual or special meeting of such shareholders may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those shareholders who have not consented in writing.

         Section 12. Record Date for Shareholder Notice; Voting; Giving
Consents. For purposes of determining the shareholders entitled to notice of any
meeting or to vote thereat or entitled to give consent to corporate action with
a meeting, the Board of Directors may fix, in advance, a record date, which
shall not be more than sixty days nor less than ten days before the date of any
such meeting nor more than sixty days before any such action without a meeting,
and in such event only shareholders of record on the date so fixed are entitled
to notice and to vote or to give consents, as the case may be, notwithstanding
any transfer of any shares on the books of the corporation after the record
date, except as otherwise provided in the General Corporation Law of the State
of California.

         Section 13. Inspectors of Election. Before any meeting of shareholders,
the Board of Directors may appoint an inspector or inspectors of election to act
at the meeting or its adjournment. If no inspector of election is so appointed,
then the chairman of the meeting may, and on the request of any shareholder or a
shareholder's proxy shall, appoint an inspector or inspectors of election to act
at the meeting. The number of inspectors shall be either one or three. If
inspectors are appointed at a meeting pursuant to the request of one or more
shareholders or proxies, then the holders of a majority of shares or their
proxies present at the meeting shall determine whether one or three inspectors
are to be appointed. If any person appointed as inspector fails to appear or
fails or refuses to act, then the chairman of the meeting may, and upon the
request of any shareholder or a shareholder's proxy shall, appoint a person to
fill that vacancy.

         Such inspector(s) shall: (i) determine the number of shares outstanding
and the voting power


                                       4
<PAGE>   9
of each, the number of shares represented at the meeting, the existence of a
quorum, and the authenticity, validity and effect of proxies; (ii) receive
votes, ballots or consents; (iii) hear and determine all challenges and
questions in any way arising in connection with the right to vote; (iv) count
and tabulate all votes or consents; (v) determine when the polls shall close;
(vi) determine the result; and (vii) do any other acts that may be proper to
conduct the election or vote with fairness to all shareholders.

                              ARTICLE III DIRECTORS

         Section 1. Powers. The business and affairs of the corporation shall be
managed by and under the direction of the Board of Directors; and all powers of
the corporation, except those specifically reserved or granted to the
shareholders by statute, the Articles of Incorporation or these Bylaws, are
hereby granted to and vested in the Board of Directors

         Section 2. Number of Directors. The Board of Directors shall consist of
such number of directors, not less than one (1) or more than five (5), as may be
determined from time to time by the Board of Directors subject to the provisions
of the Articles of Incorporation. The exact number of directors shall be three
(3) until changed by the Board of Directors pursuant to and in accordance with
the provisions of this Section 2 of this Article III of these Bylaws. No
reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.

         Section 3. Election and Term of Office of Directors. Directors shall be
elected at each annual meeting of shareholders to hold office until the next
annual meeting. The term of each director shall be for one year from the date of
his election; however, each director shall serve until his successor shall have
been duly elected and qualified, unless he shall resign, become disqualified,
disabled or shall otherwise be removed. At each annual election, the directors
chosen to succeed those whose terms then expire shall be for the same term as
the directors they succeed.

         Section 4. Resignations and Vacancies. Any director may resign
effective on giving written notice to the Chairman of the Board, the President,
the Secretary or the Board of Directors, unless the notice specifies a later
time for that resignation to become effective. If the resignation of a director
is effective at a future time, the Board of Directors may elect a successor to
take office when the resignation becomes effective.

         Vacancies and newly created directorships resulting from any increase
in the authorized number of directors may be filled by a majority of the
directors then in office, though less than a quorum, or by a sole remaining
director, and the directors so chosen shall hold office until his successor
shall have been duly elected and qualified unless he shall resign, become
disqualified, disabled or shall otherwise be removed. If there are no directors
in office, then an election of directors may be held in the manner provided by
statute. If, at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole Board of Directors (as constituted immediately prior to any such
increase), the shareholder or shareholders holding a majority of the shares at
the time outstanding having the right to vote for such directors may summarily
order an election to be held to fill any such vacancies or newly created
directorships, or to replace the directors chosen by the directors then in
office.


                                       5
<PAGE>   10
         A vacancy or vacancies in the Board of Directors shall be deemed to
exist (i) in the event of the death, resignation or removal or any director,
(ii) if the Board of Directors by resolution declares vacant the office of a
director who has been declared of unsound mind by an order of court or convicted
of a felony, (iii) if the authorized number of directors is increased, or (iv)
if the shareholders fail, at any meeting of shareholders at which any director
or directors are elected, to elect the number of directors to be elected at that
meeting.

         The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors, but any such election
other than to fill a vacancy created by removal, if by written consent, shall
require the consent of the holders of a majority of the outstanding shares
entitled to vote thereon.

         Section 5. Place of Meetings; Meetings by Telephone. Regular meetings
of the Board of Directors may be held at any place within or outside of the
State of California that have been designated from time to time by resolution of
the Board. In the absence of such a designation, regular meetings shall he held
at the principal executive office of the corporation. Special meetings of the
Board may be held at any place within or outside of the State of California that
has been designated in the notice of the meeting or, if not stated in the notice
or there is no notice, at the principal executive office of the corporation. Any
meeting, regular or special, may be held by conference telephone or similar
communication equipment, so long as all directors participating in the meeting
can hear one another; and all such directors shall be deemed to be present in
person at the meeting.

         Section 6. Organization. At every meeting of the Board of Directors,
the Chairman of the Board, if there be one, or, in the case of a vacancy in the
office or absence of the Chairman of the Board, one of the following officers
present in the order stated: the President; a Vice President; or a Chairman
chosen by a majority of the directors present, shall preside, and the Secretary,
or, in his or her absence, an Assistant Secretary, or in the absence of the
Secretary and the Assistant Secretaries, any person appointed by the Chairman of
the meeting, shall act as Secretary of the meeting.

         Section 7. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice if the times of such meetings are fixed by the Board
of Directors.

         Section 8. Special Meetings; Notice. Special meetings of the Board if
Directors for any purpose or purposes may be called at any time by the Chairman
of the Board, the President, any Vice President, the Secretary or any two
directors.

         Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four days before the time
of the holding of the meeting. If the notice is delivered personally or by
telephone or telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight hours before the time of the holding
of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has


                                       6
<PAGE>   11
reason to believe will promptly communicate it to the director. The notice need
not specify the purpose or the place of the meeting, if the meeting is to be
held at the principal executive office of the corporation.

         Section 9. Quorum. At all meetings of the Board of Directors, a
majority of the total number of directors shall constitute a quorum for the
transaction of business, and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the Board of
Directors, except as may be otherwise specifically provided by statute or by the
Articles of Incorporation. If a quorum shall not be present at any meeting of
the Board of Directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present. A meeting at which a quorum is initially present may
continue to transact business notwithstanding the withdrawal of directors, if
any action taken is approved by at least a majority of the required quorum for
that meeting.

         Section 10. Waiver of Notice. Notice of a meeting need not be given to
any director (i) who signs a waiver of notice or a consent to holding the
meeting or an approval of the minutes thereof, whether before or after the
meeting or (ii) who attends the meeting without protesting, prior thereto, or at
its commencement, the lack of notice to such directors. All such waivers,
consents and approvals shall be filed with the corporate records or made part of
the minutes of the meeting. A waiver of notice need not specify the purpose of
any regular or special meeting of the Board of Directors.

         Section 11. Adjournment. A majority of the directors present, whether
or not constituting a quorum, may adjourn any meeting to another time and place.

         Section 12. Notice of Adjournment. Notice of the time and place of
holding an adjourned meeting need not be given unless the meeting is adjourned
for more than twenty-four hours. If the meeting is adjourned for more than
twenty-four hours, then notice of the time and place of the adjourned meeting
shall be given before the adjourned meeting takes place, in the manner specified
in Section 8 of this Article III of these Bylaws, to the directors who were not
present at the time of the adjournment.

         Section 13. Board Action by Written Consent Without A Meeting. Unless
otherwise restricted by the Articles of Incorporation or these Bylaws, any
action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting, if all
members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board or committee, as the case may be. Such action by written consent
shall have the same force and effect as a unanimous vote of the Board of
Directors.

         Section 14. Fees and Compensation of Directors. Directors and members
of committees may receive such compensation, if any, for their services and such
reimbursement of expenses as may be fixed or determined by resolution of the
Board of Directors. This Section 14 of this Article III of these Bylaws shall
not be construed to preclude any director from serving the corporation in any
other capacity as an officer, agent, employee or otherwise and receiving
compensation for those services.


                                       7
<PAGE>   12
                              ARTICLE IV COMMITTEES

         Section 1. Committees of Directors. The Board of Directors may, by
resolution passed by a majority of the whole Board of Directors, designate one
or more committees, each committee to consist of one or more of the directors of
the corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of a
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in place of any such absent or disqualified member. Any such committee,
to the extent provided in the resolution of the Board of Directors, shall have
and may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers which may require it; but no
such committee shall have power or authority in reference to amending the
certificate of incorporation, adopting an agreement of merger or consolidation,
recommending to the shareholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, recommending to the
shareholders a dissolution of the corporation or a revocation of dissolution,
removing or indemnifying directors or amending these Bylaws; and unless the
resolution expressly so provides, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock. Unless
the Board of Directors otherwise provides, each committee may adopt, amend and
repeal rules for the conduct of its business. In the absence of a provision by
the Board of Directors or a provision in the rules of such committee to the
contrary, a majority of the entire authorized number of members of such
committee shall constitute a quorum for the transaction of business, the vote of
a majority of the members present at a meeting at the time of such vote if a
quorum is present shall be the act of such committee, and in other respects each
committee shall conduct its business in the same manner as the Board of
Directors conducts its business.

         Section 2. Meetings and Actions of Committees. Meetings and actions of
committees shall be governed by, and held and taken in accordance with, the
bylaw provisions applicable to meetings and actions of the Board of Directors as
provided in Article III of these Bylaws, with such changes in the context of
those Bylaws as are necessary to substitute the committee and its members for
the Board of Directors and its members; provided, however, that the time of
regular meetings of committees may be determined either by resolution of the
Board of Directors or by resolution of the committee and that special meetings
of committees may also be called by resolution of the Board of Directors. The
Board of Directors may adopt rules for the government of any committee not
inconsistent with the provisions of these Bylaws.


                                       8
<PAGE>   13
                               ARTICLE V OFFICERS

         Section 1. Officers. The officers of the corporation shall be chosen by
the Board of Directors and shall be a President, a Chief Financial Officer, and
a Secretary. The corporation may also have, at the discretion of the Board of
Directors, one or more vice presidents, one or more assistant secretaries, one
or more assistant treasurers and such other officers as may be elected in
accordance with the provisions of Section 3 of this Article V. One person may
hold more than one office. Officers may be, but need not be, directors or
shareholders of the corporation.

         Section 2. Election of Officers. The officers of the corporation,
except those elected by delegated authority pursuant to Section 3 of this
Article V, shall be chosen by the Board of Directors, and each such officer
shall hold his office until his successor shall have been elected and qualified,
or until his earlier resignation or removal, subject to the rights, if any, of
an officer under any contractor of employment.

         Section 3. Subordinate Officers. The Board of Directors may from time
to time appoint such other officers, employees or other agents as it deems
necessary, who shall hold their offices for such terms and shall exercise such
powers and perform such duties as are provided in these Bylaws, or as the Board
of Directors may from time to time determine. The Board of Directors may
delegate to any officer or committee the power to elect subordinate officers and
to retain or appoint employees or other agents, or committees thereof, and to
prescribe the authority and duties of such subordinate officers, committees,
employees or other agents.

         Section 4. Removal and Resignation of Officers. Subject to the rights,
if any, of an officer under any contract of employment, any officer or agent may
be removed, either with or without cause, by the Board of Directors at any
regular or special meeting of the Board or, except in case of an officer chosen
by the Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors. Any officer may resign at any time by
giving written notice to the Board of Directors, or to the President or the
Secretary of the corporation. Any such resignation shall take effect at the date
of the receipt of such notice or at any later time specified therein and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.

         Section 5. Vacancies in Office. A vacancy in any office because of
death, resignation, removal, disqualification, or any other cause, shall be
filled by the Board of Directors or by the officer or committee to which the
power to fill such officer has been delegated pursuant to Section 3 of this
Article V, as the case may be, and if the office is one for which these Bylaws
prescribe a term, shall be filled for the unexpired portion of the term.

         Section 6. Chairman of the Board. The Chairman of the Board, if such an
officer be elected, shall, if present, preside at all meetings of the
shareholders and of the Board of Directors, and shall exercise and perform such
other powers and duties as may from time to time be assigned to him by the Board
of Directors or as may be prescribed by these Bylaws. If there is no President,
then the Chairman of the Board shall have powers and authority identical to
those of the President.


                                       9
<PAGE>   14
         Section 7. President. The President, if such an officer be elected,
shall, subject to the control of the Board of Directors, have general and active
supervision of the affairs, business, officers and employees of the corporation.
He shall have authority to sign, execute, and acknowledge, in the name of the
corporation deeds, mortgages, bonds, contracts or other instruments, authorized
by the Board of Directors, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors, or these Bylaws,
to some other officer or agent of the corporation. He shall, from time to time,
in his discretion or at the order of the Board of Directors, submit to the Board
of Directors reports of the operations and affairs of the corporation. He shall
also perform such other duties and have such other powers as may be assigned to
him from time to time by the Board of Directors. If there is no Chairman of the
Board, the President shall preside at all meetings of the shareholders and of
the Board of Directors.

         Section 8. Vice Presidents. The corporation may have one or more Vice
Presidents, having such duties as from time to time may be determined by the
Board of Directors, the President, these Bylaws or the Chairman of the Board. In
the absence or disability of the President, the vice presidents, if any, in
order of their rank as fixed by the Board of Directors or, if not ranked, a vice
president designated by the Board of Directors, shall perform all the duties of
the President and when so acting shall have all of the powers of, and be subject
to all the restrictions upon, the President.

         Section 9. Secretary. The Secretary shall keep or cause to be kept full
minutes of all meetings of the shareholders and of the Board of Directors; shall
be ex officio Secretary of the Board of Directors; shall attend all meetings of
the shareholders and of the Board of Directors; and shall record all the votes
of the shareholders and of the directors and the minutes of the meetings of the
shareholders and of the Board of Directors and of committees of the Board in a
book or books to be kept for that purpose. The minutes shall show the time and
place of each meeting, whether regular or special (and, if special, how
authorized and the notice given), the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
shareholders' meetings, and the proceedings thereof. The Secretary shall also
keep, or cause to be kept, a share register, or a duplicate share register
showing the names of all shareholders and their addresses, the number and
classes of shares held by each, the number and date of certificates evidencing
such shares, and the number and date of cancellation of every certificate
surrendered for cancellation.

         The Secretary shall give, or cause to be given, notices of all meetings
of the shareholders of the corporation and of the Board of Directors; shall be
the custodian of the seal of the corporation and see that it is affixed to all
documents to be executed on behalf of the company under its seal; shall have
responsibility for the custody and safekeeping of all permanent records and
other documents of the corporation; and, in general, shall perform all duties
incident to the office of Secretary and such other duties as may be prescribed
by the Board of Directors or by the President, under whose supervision he or she
shall be. The Board of Directors may elect one or more assistant secretaries to
perform such duties as shall from time to time be assigned to them by the Board
of Directors or the President.

         Section 10. Chief Financial Officer. The Chief Financial Officer shall
have or provide for the custody of all funds, securities and other property of
the corporation; shall collect and receive or provide for the collection or
receipt of money earned by or in any manner due to or received by


                                       10
<PAGE>   15
the corporation; shall deposit or cause to be deposited all said moneys in such
banks or other depositories as the Board of Directors may from time to time
designate; shall make disbursements of corporate funds upon appropriate
vouchers; shall keep full and accurate accounts of transactions of his office in
books belonging to the corporation; shall, whenever so required by the Board of
Directors, render an accounting showing his transactions as Chief Financial
Officer, and the financial condition of the corporation; and, in general, shall
discharge any other duties as may from time to time be assigned to him by the
Board of Directors. The Board of Directors may elect one or more assistant
treasurers to perform the duties of the Chief Financial Officer as shall from
time to time be assigned to them by the Board of Directors or the Chief
Financial Officer.

             ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, ETC.

         Section 1. Indemnification of Directors and Officers. The corporation
shall, to the maximum extent and in the manner permitted by the General
Corporation Law of the State of California, indemnify each of its directors and
officers of the corporation against expenses, judgments, fines, settlements, and
other amounts actually and reasonably incurred in connection with any
proceeding, arising by reason of the fact that such person is or was an agent of
the corporation if he or she acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the corporation,
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner that he reasonably believed
to be in, or not opposed to, the best interests of the corporation, and, with
respect to any criminal action or proceeding, had reasonable cause to believe
that his conduct was unlawful. For purposes of this Article VI, a "director" or
"officer" of the corporation includes any person (i) who is or was a director or
officer of the corporation, (ii) who is or was serving at the request of the
corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, or (iii) who was a director or officer of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.

         Section 2. Indemnification of Others. The corporation shall have the
power to the extent and in the manner permitted by the General Corporation Law
of the State of California to indemnify each of its employees and agents (other
than directors and officers) against expenses, judgments, fines, settlements,
and other amounts actually and reasonably incurred in connection with any
proceeding, arising by reason of the fact that such person is or was an agent of
the corporation if he or she acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the corporation,
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner that he reasonably believed
to be in, or not opposed to, the best interests of the corporation, and, with
respect to any criminal action or proceeding, had reasonable cause to believe
that his conduct was unlawful. For purposes of this Article VI, an "employee" or
"agent" of the corporation (other than a director or officer) includes any
person (i) who is or was an employee or agent of the corporation, (ii) who is or
was serving at the request of the corporation as an employee or agent of another
corporation,


                                       11
<PAGE>   16
partnership, joint venture, trust or other enterprise, or (iii) who was an
employee or agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.

         Section 3. Payment of Expenses in Advance. Expenses (including
attorneys' fees) incurred in defending a civil or criminal action, suit or
proceeding shall be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of an authorized representative to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the
corporation as required in this Article VI or authorized by law.

         Section 4. Procedure for Effecting Indemnification. Indemnification
under Sections 1 or 2 of this Article VI shall be made when ordered by a court
and shall be made in a specific case upon a determination that indemnification
of the authorized representative is required or proper in the circumstances
because he has met the applicable standard of conduct set forth in Sections 1
and 2 of this Article VI. Such determination shall be made: (i) by the Board of
Directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (ii) if such a quorum is not
obtainable, or, even if obtainable a majority vote of a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or
(iii) by the shareholders.

         If a claim under this Article VI is not paid in full by the corporation
within ninety days after a written claim has been received by the corporation,
the claimant may at any time thereafter bring suit against the corporation to
recover the unpaid amount of the claim, and if successful in whole or in part,
the claimant shall be entitled to be paid also the expense of prosecuting such
claim. It shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any action, suit or
proceeding in advance of its final disposition where the required undertaking
has been tendered to the corporation) that the claimant has not met the
standards of conduct that make it permissible for the corporation to indemnify
the claimant for the amount claimed, but the burden of proving such defense
shall be on the corporation. Neither the failure of the corporation (including
its Board of Directors, independent legal counsel or its shareholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he had
met the applicable standard of conduct, nor an actual determination by the
corporation (including its Board of Directors, independent legal counsel, or its
shareholders) that the claimant has not met such applicable standard of conduct
shall be a defense to the action or create a presumption that claimant had not
met the applicable standard of conduct.

         Section 5. Indemnity Not Exclusive. The indemnification provided by
this Article VI shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any bylaw, agreement, vote of
shareholders or disinterested directors or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office, to the extent that such additional rights to indemnification are
authorized in the Articles of Incorporation of the corporation.


                                       12
<PAGE>   17
         Section 6. Insurance Indemnification. The corporation shall have the
power to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation against any liability
asserted against or incurred by such person in such capacity or arising out of
such person's status as such, whether or not the corporation would have the
power to indemnify him against such liability under the provisions of this
Article VI.

         Section 7. Conflicts. No indemnification or advance shall be made under
this Article VI, except where such indemnification or advance is mandated by law
or the order, judgment or decree of any court of competent jurisdiction, in any
circumstance where it appears: (i) that it would be inconsistent with a
provision of the Articles of Incorporation of the corporation, these Bylaws, a
resolution of the shareholders or an agreement in effect at the time of the
accrual of the alleged cause of the action asserted in the proceeding in which
the expenses were incurred or other amounts were paid, which prohibits or
otherwise limits indemnification; or (ii) that it would be inconsistent with any
condition expressly imposed by a court in approving a settlement.

                         ARTICLE VII RECORDS AND REPORTS

         Section 1. Inspection of Share Register. A shareholder or shareholders
of the corporation who holds at least five percent in the aggregate of the
outstanding voting shares of the corporation or who holds at least one percent
of such voting shares and has filed a Schedule 14B with the Securities and
Exchange Commission relating to the election of directors, may (i) inspect and
copy the records of shareholders' names, addresses, and share holdings during
usual business hours on at least five days written demand on the corporation,
(ii) obtain from the transfer agent of the corporation, on written demand and on
the tender of such transfer agent's usual charges for such list, a list of the
names and addresses of the shareholders who are entitled to vote for the
election of directors, and their share holdings, as of the most recent record
date for which that list has been compiled or as of a date specified by the
shareholder after the date of demand. Such list shall be made available to any
such shareholder by the transfer agent on or before the later of five days after
the demand is received or five days after the date specified in the demand as
the date as of which the list is to be compiled.

         The record of shareholders shall also be open to inspection on the
written demand of any shareholder or holder of a voting trust certificate, at
any time during usual business hours, for a purpose reasonably related to the
holder's interests as a shareholder or as the holder of a voting trust
certificate.

         Any inspection and copying under this Section 1 may be made in person
or by an agent or attorney of the shareholder or holder of a voting trust
certificate making the demand.

         Section 2. Maintenance and Inspection of Bylaws. The corporation shall
keep at its principal executive office or, if its principal executive office is
not in the State of California, at its principal business office in California,
the original or a copy of these Bylaws as amended to date, which Bylaws shall be
open to inspection by the shareholders at all reasonable times during office
hours. If the principal executive office of the corporation is outside the State
of California and the corporation has no principal business office in such
state, then the secretary shall, upon the written request of any shareholder,
furnish to that shareholder a copy of these Bylaws as amended to date.


                                       13
<PAGE>   18
         Section 3. Maintenance and Inspection of Other Corporate Records. The
accounting books and records and the minutes of proceedings of the shareholders,
of the Board of Directors, and of any committee or committees of the Board of
Directors shall be kept at such place or places as are designated by the Board
of Directors or, in the absence of such designation, at the principal executive
office of the corporation. The minutes shall be kept in written form, and the
accounting books and records shall be kept either in written form or in any
other form capable of being converted into written form.

         The minutes and accounting books and records shall be open to
inspection upon the written demand of any shareholder or holder of a voting
trust certificate, at any reasonable time during usual business hours, for a
purpose reasonably related to the holder's interests as a shareholder or as the
holder of a voting trust certificate. The inspection may be made in person or by
an agent or attorney and shall include the right to copy and make extracts. Such
rights of inspection shall extend to the records of each subsidiary corporation
of the corporation.

         Section 4. Inspection by Directors. Every director shall have the
absolute right at any reasonable time to inspect all books, records and
documents of every kind as well as the physical properties of the corporation
and each of its subsidiary corporations. Such inspection by a director may be
made in person or by an agent or attorney. The right of inspection includes the
right to copy and make extracts of documents.

         Section 5. Annual Report to Shareholders; Waiver. The Board of
Directors shall cause an annual report to be sent to the shareholders not later
than 120 days after the close of the fiscal year adopted by the corporation.
Such report shall be sent at least fifteen days (or, if sent by third-class
mail, thirty-five days) before the annual meeting of shareholders to be held
during the next fiscal year and in the manner specified in Section 5 of Article
II of these Bylaws for giving notice to shareholders of the corporation.

         The annual report shall contain (i) a balance sheet as of the end of
the fiscal year, (ii) an income statement, (iii) a statement of changes in
financial position for the fiscal year, and (iv) any report of independent
accountants or, if there is no such report, the certificate of an authorized
officer of the corporation that the statements were prepared without audit from
the books and records of the corporation.

         The foregoing requirement of an annual report shall be waived so long
as the shares of the corporation are held by fewer than 100 holders of record.

         Section 6. Financial Statements. If no annual report for the fiscal
year has been sent to shareholders, then the corporation shall, upon the written
request of any shareholder made more than 120 days after the close of such
fiscal year, deliver or mail to the person making the request, within thirty
days thereafter, a copy of a balance sheet as of the end of such fiscal year and
an income statement and statement of changes in financial position for such
fiscal year.

         If a shareholder or shareholders holding at least five percent of the
outstanding shares of any class of stock of the corporation makes a written
request to the corporation for an income statement of the corporation for the
three-month, six-month or nine-month period of the then current fiscal year


                                       14
<PAGE>   19
ended more than thirty days before the date of the request, and for a balance
sheet of the corporation as of the end of that period, then the Chief Financial
Officer shall cause that statement to be prepared, if not already prepared, and
shall deliver personally or mail that statement or statements to the person
making the request within thirty days after the receipt of the request. If the
corporation has not sent to the shareholders its annual report for the last
fiscal year, the statements referred to in the first paragraph of this Section 6
shall likewise be delivered or mailed to the shareholder or shareholders within
thirty days after the request.

         The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report, if any, of any independent
accountants engaged by the corporation or by the certificate of an authorized
officer of the corporation that the financial statements were prepared without
audit from the books and records of the corporation.

         Section 7. Representation of Shares of Other Corporations. The Chairman
of the Board, the President or any vice president, the Chief Financial Officer,
the Secretary or an assistant secretary of the corporation, or any person
authorized by the Board of Directors or the President, is authorized to vote,
represent, and exercise on behalf of the corporation all rights incident to any
and all shares of any other corporation or corporations standing in the name of
the corporation. The authority herein granted may be exercised either by such
person director or by any other person authorized to do so by proxy or power of
attorney duly executed by such person having the authority.

                          ARTICLE VIII GENERAL MATTERS

         Section 1. Record Date for Purposes Other Than Notice and Voting. For
purposes of determining the shareholders entitled to receive payment of any
dividend or other distribution or allotment of any rights or the shareholders
entitled to exercise any rights in respect of any other lawful action (other
than action by shareholders by written consent without a meeting), the Board of
Directors may fix, in advance, a record date, which shall not be more than sixty
days before any such action. In that case, only shareholders of record at the
close of business on the date so fixed are entitled to receive the dividend,
distribution or allotment of rights, or to exercise such rights, as the case may
be, notwithstanding any transfer of any shares on the books of the corporation
after the record date so fixed, except as otherwise provided in the General
Corporation Law of the State of California.

         If the Board of Directors does not so fix a record date, then the
record date for determining shareholders for any such purpose shall be at the
close of business on the day on which the Board adopts the applicable resolution
or the sixtieth day before the date of that action, whichever is later.

         Section 2. Checks; Drafts; Evidences of Indebtedness. From time to
time, the Board of Directors shall determine by resolution which person or
persons may sign or endorse all checks, drafts, other orders for payment of
money, notes or other evidences of indebtedness that are issued in the name of
or payable to the corporation, and only the persons so authorized shall sign or
endorse those instruments.

         Section 3. Corporate Contracts and Instruments; How Executed. The Board
of Directors, except as otherwise provided in these Bylaws, may authorize any
officer or officers, or


                                       15
<PAGE>   20
agent or agents, to enter into any contract or execute any instrument in the
name of and on behalf of the corporation; such authority may be general or
confined to specific instances. Unless so authorized or ratified by the Board of
Directors or within the agency power of an officer, no officer, agent or
employee shall have any power or authority to bind the corporation by any
contract or engagement or to pledge its credit or to render it liable for any
purpose or for any amount.

         Section 4. Certificates for Shares. A certificate or certificates for
shares of the corporation shall be issued to each shareholder when any of such
shares are fully paid. The Board of Directors may authorize the issuance of
certificates for shares partly paid provided that these certificates shall state
the total amount of the consideration to be paid for them and the amount
actually paid. All certificates shall be signed in the name of the corporation
by the Chairman of the Board or the Vice Chairman of the Board or the President
or a vice president and by the Chief Financial Officer or an assistant treasurer
or the Secretary or an assistant secretary, certifying the number of shares and
the class or series of shares owned by the shareholder. Any or all of the
signatures on the certificate may be facsimile.

         In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed on a certificate ceases to be that
officer, transfer agent or registrar before that certificate is issued, it may
be issued by the corporation with the same effect as if that person were an
officer, transfer agent or registrar at the date of issue.

         Section 5. Lost Certificates. Except as provided in this Section 5, no
new certificates for shares shall be issued to replace a previously issued
certificate unless the latter is surrendered to the corporation and canceled at
the same time. The Board of Directors may, in case any share certificate or
certificate for any other security is lost, stolen or destroyed, authorize the
issuance of replacement certificates on such terms and conditions as the Board
may require; the Board may require indemnification of the corporation secured by
a bond or other adequate security sufficient to protect the corporation against
any claim that may be made against it, including any expense or liability, on
account of the alleged loss, theft or destruction of the certificate or the
issuance of the replacement certificate.

         Section 6. Construction; Definitions. Unless the context requires
otherwise, the general provisions, rules of construction and definitions in the
General Corporation Law of the State of California shall govern the construction
of these Bylaws. Without limiting the generality of this provision, the singular
number includes the plural, the plural number includes the singular, and the
term "person" includes both a corporation and a natural person.

                              ARTICLE IX AMENDMENTS

         Section 1. Amendment By Shareholders. New bylaws may be adopted or
these Bylaws may be amended or repealed by the vote or written consent of
holders of a majority of the outstanding shares entitled to vote; provided,
however, that if the Articles of Incorporation of the corporation set forth the
number of authorized directors of the corporation, then the authorized number of
directors may be changed only by an amendment of the Articles of Incorporation.


                                       16
<PAGE>   21
         Section 2. Amendment By Directors. Subject to the rights of
shareholders as provided in Section 1 of this Article IX of these Bylaws,
bylaws, other than bylaws or an amendment of a bylaw changing the authorized
number of directors (except to fix the authorized number of directors pursuant
to a bylaw providing for a variable number of directors), may be adopted,
amended or repealed by the Board of Directors.


                                       17
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.19
<SEQUENCE>19
<FILENAME>p65173ex3-19.txt
<DESCRIPTION>EX-3.19
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 3.19



                            ARTICLES OF INCORPORATION

                                       OF

                           HANCOCK-MTH BUILDERS, INC.

                  1.  The name of the corporation is Hancock-MTH Builders, Inc.

                  2. The purpose for which the corporation is organized is the
transaction of any or all lawful business for which corporations may be
incorporated under the laws of the State of Arizona, as they may be amended from
time to time. The character of business which the corporation initially intends
actually to conduct in the State of Arizona is residential real property
development.

                  3. The aggregate number of shares that the corporation shall
have authority to issue is one thousand (1,000) common shares, all of which
shares shall be of a single class.

                  4. The name and street address in Arizona of the initial
statutory agent of the corporation is CT Corporation System, Inc., 3225 N
Central Ave, Phoenix, AZ 85012.

                  5. The number of directors constituting the initial board of
directors of the corporation is two (2). The names and addresses of the persons
who are to serve as directors until the first annual meeting of shareholders, or
until their successors are elected and qualified, are Steve Hilton, 6613 N
Scottsdale Rd, Scottsdale, AZ 85252 and John Landon, 6613 N Scottsdale Rd,
Scottsdale, AZ 85252. The number of persons to serve on the board of directors
thereafter shall be fixed by the bylaws of the corporation.

                  6. The name and address of the incorporator is Larry Seay,
6613 N Scottsdale Rd, Scottsdale, AZ 85252.

                  7. The liability of a director or former director to the
corporation or its shareholders shall be eliminated to the fullest extent
permitted by Section 10-202.B.1 of the Arizona Revised Statutes.

                  If the Arizona Business Corporation Act is amended to
authorize corporate action further eliminating or limiting the liability of
directors, the liability of a director of the corporation shall be eliminated or
limited to the fullest extent permitted by the Arizona Business Corporation Act,
as amended.

                  Any repeal or modification of this Article 7 shall not
adversely affect any right or protection of a director of the corporation
existing hereunder with respect to any act or omission occurring prior to or at
the time of such repeal or modification.

                  The provisions of this Article 7 shall not be deemed to limit
or preclude indemnification of a director by the corporation for any liability
of a director which has not been eliminated by the provisions of this Article 7.

                  8. The corporation shall indemnify any and all of its existing
and former directors and officers to the fullest extent permitted by Section
10-202.B.2 of the Arizona Business
<PAGE>   2
Corporation Act. If the Arizona Business Corporation Act is amended to authorize
corporate action broadening the corporation's ability to indemnify its directors
and officers, the corporation shall indemnify its existing and former directors
and officers to the fullest extent permitted by the Arizona Business Corporation
Act, as amended. Any repeal or modification of this Article 8 shall not
adversely affect any right or protection of any existing or former director or
officer of the corporation existing hereunder with respect to any act or
omission occurring prior to or at the time of such repeal or modification.

                  DATED:  May 7, 2001



                                                                  /s/ Larry Seay
                                                                  Larry Seay
                                                                  Incorporator

                                     - 2 -
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.20
<SEQUENCE>20
<FILENAME>p65173ex3-20.txt
<DESCRIPTION>EX-3.20
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 3.20

                                     BYLAWS

                                       OF

                           HANCOCK-MTH BUILDERS, INC.


         I. REFERENCES TO CERTAIN TERMS AND CONSTRUCTION

         1.01 Certain References. Any reference herein made to law will be
deemed to refer to the law of the State of Arizona, including any applicable
provision of Chapters 1 through 17 of Title 10 of the Arizona Revised Statutes,
or any successor statute, as from time to time amended and in effect (sometimes
referred to herein as the "Arizona Business Corporation Act"). Any reference
herein made to the corporation's Articles will be deemed to refer to its
Articles of Incorporation and all amendments thereto as at any given time on
file with the Arizona Corporation Commission. Except as otherwise required by
law and subject to any procedures established by the corporation pursuant to
Arizona Revised Statutes Section 723, the term "shareholder" as used herein
shall mean one who is a holder of record of shares of the corporation.
References to specific sections of law herein made shall be deemed to refer to
such sections, or any comparable successor provisions, as from time to time
amended and in effect.

         1.02 Seniority. The law and the Articles (in that order of precedence)
will in all respects be considered senior and superior to these Bylaws, with any
inconsistency to be resolved in favor of the law and such Articles (in that
order of precedence), and with these Bylaws to be deemed automatically amended
from time to time to eliminate any such inconsistency which may then exist.

         1.03 Computation of Time. The time during which an act is required to
be done, including the time for the giving of any required notice herein, shall
be computed by excluding the first day or hour, as the case may be, and
including the last day or hour.

                                   II. OFFICES

         2.01 Principal Office. The principal office of the corporation shall be
located at any place either within or outside the State of Arizona as designated
in the corporation's most current Annual Report filed with the Arizona
Corporation Commission or in any other document executed and delivered to the
Arizona Corporation Commission for filing. If a principal office is not so
designated, the principal office of the corporation shall mean the known place
of business of the corporation. The corporation may have such other offices,
either within or without the State of Arizona, as the Board of Directors may
designate or as the business of the corporation may require from time to time.

         2.02 Known Place of Business. A known place of business of the
corporation shall be located within the State of Arizona and may be, but need
not be, the address of the statutory agent of the corporation. The corporation
may change its known place of business from time to time in accordance with the
relevant provisions of the Arizona Business Corporation Act.
<PAGE>   2
                               III. SHAREHOLDERS

         3.01 Annual Shareholder Meeting. The annual meeting of the shareholders
shall be held on such date and at such time and place, either within or without
the State of Arizona, as shall be fixed by the Board of Directors or, in the
absence of action by the Board, as set forth in the notice given or waiver
signed with respect to such meeting pursuant to Section 3.03 below, for the
purpose of electing directors and for the transaction of such other business as
may properly come before the meeting. If any annual meeting is for any reason
not held on the date determined as aforesaid, a deferred annual meeting may
thereafter be called and held in lieu thereof, at which the same proceedings may
be conducted. If the day fixed for the annual meeting shall be a legal holiday
in the State of Arizona such meeting shall be held on the next succeeding
business day.

         3.02 Special Shareholder Meetings. Special meetings of the shareholders
may be held whenever and wherever, either within or without the State of
Arizona, called for by or at the direction of a Co-Chairman of the Board, a
Co-President, or the Board of Directors.

         3.03 Notice of Shareholders Meetings.

                  (a) Required Notice. Notice stating the place, day and hour of
any annual or special shareholders meeting shall be given not less than ten (10)
nor more than sixty (60) days before the date of the meeting by or at the
direction of the person or persons calling the meeting, to each shareholder
entitled to vote at such meeting and to any other shareholder entitled to
receive notice of the meeting by law or the Articles. Notices to shareholders
shall be given in accordance with, and shall be deemed to be effective at the
time and in the manner described in, Arizona Revised Statutes Section 10-141. If
no designation is made of the place at which an annual or special meeting will
be held in the notice for such meeting, the place of the meeting will be at the
principal place of business of the corporation.

                  (b) Adjourned Meeting. If any shareholders meeting is
adjourned to a different date, time, or place, notice need not be given of the
new date, time, and place, if the new date, time, and place are announced at the
meeting before adjournment. But if a new record date for the adjourned meeting
is fixed or must be fixed in accordance with law or these Bylaws, then notice of
the adjourned meeting shall be given to those persons who are shareholders as of
the new record date and who are entitled to such notice pursuant to Section
3.03(a) above.

                  (c) Waiver of Notice. Any shareholder may waive notice of a
meeting (or any notice of any other action required to be given by the Arizona
Business Corporation Act, the corporation's Articles, or these Bylaws), at any
time before, during, or after the meeting or other action, by a writing signed
by the shareholder entitled to the notice. Each such waiver shall be delivered
to the corporation for inclusion in the minutes or filing with the corporate
records. Under certain circumstances, a shareholder's attendance at a meeting
may constitute a waiver of notice, unless the shareholder takes certain actions
to preserve his/her objections as described in the Arizona Business Corporation
Act.

                  (d) Contents of Notice. The notice of each special
shareholders meeting shall include a description of the purpose or purposes for
which the meeting is called. Except as required by law or the corporation's
Articles, the notice of an annual shareholders meeting need not include a
description of the purpose or purposes for which the meeting is called.


                                       2
<PAGE>   3
         3.04 Fixing of Record Date. For the purpose of determining shareholders
of any voting group entitled to notice of or to vote at any meeting of
shareholders, or shareholders entitled to receive any distribution or dividend,
or in order to make a determination of shareholders for any other proper
purpose, the Board of Directors may fix in advance a date as the record date.
Such record date shall not be more than seventy (70) days prior to the date on
which the particular action requiring such determination of shareholders is to
be taken. If no record date is so fixed by the Board of Directors, the record
date for the determination of shareholders shall be as provided in the Arizona
Business Corporation Act.

         When a determination of shareholders entitled to notice of or to vote
at any meeting of shareholders has been made as provided in this Section, such
determination shall apply to any adjournment thereof, unless the Board of
Directors fixes a new record date, which it must do if the meeting is adjourned
to a date more than one hundred twenty (120) days after the date fixed for the
original meeting.

         3.05 Shareholder List. The corporation shall make a complete record of
the shareholders entitled to notice of each meeting of shareholders thereof,
arranged in alphabetical order, listing the address and the number of shares
held by each. The list shall be arranged by voting group and within each voting
group by class or series of shares. The shareholder list shall be available for
inspection by any shareholder, beginning two (2) business days after notice of
the meeting is given for which the list was prepared and continuing through the
meeting. The list shall be available at the corporation's principal office or at
another place identified in the meeting notice in the city where the meeting is
to be held. Failure to comply with this section shall not affect the validity of
any action taken at the meeting.

         3.06 Shareholder Quorum and Voting Requirements.

                  (a) If the Articles or the Arizona Business Corporation Act
provide for voting by a single voting group on a matter, action on that matter
is taken when voted upon by that voting group.

                  (b) If the Articles or the Arizona Business Corporation Act
provide for voting by two (2) or more voting groups on a matter, action on that
matter is taken only when voted upon by each of those voting groups counted
separately.

                  (c) Shares entitled to vote as a separate voting group may
take action on a matter at a meeting only if a quorum of those shares exists
with respect to that matter. Unless the Articles or the Arizona Business
Corporation Act provide otherwise, a majority of the votes entitled to be cast
on the matter by the voting group constitutes a quorum of that voting group for
action on that matter.

                  (d) Once a share is represented for any purpose at a meeting,
it is deemed present for quorum purposes for the remainder of the meeting and
for any adjournment of that meeting, unless a new record date is or must be set
for that adjourned meeting.

                  (e) If a quorum exists, action on a matter (other than the
election of directors) by a voting group is approved if the votes cast within
the voting group favoring the action

                                       3
<PAGE>   4
exceed the votes cast opposing the action, unless the Articles or the Arizona
Business Corporation Act require a greater number of affirmative votes.

                  (f) Voting will be by ballot on any question as to which a
ballot vote is demanded prior to the time the voting begins by any person
entitled to vote on such question; otherwise, a voice vote will suffice. No
ballot or change of vote will be accepted after the polls have been declared
closed following the ending of the announced time for voting.

         3.07 Proxies. At all meetings of shareholders, a shareholder may vote
in person or by proxy duly executed in writing by the shareholder or the
shareholder's duly authorized attorney-in-fact. Such proxy shall comply with law
and shall be filed with the Secretary of the corporation or other person
authorized to tabulate votes before or at the time of the meeting. No proxy
shall be valid after eleven (11) months from the date of its execution unless
otherwise provided in the proxy. The burden of proving the validity of any
undated, irrevocable, or otherwise contested proxy at a meeting of the
shareholders will rest with the person seeking to exercise the same. A facsimile
appearing to have been transmitted by a shareholder or by such shareholder's
duly authorized attorney-in-fact may be accepted as a sufficiently written and
executed proxy.

         3.08 Voting of Shares. Unless otherwise provided in the Articles or the
Arizona Business Corporation Act, each outstanding share entitled to vote shall
be entitled to one (1) vote upon each matter submitted to a vote at a meeting of
shareholders.

         3.09 Voting for Directors. Unless otherwise provided in the Articles,
directors are elected by a plurality of the votes cast by the shares entitled to
vote in the election at a meeting at which a quorum is present at the time of
such vote. As provided by law, shareholders shall be entitled to cumulative
voting in the election of directors.

         3.10 Election Inspectors. The Board of Directors, in advance of any
meeting of the shareholders, may appoint an election inspector or inspectors to
act at such meeting (and at any adjournment thereof). If an election inspector
or inspectors are not so appointed, the chairman of the meeting may, or upon
request of any person entitled to vote at the meeting will, make such
appointment. If any person appointed as an inspector fails to appear or to act,
a substitute may be appointed by the chairman of the meeting. If appointed, the
election inspector or inspectors (acting through a majority of them if there be
more than one) will determine the number of shares outstanding, the
authenticity, validity, and effect of proxies, the credentials of persons
purporting to be shareholders or persons named or referred to in proxies, and
the number of shares represented at the meeting in person and by proxy; will
receive and count votes, ballots, and consents and announce the results thereof;
will hear and determine all challenges and questions pertaining to proxies and
voting; and, in general, will perform such acts as may be proper to conduct
elections and voting with complete fairness to all shareholders. No such
election inspector need be a shareholder of the corporation.

         3.11 Organization and Conduct of Meetings. Each meeting of the
shareholders will be called to order and thereafter chaired by a Co-Chairman of
the Board of Directors if there is one, or, if not, or if a Co-Chairman of the
Board is absent or so requests, then by a Co-President, or if both a Co-Chairman
of the Board and a Co-President are unavailable, then by such other officer of
the corporation or such shareholder as may be appointed by the Board of
Directors. The corporation's Secretary or in his or her absence, an Assistant
Secretary will act as secretary of each

                                       4
<PAGE>   5
meeting of the shareholders. If neither the Secretary nor an Assistant Secretary
is in attendance, the chairman of the meeting may appoint any person (whether a
shareholder or not) to act as secretary for the meeting. After calling a meeting
to order, the chairman thereof may require the registration of all shareholders
intending to vote in person and the filing of all proxies with the election
inspector or inspectors, if one or more have been appointed (or, if not, with
the secretary of the meeting). After the announced time for such filing of
proxies has ended, no further proxies or changes, substitutions, or revocations
of proxies will be accepted. If directors are to be elected, a tabulation of the
proxies so filed will, if any person entitled to vote in such election so
requests, be announced at the meeting (or adjournment thereof) prior to the
closing of the election polls. Absent a showing of bad faith on his or her part,
the chairman of a meeting will, among other things, have absolute authority to
fix the period of time allowed for the registration of shareholders and the
filing of proxies, to determine the order of business to be conducted at such
meeting, and to establish reasonable rules for expediting the business of the
meeting and preserving the orderly conduct thereof (including any informal, or
question and answer portions thereof).

         3.12 Shareholder Approval or Ratification. The Board of Directors may
submit any contract or act for approval or ratification of the shareholders at a
duly constituted meeting of the shareholders. Except as otherwise required by
law, if any contract or act so submitted is approved or ratified by a majority
of the votes cast thereon at such meeting, the same will be valid and as binding
upon the corporation and all of its shareholders as it would be if it were the
act of its shareholders.

         3.13 Informalities and Irregularities. All informalities or
irregularities in any call or notice of a meeting of the shareholders or in the
areas of credentials, proxies, quorums, voting, and similar matters, will be
deemed waived if no objection is made at the meeting.

         3.14 Shareholder Action by Written Consent. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if one (1) or more consents in writing, setting forth the action so
taken, shall be signed by all of the shareholders entitled to vote with respect
to the subject matter thereof. The consents shall be delivered to the
corporation for inclusion in the minutes or filing with the corporate record.
Action taken by consent is effective when the last shareholder signs the
consent, unless the consent specifies a different effective date, except that
if, by law, the action to be taken requires that notice be given to shareholders
who are not entitled to vote on the matter, the effective date shall not be
prior to ten (10) days after the corporation shall give such shareholders
written notice of the proposed action, which notice shall contain or be
accompanied by the same material that would have been required if a formal
meeting had been called to consider the action. A consent signed under this
section has the effect of a meeting vote and may be described as such in any
document.

                             IV. BOARD OF DIRECTORS

         4.01 General Powers. All corporate powers shall be exercised by or
under the authority of, and the business and affairs of the corporation shall be
managed under the direction of, the Board of Directors.

         4.02 Number, Tenure, and Qualification of Directors. Unless otherwise
provided in the Articles of Incorporation, the authorized number of directors
shall be not less than two (2) nor more than five (5). The initial number of
directors of the corporation shall be two (2). The number

                                       5
<PAGE>   6
of directors in office from time to time shall be within the limits specified
above, as prescribed from time to time by resolution adopted by either the
shareholders or the Board of Directors. The directors will regularly be elected
at each annual meeting of the shareholders, but directors may be elected at any
other meeting of the shareholders. Each director shall hold office until the
annual meeting of shareholders following his/her election, subject to his/her
earlier resignation or removal. However, if a director's term expires, he/she
shall continue to serve until his/her successor shall have been elected and
qualified, until his/her resignation or removal, or until there is a decrease in
the number of directors. Unless required by the Articles, directors do not need
to be residents of the State of Arizona or shareholders of the corporation.

         4.03 Regular Meetings of the Board of Directors. A regular annual
meeting of the Board of Directors is to be held as soon as practicable after the
adjournment of each annual meeting of the shareholders, either at the place of
the shareholders meeting or at such other place as the directors elected at the
shareholders meeting may have been informed of at or prior to the time of their
election. Additional regular meetings may be held at regular intervals at such
places and at such times as the Board of Directors may determine.

         4.04 Special Meetings of the Board of Directors. Special meetings of
the Board of Directors may be held whenever and wherever called for by a
Co-Chairman of the Board, a Co-President, or the number of directors that would
be required to constitute a quorum.

         4.05 Notice of, and Waiver of Notice for, Directors Meetings. No notice
need be given of regular meetings of the Board of Directors. Notice of the time
and place of any special directors meeting shall be given at least 48 hours
prior thereto. Notice shall be given in accordance with and shall be deemed to
be effective at the time and in the manner described in Arizona Revised Statutes
Section 10-141. Any director may waive notice of any meeting and any adjournment
thereof at any time before, during, or after it is held. Except as provided in
the next sentence below, the waiver must be in writing, signed by the director
entitled to the notice, and filed with the minutes or corporate records. The
attendance of a director at or participation of a director in a meeting shall
constitute a waiver of notice of such meeting, unless the director at the
beginning of the meeting (or promptly upon his/her arrival) objects to holding
the meeting or transacting business at the meeting, and does not thereafter vote
for or assent to action taken at the meeting.

         4.06 Director Quorum. A majority of the number of directors prescribed
according to Section 4.02 above, or if no number is so prescribed, the number in
office immediately before the meeting begins, shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors, unless the
Articles require a greater number.

         4.07 Directors, Manner of Acting.

                  (a) If a quorum is present when a vote is taken, the
affirmative vote of a majority of the directors present shall be the act of the
Board of Directors unless the Articles require a greater percentage.

                  (b) Unless the Articles provide otherwise, any or all
directors may participate in a regular or special meeting by, or conduct the
meeting through the use of, any means of communication by which all directors
participating may simultaneously hear each other during the meeting, in which
case, any required notice of the meeting may generally describe the

                                       6
<PAGE>   7
arrangements (rather than or in addition to the place) for the holding thereof.
A director participating in a meeting by this means is deemed to be present in
person at the meeting.

                  (c) A director who is present at a meeting of the Board of
Directors or a committee of the Board of Directors when corporate action is
taken is deemed to have assented to the action taken unless: (1) the director
objects at the beginning of the meeting (or promptly upon his/her arrival) to
holding it or transacting business at the meeting; or (2) his/her dissent or
abstention from the action taken is entered in the minutes of the meeting; or
(3) he/she delivers written notice of his/her dissent or abstention to the
presiding officer of the meeting before its adjournment or to the corporation
before 5:00 p.m. on the next business day after the meeting. The right of
dissent or abstention is not available to a director who votes in favor of the
action taken.

         4.08 Director Action Without a Meeting. Unless the Articles provide
otherwise, any action required or permitted to be taken by the Board of
Directors at a meeting may be taken without a meeting if the action is taken by
unanimous written consent of the Board of Directors as evidenced by one (1) or
more written consents describing the action taken, signed by each director and
filed with the minutes or corporate records. Action taken by consent is
effective when the last director signs the consent, unless the consent specifies
a different effective date. A signed consent has the effect of a meeting vote
and may be described as such in any document.

         4.09 Removal of Directors by Shareholders. The shareholders may remove
one (1) or more directors at a meeting called for that purpose if notice has
been given that a purpose of the meeting is such removal. The removal may be
with or without cause unless the Articles provide that directors may only be
removed with cause. If a director is elected by a voting group of shareholders,
only the shareholders of that voting group may participate in a shareholder vote
to remove him. If less than the entire Board of Directors is to be removed, a
director may not be removed if the number of votes sufficient to elect the
director under cumulative voting is voted against the director's removal.



                                       7
<PAGE>   8
         4.10 Board of Director Vacancies.


                  (a) Unless the Articles provide otherwise, if a vacancy occurs
on the Board of Directors, including a vacancy resulting from an increase in the
number of directors, either the shareholders or the Board of Directors may fill
the vacancy.

                  (b) If the vacant office was held by a director elected by a
voting group of shareholders, only the holders of shares of that voting group
are entitled to vote to fill the vacancy if it is filled by the shareholders.

                  (c) A vacancy that will occur at a specific later date (by
reason of resignation effective at a later date) may be filled before the
vacancy occurs, but the new director may not take office until the vacancy
occurs.

                  (d) The term of a director elected to fill a vacancy expires
at the next shareholders meeting at which directors are elected.

         4.11 Director Compensation. Unless otherwise provided in the Articles
by resolution of the Board of Directors, each director may be paid his/her
expenses, if any, of attendance at each meeting of the Board of Directors or any
committee thereof, and may be paid a stated salary as director or a fixed sum
for attendance at each meeting of the Board of Directors or any committee
thereof, or both. No such payment shall preclude any director from serving the
corporation in any capacity and receiving compensation therefor.

         4.12 Director Committees.

                  (a) Creation of Committees. Unless the Articles provide
otherwise, the Board of Directors may create one (1) or more committees and
appoint members of the Board of Directors to serve on them. Each committee shall
have one (1) or more members, who serve at the pleasure of the Board of
Directors.

                  (b) Selection of Members. The creation of a committee and
appointment of members to it shall be approved by the greater of (1) a majority
of all the directors in office when the action is taken or (2) the number of
directors required by the Articles to take such action.

                  (c) Required Procedures. Sections 4.03 through 4.08 of this
Article IV, which govern meetings, action without meetings, notice and waiver of
notice, and quorum and voting requirements of the Board of Directors, apply to
committees and their members.

                  (d) Authority. Unless limited by the Articles, each committee
may exercise those aspects of the authority of the Board of Directors which the
Board of Directors confers upon such committee in the resolution creating the
committee, provided, however, that a committee may not: (1) authorize
distributions; (2) approve or propose to shareholders action that requires
shareholder approval under the Arizona Business Corporation Act; (3) fill
vacancies on the Board of Directors or on any of its committees; (4) amend the
Articles of Incorporation without shareholder action as provided by law; (5)
adopt, amend or repeal these Bylaws; (6) approve a plan of merger not requiring
shareholder approval; (7) authorize or approve reacquisition of shares, except
according to a formula or method prescribed by the Board of Directors; (8)
authorize or approve the

                                       8
<PAGE>   9
issuance or sale or contract for sale of shares or determine the designation and
relative rights, preferences, and limitations of a class or series of shares,
except within limits specifically prescribed by the Board of Directors; or (9)
fix the compensation of directors for serving on the Board of Directors or any
committee of the Board of Directors.

         4.13 Director Resignations. Any director or committee member may resign
from his or her office at any time by written notice delivered to the Board of
Directors, a Co-Chairman of the Board, or the corporation at its known place of
business. Any such resignation will be effective upon its receipt unless some
later time is therein fixed, and then from that time. The acceptance of a
resignation will not be required to make it effective.

                                  V. OFFICERS

         5.01 In General. The Board of Directors shall elect not more than two
Co-Chairmen, Co-Chief Executive Officers, and Co-Presidents, one or more Vice
Presidents, a Treasurer, a Secretary, and such Assistant Secretaries and
Assistant Treasurers as the Board may from time to time deem appropriate. All
officers shall hold office only during the pleasure of the Board or until their
successors are chosen and qualify. Any two of the above offices, except those of
a Co-President and Vice President, may be held by the same person, but no
officer shall execute, acknowledge or verify any instrument in more than one
capacity when such instrument is required to be executed, acknowledged or
verified by any two or more officers. The Board of Directors may from time to
time appoint such other agents and employees with such powers and duties as the
Board may deem proper. In its discretion, the Board of Directors may leave
unfilled any offices except those of Co-Chairman, Co-Chief Executive Officer,
Co-President, Treasurer and Secretary.

         5.02 Co-Chairman of the Board. Each Co-Chairman shall have the
responsibility for the implementation of the policies determined by the Board of
Directors and for the administration of the business affairs of the Corporation.
Each Co-Chairman shall, if present, preside over the meetings of the Board and
of the stockholders on a rotating basis such that a Co-Chairman shall preside
over no more than one consecutive Board meeting or one consecutive stockholders
meeting.

         5.03 Co-President. Each Co-President shall have the responsibility for
the active management of the business and general supervision and direction of
all of the affairs of the Corporation. Each Co-President shall perform such
other duties as may be assigned by the Board of Directors or the Executive
Committee. Each Co-President shall have the authority on the Corporation's
behalf to endorse securities owned by the Corporation and to execute any
documents requiring the signature of an executive officer. Each Co-President
shall perform such other duties as the Board of Directors may direct.

         5.04 Vice Presidents. The Vice Presidents, in the order of priority
designated by the Board of Directors, shall be vested with all the power and may
perform all the duties of a Co-President in the latter's absence. They may
perform such other duties as may be prescribed by the Board of Directors or the
Executive Committee or a Co-President.

         5.05 Treasurer. The Treasurer shall have general supervision over the
finances of the Corporation and shall perform such other duties as may be
assigned by the Board of Directors or a Co-President. If required by resolution
of the Board, the Treasurer shall furnish bond (which

                                       9
<PAGE>   10
may be a blanket bond) with such surety and in such penalty for the faithful
performance of duty as the Board of Directors may from time to time require, the
cost of such bond to be defrayed by the Corporation.

         5.06 Secretary. The Secretary shall keep the minutes of the meetings of
the stockholders and of the Board of Directors and shall attend to the giving
and serving of all notices of the Corporation required by law or these Bylaws.
The Secretary shall maintain at all times in the principal office of the
Corporation at least one copy of the Bylaws with all amendments to date, and
shall make the same, together with the minutes of the meetings of the
stockholders, the annual statement of affairs of the Corporation and any voting
trust or other stockholders agreement on file at the office of the Corporation,
available for inspection by any officer, director or stockholder during
reasonable business hours. The Secretary shall perform such other duties as may
be assigned by the Board of Directors.

         5.07 Assistant Treasurer and Secretary. The Board of Directors may
designate from time to time Assistant Treasurers and Secretaries, who shall
perform such duties as may from time to time be assigned to them by the Board of
Directors or a Co-President.

         5.08 Salaries. The salaries of the officers of the corporation may be
fixed from time to time by the Board of Directors or (except as to a
Co-President's own) left to the discretion of a Co-President. No officer will be
prevented from receiving a salary by reason of the fact that he or she is also a
director of the corporation.

         5.09 Additional Appointments. In addition to the officers contemplated
in this Article V, the Board of Directors may appoint other agents of the
corporation with such authority to perform such duties as may be prescribed from
time to time by the Board of Directors.

                 VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER

         6.01 Certificates for Shares.

                  (a) Content. Certificates representing shares of the
corporation shall, at a minimum, state on their face the name of the issuing
corporation and that it is formed under the laws of the State of Arizona, the
name of the person to whom issued, and the number and class of shares and the
designation of the series, if any, the certificate represents. Such certificates
shall be signed (either manually or by facsimile to the extent allowable by law)
by one or more officers of the corporation, as determined by the Board of
Directors, or, if no such determination is made, by any of a Co-Chairman of the
Board (if any), a Co-President, any Vice-President, the Secretary, or the
Treasurer of the corporation, and may be sealed with a corporate seal or a
facsimile thereof. Each certificate for shares shall be consecutively numbered
or otherwise identified and will exhibit such information as may be required by
law. If a supply of unissued certificates bearing the facsimile signature of a
person remains when that person ceases to hold the office of the corporation
indicated on such certificates or ceases to be the transfer agent or registrar
of the corporation, they may still be issued by the corporation and
countersigned, registered, issued, and delivered by the corporation's transfer
agent and/or registrar thereafter, as though such person had continued to hold
the office indicated on such certificate.


                                       10
<PAGE>   11
                  (b) Legend as to Class or Series. If the corporation is
authorized to issue different classes of shares or different series within a
class, the designations, relative rights, preferences, and limitations
applicable to each class and the variations in rights, preferences, and
limitations determined for each series (and the authority of the Board of
Directors to determine variations for future series) shall be summarized on the
front or back of each certificate. Alternatively, each certificate may state
conspicuously on its front or back that the corporation will furnish a
shareholder this information on request in writing and without charge.

                  (c) Shareholder List. The name and address of the person to
whom shares are issued, with the number of shares and date of issue, shall be
entered on the stock transfer books of the corporation.

                  (d) Lost Certificates. In the event of the loss, theft, or
destruction of any certificate representing shares of the corporation or of any
predecessor corporation, the corporation may issue (or, in the case of any such
shares as to which a transfer agent and/or registrar have been appointed, may
direct such transfer agent and/or registrar to countersign, register, and issue)
a new certificate, and cause the same to be delivered to the registered owner of
the shares represented thereby; provided that such owner shall have submitted
such evidence showing the circumstances of the alleged loss, theft, or
destruction, and his, her, or its ownership of the certificate, as the
corporation considers satisfactory, together with any other facts that the
corporation considers pertinent; and further provided that, if so required by
the corporation, the owner shall provide a bond or other indemnity in form and
amount satisfactory to the corporation (and to its transfer agent and/or
registrar, if applicable).

         6.02 Registration of the Transfer of Shares. Registration of the
transfer of shares of the corporation shall be made only on the stock transfer
books of the corporation. In order to register a transfer, the record owner
shall surrender the shares to the corporation for cancellation, properly
endorsed by the appropriate person or persons with reasonable assurances that
the endorsements are genuine and effective. Unless the corporation has
established a procedure by which a beneficial owner of shares held by a nominee
is to be recognized by the corporation as the owner, the corporation will be
entitled to treat the registered owner of any share of the capital stock of the
corporation as the absolute owner thereof and, accordingly, will not be bound to
recognize any beneficial, equitable, or other claim to, or interest in, such
share on the part of any other person, whether or not it has notice thereof,
except as may expressly be provided by applicable law.

         6.03 Shares Without Certificates. The Board of Directors may authorize
the issuance of uncertificated shares by the corporation and may prescribe
procedures for the issuance and registration of transfer thereof and with
respect to such other matters as the Board of Directors shall deem necessary or
appropriate.

                               VII. DISTRIBUTIONS

         7.01 Distributions. Subject to such restrictions or requirements as may
be imposed by applicable law or the corporation's Articles or as may otherwise
be binding upon the corporation, the Board of Directors may from time to time
declare, and the corporation may pay or make, dividends or other distributions
to its shareholders.


                                       11
<PAGE>   12
                              VIII. CORPORATE SEAL

         8.01 Corporate Seal. The Board of Directors may provide for a corporate
seal of the corporation that will have inscribed thereon any designation
including the name of the corporation, Arizona as the state of incorporation,
the year of incorporation, and the words "Corporate Seal."

                                 IX. AMENDMENTS

         9.01 Amendments. The corporation's Board of Directors may amend or
repeal the corporation's Bylaws unless:

                  (1)      the Articles or the Arizona Business Corporation Act
                           reserve this power exclusively to the shareholders in
                           whole or part; or

                  (2)      the shareholders in adopting, amending, or repealing
                           a particular Bylaw provide expressly that the Board
                           of Directors may not amend or repeal that Bylaw.

         The corporation's shareholders may amend or repeal the corporation's
Bylaws even though the Bylaws may also be amended or repealed by its Board of
Directors.

                                       12
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.21
<SEQUENCE>21
<FILENAME>p65173ex3-21.txt
<DESCRIPTION>EX-3.21
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 3.21

                            ARTICLES OF INCORPORATION
                                       OF
                          HANCOCK-MTH COMMUNITIES, INC.


                  1. The name of the corporation is Hancock-MTH Communities,
Inc.

                  2. The purpose for which the corporation is organized is the
transaction of any or all lawful business for which corporations may be
incorporated under the laws of the State of Arizona, as they may be amended from
time to time. The character of business which the corporation initially intends
actually to conduct in the State of Arizona is the marketing of residential real
property.

                  3. The aggregate number of shares that the corporation shall
have authority to issue is one thousand (1,000) common shares, all of which
shares shall be of a single class.

                  4. The name and street address in Arizona of the initial
statutory agent of the corporation is CT Corporation System, Inc., 3225 N
Central Ave, Phoenix, AZ 85012.

                  5. The number of directors constituting the initial board of
directors of the corporation is two (2). The names and addresses of the persons
who are to serve as directors until the first annual meeting of shareholders, or
until their successors are elected and qualified, are Steve Hilton, 6613 N
Scottsdale Rd, Scottsdale, AZ 85252 and John Landon, 6613 N Scottsdale Rd,
Scottsdale, AZ 85252. The number of persons to serve on the board of directors
thereafter shall be fixed by the bylaws of the corporation.

                  6. The name and address of the incorporator is Larry Seay,
6613 N Scottsdale Rd, Scottsdale, AZ 85252.

                  7. The liability of a director or former director to the
corporation or its shareholders shall be eliminated to the fullest extent
permitted by Section 10-202.B.1 of the Arizona Revised Statutes.

                  If the Arizona Business Corporation Act is amended to
authorize corporate action further eliminating or limiting the liability of
directors, the liability of a director of the corporation shall be eliminated or
limited to the fullest extent permitted by the Arizona Business Corporation Act,
as amended.

                  Any repeal or modification of this Article 7 shall not
adversely affect any right or protection of a director of the corporation
existing hereunder with respect to any act or omission occurring prior to or at
the time of such repeal or modification.

                  The provisions of this Article 7 shall not be deemed to limit
or preclude indemnification of a director by the corporation for any liability
of a director which has not been eliminated by the provisions of this Article 7.

                  8. The corporation shall indemnify any and all of its existing
and former directors and officers to the fullest extent permitted by Section
10-202.B.2 of the Arizona Business
<PAGE>   2
Corporation Act. If the Arizona Business Corporation Act is amended to authorize
corporate action broadening the corporation's ability to indemnify its directors
and officers, the corporation shall indemnify its existing and former directors
and officers to the fullest extent permitted by the Arizona Business Corporation
Act, as amended. Any repeal or modification of this Article 8 shall not
adversely affect any right or protection of any existing or former director or
officer of the corporation existing hereunder with respect to any act or
omission occurring prior to or at the time of such repeal or modification.

                  DATED:  May 7, 2001



                                             /s/ Larry Seay
                                          --------------------------------------
                                          Larry Seay
                                          Incorporator







                                     - 2 -
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.22
<SEQUENCE>22
<FILENAME>p65173ex3-22.txt
<DESCRIPTION>EX-3.22
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 3.22



                                     BYLAWS

                                       OF

                          HANCOCK-MTH COMMUNITIES, INC.

                  I. REFERENCES TO CERTAIN TERMS AND CONSTRUCTION

                  1.1 Certain References. Any reference herein made to law will
be deemed to refer to the law of the State of Arizona, including any applicable
provision of Chapters 1 through 17 of Title 10 of the Arizona Revised Statutes,
or any successor statute, as from time to time amended and in effect (sometimes
referred to herein as the "Arizona Business Corporation Act"). Any reference
herein made to the corporation's Articles will be deemed to refer to its
Articles of Incorporation and all amendments thereto as at any given time on
file with the Arizona Corporation Commission. Except as otherwise required by
law and subject to any procedures established by the corporation pursuant to
Arizona Revised Statutes Section 723, the term "shareholder" as used herein
shall mean one who is a holder of record of shares of the corporation.
References to specific sections of law herein made shall be deemed to refer to
such sections, or any comparable successor provisions, as from time to time
amended and in effect.

                  1.2 Seniority. The law and the Articles (in that order of
precedence) will in all respects be considered senior and superior to these
Bylaws, with any inconsistency to be resolved in favor of the law and such
Articles (in that order of precedence), and with these Bylaws to be deemed
automatically amended from time to time to eliminate any such inconsistency
which may then exist.

                  1.3 Computation of Time. The time during which an act is
required to be done, including the time for the giving of any required notice
herein, shall be computed by excluding the first day or hour, as the case may
be, and including the last day or hour.

                                   II. OFFICES

                  2.1 Principal Office. The principal office of the corporation
shall be located at any place either within or outside the State of Arizona as
designated in the corporation's most current Annual Report filed with the
Arizona Corporation Commission or in any other document executed and delivered
to the Arizona Corporation Commission for filing. If a principal office is not
so designated, the principal office of the corporation shall mean the known
place of business of the corporation. The corporation may have such other
offices, either within or without the State of Arizona, as the Board of
Directors may designate or as the business of the corporation may require from
time to time.

                  2.2 Known Place of Business. A known place of business of the
corporation shall be located within the State of Arizona and may be, but need
not be, the address of the statutory agent of the corporation. The corporation
may change its known place of business from time to time in accordance with the
relevant provisions of the Arizona Business Corporation Act.
<PAGE>   2
                                III. SHAREHOLDERS

                  3.1 Annual Shareholder Meeting. The annual meeting of the
shareholders shall be held on such date and at such time and place, either
within or without the State of Arizona, as shall be fixed by the Board of
Directors or, in the absence of action by the Board, as set forth in the notice
given or waiver signed with respect to such meeting pursuant to Section 3.03
below, for the purpose of electing directors and for the transaction of such
other business as may properly come before the meeting. If any annual meeting is
for any reason not held on the date determined as aforesaid, a deferred annual
meeting may thereafter be called and held in lieu thereof, at which the same
proceedings may be conducted. If the day fixed for the annual meeting shall be a
legal holiday in the State of Arizona such meeting shall be held on the next
succeeding business day.

                  3.2 Special Shareholder Meetings. Special meetings of the
shareholders may be held whenever and wherever, either within or without the
State of Arizona, called for by or at the direction of a Co-Chairman of the
Board, a Co-President, or the Board of Directors.

                  3.3 Notice of Shareholders Meetings.

                           (a) Required Notice. Notice stating the place, day
and hour of any annual or special shareholders meeting shall be given not less
than ten (10) nor more than sixty (60) days before the date of the meeting by or
at the direction of the person or persons calling the meeting, to each
shareholder entitled to vote at such meeting and to any other shareholder
entitled to receive notice of the meeting by law or the Articles. Notices to
shareholders shall be given in accordance with, and shall be deemed to be
effective at the time and in the manner described in, Arizona Revised Statutes
Section 10-141. If no designation is made of the place at which an annual or
special meeting will be held in the notice for such meeting, the place of the
meeting will be at the principal place of business of the corporation.

                           (b) Adjourned Meeting. If any shareholders meeting is
adjourned to a different date, time, or place, notice need not be given of the
new date, time, and place, if the new date, time, and place are announced at the
meeting before adjournment. But if a new record date for the adjourned meeting
is fixed or must be fixed in accordance with law or these Bylaws, then notice of
the adjourned meeting shall be given to those persons who are shareholders as of
the new record date and who are entitled to such notice pursuant to Section
3.03(a) above.

                           (c) Waiver of Notice. Any shareholder may waive
notice of a meeting (or any notice of any other action required to be given by
the Arizona Business Corporation Act, the corporation's Articles, or these
Bylaws), at any time before, during, or after the meeting or other action, by a
writing signed by the shareholder entitled to the notice. Each such waiver shall
be delivered to the corporation for inclusion in the minutes or filing with the
corporate records. Under certain circumstances, a shareholder's attendance at a
meeting may constitute a waiver of notice, unless the shareholder takes certain
actions to preserve his/her objections as described in the Arizona Business
Corporation Act.

                           (d) Contents of Notice. The notice of each special
shareholders meeting shall include a description of the purpose or purposes for
which the meeting is called. Except as


                                       2
<PAGE>   3
required by law or the corporation's Articles, the notice of an annual
shareholders meeting need not include a description of the purpose or purposes
for which the meeting is called.

                  3.4 Fixing of Record Date. For the purpose of determining
shareholders of any voting group entitled to notice of or to vote at any meeting
of shareholders, or shareholders entitled to receive any distribution or
dividend, or in order to make a determination of shareholders for any other
proper purpose, the Board of Directors may fix in advance a date as the record
date. Such record date shall not be more than seventy (70) days prior to the
date on which the particular action requiring such determination of shareholders
is to be taken. If no record date is so fixed by the Board of Directors, the
record date for the determination of shareholders shall be as provided in the
Arizona Business Corporation Act.

                  When a determination of shareholders entitled to notice of or
to vote at any meeting of shareholders has been made as provided in this
Section, such determination shall apply to any adjournment thereof, unless the
Board of Directors fixes a new record date, which it must do if the meeting is
adjourned to a date more than one hundred twenty (120) days after the date fixed
for the original meeting.

                  3.5 Shareholder List. The corporation shall make a complete
record of the shareholders entitled to notice of each meeting of shareholders
thereof, arranged in alphabetical order, listing the address and the number of
shares held by each. The list shall be arranged by voting group and within each
voting group by class or series of shares. The shareholder list shall be
available for inspection by any shareholder, beginning two (2) business days
after notice of the meeting is given for which the list was prepared and
continuing through the meeting. The list shall be available at the corporation's
principal office or at another place identified in the meeting notice in the
city where the meeting is to be held. Failure to comply with this section shall
not affect the validity of any action taken at the meeting.

                  3.6      Shareholder Quorum and Voting Requirements.

                           (a) If the Articles or the Arizona Business
Corporation Act provide for voting by a single voting group on a matter, action
on that matter is taken when voted upon by that voting group.

                           (b) If the Articles or the Arizona Business
Corporation Act provide for voting by two (2) or more voting groups on a matter,
action on that matter is taken only when voted upon by each of those voting
groups counted separately.

                           (c) Shares entitled to vote as a separate voting
group may take action on a matter at a meeting only if a quorum of those shares
exists with respect to that matter. Unless the Articles or the Arizona Business
Corporation Act provide otherwise, a majority of the votes entitled to be cast
on the matter by the voting group constitutes a quorum of that voting group for
action on that matter.

                           (d) Once a share is represented for any purpose at a
meeting, it is deemed present for quorum purposes for the remainder of the
meeting and for any adjournment of that meeting, unless a new record date is or
must be set for that adjourned meeting.


                                       3
<PAGE>   4
                           (e) If a quorum exists, action on a matter (other
than the election of directors) by a voting group is approved if the votes cast
within the voting group favoring the action exceed the votes cast opposing the
action, unless the Articles or the Arizona Business Corporation Act require a
greater number of affirmative votes.

                           (f) Voting will be by ballot on any question as to
which a ballot vote is demanded prior to the time the voting begins by any
person entitled to vote on such question; otherwise, a voice vote will suffice.
No ballot or change of vote will be accepted after the polls have been declared
closed following the ending of the announced time for voting.

                  3.7 Proxies. At all meetings of shareholders, a shareholder
may vote in person or by proxy duly executed in writing by the shareholder or
the shareholder's duly authorized attorney-in-fact. Such proxy shall comply with
law and shall be filed with the Secretary of the corporation or other person
authorized to tabulate votes before or at the time of the meeting. No proxy
shall be valid after eleven (11) months from the date of its execution unless
otherwise provided in the proxy. The burden of proving the validity of any
undated, irrevocable, or otherwise contested proxy at a meeting of the
shareholders will rest with the person seeking to exercise the same. A facsimile
appearing to have been transmitted by a shareholder or by such shareholder's
duly authorized attorney-in-fact may be accepted as a sufficiently written and
executed proxy.

                  3.8 Voting of Shares. Unless otherwise provided in the
Articles or the Arizona Business Corporation Act, each outstanding share
entitled to vote shall be entitled to one (1) vote upon each matter submitted to
a vote at a meeting of shareholders.

                  3.9 Voting for Directors. Unless otherwise provided in the
Articles, directors are elected by a plurality of the votes cast by the shares
entitled to vote in the election at a meeting at which a quorum is present at
the time of such vote. As provided by law, shareholders shall be entitled to
cumulative voting in the election of directors.

                  3.10 Election Inspectors. The Board of Directors, in advance
of any meeting of the shareholders, may appoint an election inspector or
inspectors to act at such meeting (and at any adjournment thereof). If an
election inspector or inspectors are not so appointed, the chairman of the
meeting may, or upon request of any person entitled to vote at the meeting will,
make such appointment. If any person appointed as an inspector fails to appear
or to act, a substitute may be appointed by the chairman of the meeting. If
appointed, the election inspector or inspectors (acting through a majority of
them if there be more than one) will determine the number of shares outstanding,
the authenticity, validity, and effect of proxies, the credentials of persons
purporting to be shareholders or persons named or referred to in proxies, and
the number of shares represented at the meeting in person and by proxy; will
receive and count votes, ballots, and consents and announce the results thereof;
will hear and determine all challenges and questions pertaining to proxies and
voting; and, in general, will perform such acts as may be proper to conduct
elections and voting with complete fairness to all shareholders. No such
election inspector need be a shareholder of the corporation.

                  3.11 Organization and Conduct of Meetings. Each meeting of the
shareholders will be called to order and thereafter chaired by a Co-Chairman of
the Board of Directors if there is one, or, if not, or if a Co-Chairman of the
Board is absent or so requests, then by a Co-President, or


                                       4
<PAGE>   5
if both a Co-Chairman of the Board and a Co-President are unavailable, then by
such other officer of the corporation or such shareholder as may be appointed by
the Board of Directors. The corporation's Secretary or in his or her absence, an
Assistant Secretary will act as secretary of each meeting of the shareholders.
If neither the Secretary nor an Assistant Secretary is in attendance, the
chairman of the meeting may appoint any person (whether a shareholder or not) to
act as secretary for the meeting. After calling a meeting to order, the chairman
thereof may require the registration of all shareholders intending to vote in
person and the filing of all proxies with the election inspector or inspectors,
if one or more have been appointed (or, if not, with the secretary of the
meeting). After the announced time for such filing of proxies has ended, no
further proxies or changes, substitutions, or revocations of proxies will be
accepted. If directors are to be elected, a tabulation of the proxies so filed
will, if any person entitled to vote in such election so requests, be announced
at the meeting (or adjournment thereof) prior to the closing of the election
polls. Absent a showing of bad faith on his or her part, the chairman of a
meeting will, among other things, have absolute authority to fix the period of
time allowed for the registration of shareholders and the filing of proxies, to
determine the order of business to be conducted at such meeting, and to
establish reasonable rules for expediting the business of the meeting and
preserving the orderly conduct thereof (including any informal, or question and
answer portions thereof).

                  3.12 Shareholder Approval or Ratification. The Board of
Directors may submit any contract or act for approval or ratification of the
shareholders at a duly constituted meeting of the shareholders. Except as
otherwise required by law, if any contract or act so submitted is approved or
ratified by a majority of the votes cast thereon at such meeting, the same will
be valid and as binding upon the corporation and all of its shareholders as it
would be if it were the act of its shareholders.

                  3.13 Informalities and Irregularities. All informalities or
irregularities in any call or notice of a meeting of the shareholders or in the
areas of credentials, proxies, quorums, voting, and similar matters, will be
deemed waived if no objection is made at the meeting.

                  3.14 Shareholder Action by Written Consent. Any action
required or permitted to be taken at a meeting of the shareholders may be taken
without a meeting if one (1) or more consents in writing, setting forth the
action so taken, shall be signed by all of the shareholders entitled to vote
with respect to the subject matter thereof. The consents shall be delivered to
the corporation for inclusion in the minutes or filing with the corporate
record. Action taken by consent is effective when the last shareholder signs the
consent, unless the consent specifies a different effective date, except that
if, by law, the action to be taken requires that notice be given to shareholders
who are not entitled to vote on the matter, the effective date shall not be
prior to ten (10) days after the corporation shall give such shareholders
written notice of the proposed action, which notice shall contain or be
accompanied by the same material that would have been required if a formal
meeting had been called to consider the action. A consent signed under this
section has the effect of a meeting vote and may be described as such in any
document.

                             IV. BOARD OF DIRECTORS


                                       5
<PAGE>   6
                  4.1 General Powers. All corporate powers shall be exercised by
or under the authority of, and the business and affairs of the corporation shall
be managed under the direction of, the Board of Directors.

                  4.2 Number, Tenure, and Qualification of Directors. Unless
otherwise provided in the Articles of Incorporation, the authorized number of
directors shall be not less than two (2) nor more than five (5). The initial
number of directors of the corporation shall be two (2).The number of directors
in office from time to time shall be within the limits specified above, as
prescribed from time to time by resolution adopted by either the shareholders or
the Board of Directors. The directors will regularly be elected at each annual
meeting of the shareholders, but directors may be elected at any other meeting
of the shareholders. Each director shall hold office until the annual meeting of
shareholders following his/her election, subject to his/her earlier resignation
or removal. However, if a director's term expires, he/she shall continue to
serve until his/her successor shall have been elected and qualified, until
his/her resignation or removal, or until there is a decrease in the number of
directors. Unless required by the Articles, directors do not need to be
residents of the State of Arizona or shareholders of the corporation.

                  4.3 Regular Meetings of the Board of Directors. A regular
annual meeting of the Board of Directors is to be held as soon as practicable
after the adjournment of each annual meeting of the shareholders, either at the
place of the shareholders meeting or at such other place as the directors
elected at the shareholders meeting may have been informed of at or prior to the
time of their election. Additional regular meetings may be held at regular
intervals at such places and at such times as the Board of Directors may
determine.

                  4.4 Special Meetings of the Board of Directors. Special
meetings of the Board of Directors may be held whenever and wherever called for
by a Co-Chairman of the Board, a Co-President, or the number of directors that
would be required to constitute a quorum.

                  4.5 Notice of, and Waiver of Notice for, Directors Meetings.
No notice need be given of regular meetings of the Board of Directors. Notice of
the time and place of any special directors meeting shall be given at least 48
hours prior thereto. Notice shall be given in accordance with and shall be
deemed to be effective at the time and in the manner described in Arizona
Revised Statutes Section 10-141. Any director may waive notice of any meeting
and any adjournment thereof at any time before, during, or after it is held.
Except as provided in the next sentence below, the waiver must be in writing,
signed by the director entitled to the notice, and filed with the minutes or
corporate records. The attendance of a director at or participation of a
director in a meeting shall constitute a waiver of notice of such meeting,
unless the director at the beginning of the meeting (or promptly upon his/her
arrival) objects to holding the meeting or transacting business at the meeting,
and does not thereafter vote for or assent to action taken at the meeting.

                  4.6 Director Quorum. A majority of the number of directors
prescribed according to Section 4.02 above, or if no number is so prescribed,
the number in office immediately before the meeting begins, shall constitute a
quorum for the transaction of business at any meeting of the Board of Directors,
unless the Articles require a greater number.

                  4.7      Directors, Manner of Acting.


                                       6
<PAGE>   7
                           (a) If a quorum is present when a vote is taken, the
affirmative vote of a majority of the directors present shall be the act of the
Board of Directors unless the Articles require a greater percentage.

                           (b) Unless the Articles provide otherwise, any or all
directors may participate in a regular or special meeting by, or conduct the
meeting through the use of, any means of communication by which all directors
participating may simultaneously hear each other during the meeting, in which
case, any required notice of the meeting may generally describe the arrangements
(rather than or in addition to the place) for the holding thereof. A director
participating in a meeting by this means is deemed to be present in person at
the meeting.

                           (c) A director who is present at a meeting of the
Board of Directors or a committee of the Board of Directors when corporate
action is taken is deemed to have assented to the action taken unless: (1) the
director objects at the beginning of the meeting (or promptly upon his/her
arrival) to holding it or transacting business at the meeting; or (2) his/her
dissent or abstention from the action taken is entered in the minutes of the
meeting; or (3) he/she delivers written notice of his/her dissent or abstention
to the presiding officer of the meeting before its adjournment or to the
corporation before 5:00 p.m. on the next business day after the meeting. The
right of dissent or abstention is not available to a director who votes in favor
of the action taken.

                  4.8 Director Action Without a Meeting. Unless the Articles
provide otherwise, any action required or permitted to be taken by the Board of
Directors at a meeting may be taken without a meeting if the action is taken by
unanimous written consent of the Board of Directors as evidenced by one (1) or
more written consents describing the action taken, signed by each director and
filed with the minutes or corporate records. Action taken by consent is
effective when the last director signs the consent, unless the consent specifies
a different effective date. A signed consent has the effect of a meeting vote
and may be described as such in any document.

                  4.9 Removal of Directors by Shareholders. The shareholders may
remove one (1) or more directors at a meeting called for that purpose if notice
has been given that a purpose of the meeting is such removal. The removal may be
with or without cause unless the Articles provide that directors may only be
removed with cause. If a director is elected by a voting group of shareholders,
only the shareholders of that voting group may participate in a shareholder vote
to remove him. If less than the entire Board of Directors is to be removed, a
director may not be removed if the number of votes sufficient to elect the
director under cumulative voting is voted against the director's removal.


                                       7
<PAGE>   8
                  4.10 Board of Director Vacancies.

                           (a) Unless the Articles provide otherwise, if a
vacancy occurs on the Board of Directors, including a vacancy resulting from an
increase in the number of directors, either the shareholders or the Board of
Directors may fill the vacancy.

                           (b) If the vacant office was held by a director
elected by a voting group of shareholders, only the holders of shares of that
voting group are entitled to vote to fill the vacancy if it is filled by the
shareholders.

                           (c) A vacancy that will occur at a specific later
date (by reason of resignation effective at a later date) may be filled before
the vacancy occurs, but the new director may not take office until the vacancy
occurs.

                           (d) The term of a director elected to fill a vacancy
expires at the next shareholders meeting at which directors are elected.

                  4.11 Director Compensation. Unless otherwise provided in the
Articles by resolution of the Board of Directors, each director may be paid
his/her expenses, if any, of attendance at each meeting of the Board of
Directors or any committee thereof, and may be paid a stated salary as director
or a fixed sum for attendance at each meeting of the Board of Directors or any
committee thereof, or both. No such payment shall preclude any director from
serving the corporation in any capacity and receiving compensation therefor.

                  4.12     Director Committees.

                           (a) Creation of Committees. Unless the Articles
provide otherwise, the Board of Directors may create one (1) or more committees
and appoint members of the Board of Directors to serve on them. Each committee
shall have one (1) or more members, who serve at the pleasure of the Board of
Directors.

                           (b) Selection of Members. The creation of a committee
and appointment of members to it shall be approved by the greater of (1) a
majority of all the directors in office when the action is taken or (2) the
number of directors required by the Articles to take such action.

                           (c) Required Procedures. Sections 4.03 through 4.08
of this Article IV, which govern meetings, action without meetings, notice and
waiver of notice, and quorum and voting requirements of the Board of Directors,
apply to committees and their members.

                           (d) Authority. Unless limited by the Articles, each
committee may exercise those aspects of the authority of the Board of Directors
which the Board of Directors confers upon such committee in the resolution
creating the committee, provided, however, that a committee may not: (1)
authorize distributions; (2) approve or propose to shareholders action that
requires shareholder approval under the Arizona Business Corporation Act; (3)
fill vacancies on the Board of Directors or on any of its committees; (4) amend
the Articles of Incorporation without shareholder action as provided by law; (5)
adopt, amend or repeal these Bylaws; (6) approve a plan of merger not requiring
shareholder approval; (7) authorize or approve reacquisition of shares, except


                                       8
<PAGE>   9
according to a formula or method prescribed by the Board of Directors; (8)
authorize or approve the issuance or sale or contract for sale of shares or
determine the designation and relative rights, preferences, and limitations of a
class or series of shares, except within limits specifically prescribed by the
Board of Directors; or (9) fix the compensation of directors for serving on the
Board of Directors or any committee of the Board of Directors.

                  4.13 Director Resignations. Any director or committee member
may resign from his or her office at any time by written notice delivered to the
Board of Directors, a Co-Chairman of the Board, or the corporation at its known
place of business. Any such resignation will be effective upon its receipt
unless some later time is therein fixed, and then from that time. The acceptance
of a resignation will not be required to make it effective.

                                   V. OFFICERS

                  5.1 In General. The Board of Directors shall elect not more
than two Co-Chairmen, Co-Chief Executive Officers, and Co-Presidents, one or
more Vice Presidents, a Treasurer, a Secretary, and such Assistant Secretaries
and Assistant Treasurers as the Board may from time to time deem appropriate.
All officers shall hold office only during the pleasure of the Board or until
their successors are chosen and qualify. Any two of the above offices, except
those of a Co-President and Vice President, may be held by the same person, but
no officer shall execute, acknowledge or verify any instrument in more than one
capacity when such instrument is required to be executed, acknowledged or
verified by any two or more officers. The Board of Directors may from time to
time appoint such other agents and employees with such powers and duties as the
Board may deem proper. In its discretion, the Board of Directors may leave
unfilled any offices except those of Co-Chairman, Co-Chief Executive Officer,
Co-President, Treasurer and Secretary.

                  5.2 Co-Chairman of the Board. Each Co-Chairman shall have the
responsibility for the implementation of the policies determined by the Board of
Directors and for the administration of the business affairs of the Corporation.
Each Co-Chairman shall, if present, preside over the meetings of the Board and
of the stockholders on a rotating basis such that a Co-Chairman shall preside
over no more than one consecutive Board meeting or one consecutive stockholders
meeting.

                  5.3 Co-President. Each Co-President shall have the
responsibility for the active management of the business and general supervision
and direction of all of the affairs of the Corporation. Each Co-President shall
perform such other duties as may be assigned by the Board of Directors or the
Executive Committee. Each Co-President shall have the authority on the
Corporation's behalf to endorse securities owned by the Corporation and to
execute any documents requiring the signature of an executive officer. Each
Co-President shall perform such other duties as the Board of Directors may
direct.

                  5.4 Vice Presidents. The Vice Presidents, in the order of
priority designated by the Board of Directors, shall be vested with all the
power and may perform all the duties of a Co-President in the latter's absence.
They may perform such other duties as may be prescribed by the Board of
Directors or the Executive Committee or a Co-President.


                                       9
<PAGE>   10
                  5.5 Treasurer. The Treasurer shall have general supervision
over the finances of the Corporation and shall perform such other duties as may
be assigned by the Board of Directors or a Co-President. If required by
resolution of the Board, the Treasurer shall furnish bond (which may be a
blanket bond) with such surety and in such penalty for the faithful performance
of duty as the Board of Directors may from time to time require, the cost of
such bond to be defrayed by the Corporation.

                  5.6 Secretary. The Secretary shall keep the minutes of the
meetings of the stockholders and of the Board of Directors and shall attend to
the giving and serving of all notices of the Corporation required by law or
these Bylaws. The Secretary shall maintain at all times in the principal office
of the Corporation at least one copy of the Bylaws with all amendments to date,
and shall make the same, together with the minutes of the meetings of the
stockholders, the annual statement of affairs of the Corporation and any voting
trust or other stockholders agreement on file at the office of the Corporation,
available for inspection by any officer, director or stockholder during
reasonable business hours. The Secretary shall perform such other duties as may
be assigned by the Board of Directors.

                  5.7 Assistant Treasurer and Secretary. The Board of Directors
may designate from time to time Assistant Treasurers and Secretaries, who shall
perform such duties as may from time to time be assigned to them by the Board of
Directors or a Co-President.

                  5.8 Salaries. The salaries of the officers of the corporation
may be fixed from time to time by the Board of Directors or (except as to a
Co-President's own) left to the discretion of a Co-President. No officer will be
prevented from receiving a salary by reason of the fact that he or she is also a
director of the corporation.

                  5.9 Additional Appointments. In addition to the officers
contemplated in this Article V, the Board of Directors may appoint other agents
of the corporation with such authority to perform such duties as may be
prescribed from time to time by the Board of Directors.

                 VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER

                  6.1      Certificates for Shares.

                           (a) Content. Certificates representing shares of the
corporation shall, at a minimum, state on their face the name of the issuing
corporation and that it is formed under the laws of the State of Arizona, the
name of the person to whom issued, and the number and class of shares and the
designation of the series, if any, the certificate represents. Such certificates
shall be signed (either manually or by facsimile to the extent allowable by law)
by one or more officers of the corporation, as determined by the Board of
Directors, or, if no such determination is made, by any of a Co-Chairman of the
Board (if any), a Co-President, any Vice-President, the Secretary, or the
Treasurer of the corporation, and may be sealed with a corporate seal or a
facsimile thereof. Each certificate for shares shall be consecutively numbered
or otherwise identified and will exhibit such information as may be required by
law. If a supply of unissued certificates bearing the facsimile signature of a
person remains when that person ceases to hold the office of the corporation
indicated on such certificates or ceases to be the transfer agent or registrar
of the corporation, they may still be issued by the corporation and
countersigned, registered, issued, and delivered by the


                                       10
<PAGE>   11
corporation's transfer agent and/or registrar thereafter, as though such person
had continued to hold the office indicated on such certificate.

                           (b) Legend as to Class or Series. If the corporation
is authorized to issue different classes of shares or different series within a
class, the designations, relative rights, preferences, and limitations
applicable to each class and the variations in rights, preferences, and
limitations determined for each series (and the authority of the Board of
Directors to determine variations for future series) shall be summarized on the
front or back of each certificate. Alternatively, each certificate may state
conspicuously on its front or back that the corporation will furnish a
shareholder this information on request in writing and without charge.

                           (c) Shareholder List. The name and address of the
person to whom shares are issued, with the number of shares and date of issue,
shall be entered on the stock transfer books of the corporation.

                           (d) Lost Certificates. In the event of the loss,
theft, or destruction of any certificate representing shares of the corporation
or of any predecessor corporation, the corporation may issue (or, in the case of
any such shares as to which a transfer agent and/or registrar have been
appointed, may direct such transfer agent and/or registrar to countersign,
register, and issue) a new certificate, and cause the same to be delivered to
the registered owner of the shares represented thereby; provided that such owner
shall have submitted such evidence showing the circumstances of the alleged
loss, theft, or destruction, and his, her, or its ownership of the certificate,
as the corporation considers satisfactory, together with any other facts that
the corporation considers pertinent; and further provided that, if so required
by the corporation, the owner shall provide a bond or other indemnity in form
and amount satisfactory to the corporation (and to its transfer agent and/or
registrar, if applicable).

                  6.2 Registration of the Transfer of Shares. Registration of
the transfer of shares of the corporation shall be made only on the stock
transfer books of the corporation. In order to register a transfer, the record
owner shall surrender the shares to the corporation for cancellation, properly
endorsed by the appropriate person or persons with reasonable assurances that
the endorsements are genuine and effective. Unless the corporation has
established a procedure by which a beneficial owner of shares held by a nominee
is to be recognized by the corporation as the owner, the corporation will be
entitled to treat the registered owner of any share of the capital stock of the
corporation as the absolute owner thereof and, accordingly, will not be bound to
recognize any beneficial, equitable, or other claim to, or interest in, such
share on the part of any other person, whether or not it has notice thereof,
except as may expressly be provided by applicable law.

                  6.3 Shares Without Certificates. The Board of Directors may
authorize the issuance of uncertificated shares by the corporation and may
prescribe procedures for the issuance and registration of transfer thereof and
with respect to such other matters as the Board of Directors shall deem
necessary or appropriate.

                               VII. DISTRIBUTIONS

                  7.1 Distributions. Subject to such restrictions or
requirements as may be imposed by applicable law or the corporation's Articles
or as may otherwise be binding upon the corporation,


                                       11
<PAGE>   12
the Board of Directors may from time to time declare, and the corporation may
pay or make, dividends or other distributions to its shareholders.

                              VIII. CORPORATE SEAL

                  8.1 Corporate Seal. The Board of Directors may provide for a
corporate seal of the corporation that will have inscribed thereon any
designation including the name of the corporation, Arizona as the state of
incorporation, the year of incorporation, and the words "Corporate Seal."

                                 IX. AMENDMENTS

                  9.1 Amendments. The corporation's Board of Directors may amend
or repeal the corporation's Bylaws unless:

                                    (1)      the Articles or the Arizona
                                             Business Corporation Act reserve
                                             this power exclusively to the
                                             shareholders in whole or part; or

                                    (2)      the shareholders in adopting,
                                             amending, or repealing a particular
                                             Bylaw provide expressly that the
                                             Board of Directors may not amend or
                                             repeal that Bylaw.

                  The corporation's shareholders may amend or repeal the
corporation's Bylaws even though the Bylaws may also be amended or repealed by
its Board of Directors.




                                       12

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.23
<SEQUENCE>23
<FILENAME>p65173ex3-23.txt
<DESCRIPTION>EX-3.23
<TEXT>

<PAGE>   1


                                                                    EXHIBIT 3.23






[State of Texas Seal]                              FILED
Office of the Secretary of State            In the Office of the
Corporations Section                     Secretary of State of Texas
P.O. Box 13697                                 March 27, 2001
Austin, Texas 78711-3697                    Corporations Section


_________________________________________________________________________

                       CERTIFICATE OF LIMITED PARTNERSHIP

1. The name of the limited partnership is   Legacy Operating Company L.P.

2. The street address of its proposed registered office in Texas
   is (a P.O. Box is not sufficient)


   350 N. St. Paul
   Dallas, TX 75201

   and the name of its proposed registered agent in Texas at such address is

   CT Corporation System, 350 North St. Paul, Dallas, TX 75201



3. The address of the principal office in the United States where records of
   the partnership are to be kept or made available is

   4050 West Park Blvd., Plano, TX 75093


4. The name, the mailing address, and the street address of the business or
   residence of each general partner is as follows:

    Name              MAILING ADDRESS             STREET ADDRESS
                   (include city, state,        (include city, state,
                          zip code)                     zip code)

   MTH-Texas GP Inc.   6613 N. Scottsdale Road   6613 N. Scottsdale Road
                       Suite 200                 Suite 200
                       Scottsdale, AZ 85250      Scottsdale, AZ 85250


     Date Signed:    3/23/01               /s/ Richard T. Morgan
                                           ____________________
                                              General Partner(s)
                                           Richard T. Morgan
                                           Vice President

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.24
<SEQUENCE>24
<FILENAME>p65173ex3-24.txt
<DESCRIPTION>EX-3.24
<TEXT>

<PAGE>   1

                                                                    Exhibit 3.24


                            ARTICLES OF INCORPORATION

                                       OF

                        MERITAGE HOMES CONSTRUCTION, INC.

         FIRST: The name of this corporation is MERITAGE HOMES CONSTRUCTION,
INC.

         SECOND: The purpose for which the corporation is organized is the
transaction of any and all lawful business for which corporations may be
incorporated under the laws of the State of Arizona, as they may be amended from
time to time. The character of business which the corporation initially intends
actually to conduct in the State of Arizona is the construction of homes.

         THIRD: The aggregate number of shares that the corporation shall have
authority to issue is one thousand (1000) common shares, all of which shares
shall be of a single class.

         FOURTH: The name and address of the initial statutory agent of the
corporation is C T Corporation System, 3225 N. Central Avenue, Suite 1601,
Phoenix, Arizona 85012. The street address of the initial known place of
business of the corporation in Arizona is 6613 N. Scottsdale Road, Suite 200,
Scottsdale, Arizona 85250.

         FIFTH: The number of directors constituting the initial board of
directors of the corporation is two (2). The names and addresses of the persons
who are to serve as directors until the first annual meeting of shareholders, or
until their successors are elected and qualified, are:

       Name                               Address

       John R. Landon                     4050 W. Park Boulevard
                                          Plano, TX 75093-3839

       Steven J. Hilton                   6613 North Scottsdale Road, Suite 200
                                          Scottsdale, Arizona 85250

The number of persons to serve on the board of directors thereafter shall be
fixed by the bylaws of the corporation.

         SIXTH: The name and address of the incorporator is Larry W. Seay, 6613
N. Scottsdale Road, Suite 200, Scottsdale, Arizona 85250.

         SEVENTH: The liability of a director or former director to the
corporation or its shareholders shall be eliminated to the fullest extent
permitted by Section 10-202.B.1 of the Arizona Revised Statutes.

         If the Arizona Business Corporation Act is amended to authorize
corporate action further eliminating or limiting the liability of directors, the
liability of a director of the corporation shall be eliminated or limited to the
fullest extent permitted by Arizona Business Corporation Act, as amended.


                                       -1-
<PAGE>   2



         Any repeal or modification of this Article Seventh shall not adversely
affect any right or protection of a director of the corporation existing
hereunder with respect to any act or omission occurring prior to or at the time
of such repeal or modification.

         The provisions of this Article Seventh shall not be deemed to limit or
preclude indemnification of a director by the corporation for any liability of a
director which has not been eliminated by the provisions of this Article
Seventh.

         DATED:            January 12, 2001



                                            ____________________________________
                                            Larry W. Seay, Incorporator



                                       -2-
<PAGE>   3


                                STATE OF ARIZONA
                            ACCEPTANCE OF APPOINTMENT

                               AS STATUTORY AGENT

                                       OF

                       MERITAGE HOMES CONSTRUCTION, INC.,

                             AN ARIZONA CORPORATION

To:      Arizona Corporation Commission
         Incorporating Division
         1300 West Washington
         Phoenix, Arizona  85007

                  Please be advised that C T Corporation System, a Delaware
corporation doing business in Arizona, and located at 3225 N. Central Avenue,
Suite 1601, Phoenix, Arizona 85012, hereby accepts and acknowledges its
appointment as statutory agent for service of process upon Meritage Homes
Construction, Inc., an Arizona corporation, and consents to act in that capacity
until removal or resignation.

                  The undersigned hereby certifies that it has been a
corporation in good standing in the State of Arizona for a period in excess of
three years.

                  DATED this 31st day of January, 2001


                                         C T CORPORATION SYSTEM



                                         By
                                           -------------------------------------

                                         Its
                                            ------------------------------------







</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.25
<SEQUENCE>25
<FILENAME>p65173ex3-25.txt
<DESCRIPTION>EX-3.25
<TEXT>

<PAGE>   1
                                                                    Exhibit 3.25

                                     BY-LAWS

                                       OF

                        MERITAGE HOMES CONSTRUCTION, INC.

                 I. REFERENCES TO CERTAIN TERMS AND CONSTRUCTION

         1.01 CERTAIN REFERENCES. Any reference herein made to law will be
deemed to refer to the law of the State of Arizona, including any applicable
provision of Chapters 1 through 17 of Title 10 of the Arizona Revised Statutes,
or any successor statute, as from time to time amended and in effect (sometimes
referred to herein as the "Arizona Business Corporation Act"). Any reference
herein made to the corporation's Articles will be deemed to refer to its
Articles of Incorporation and all amendments thereto as at any given time on
file with the Arizona Corporation Commission. Except as otherwise required by
law and subject to any procedures established by the corporation pursuant to
Arizona Revised Statutes Section 10- 723, the term "shareholder as used herein
shall mean one who is a holder of record of shares of the corporation.
References to specific sections of law herein made shall be deemed to refer to
such sections, or any comparable successor provisions, as from time to time
amended and in effect.

         1.02 SENIORITY. The law and the Articles (in that order of precedence)
will in all respects be considered senior and superior to these Bylaws, with any
inconsistency to be resolved in favor of the law and such Articles (in that
order of precedence), and with these Bylaws to be deemed automatically amended
from time to time to eliminate any such inconsistency which may then exist.

         1.03 COMPUTATION OF TIME. The time during which an act is required to
be done, including the time for the giving of any required notice herein, shall
be computed by excluding the first day or hour, as the case may be, and
including the last day or hour.

                                   II. OFFICES

         2.01 PRINCIPAL OFFICE. The principal office of the corporation shall be
located at any place either within or outside the State of Arizona as designed
in the corporation's most current Annual Report filed with the Arizona
Corporation Commission or in any other document executed and delivered to the
Arizona Corporation Commission for filing. If a principal office is not so
designated, the principal office of the corporation shall mean the known place
of business of the corporation. The corporation may have such other offices,
either within or without the State of Arizona, as the Board of Directors may
designate or as the business of the corporation may require from time to time.

         2.02 KNOWN PLACE OF BUSINESS. A known place of business of the
corporation shall be located within the State of Arizona and may be, but need
not be, the address of the statutory agent of the corporation. The corporation
may change its known place of



<PAGE>   2
business from time to time in accordance with the relevant provisions of the
Arizona Business Corporation Act.

                                III. SHAREHOLDERS

         3.01 ANNUAL SHAREHOLDER MEETING. The annual meeting of the shareholders
shall be held on such date within the month of January (or at such other date
within each calendar year) as may be fixed from time to time by the Board of
Directors for the purpose of electing directors and for the transaction of such
other business as may properly come before the meeting.

         3.02 SPECIAL SHAREHOLDER MEETINGS. Special meetings of the shareholders
may be held whenever and wherever, either within or without the State of
Arizona, called for by or at the direction of the Chairman of the Board, the
President or the Board of Directors.

         3.03     NOTICE OF SHAREHOLDERS MEETINGS.

                  (a) REQUIRED NOTICE. Notice stating the place, day and hour of
any annual or special shareholders meeting shall be given not less than ten (10)
nor more than sixty (60) days before the date of the meeting by or at the
direction of the person or persons calling the meeting, to each shareholder
entitled to vote at such meeting and to any other shareholder entitled to
receive notice of the meeting by law or the Articles. Notices to shareholders
shall be given in accordance with, and shall be deemed to be effective at the
time and in the manner described in, Section 10-141 of the Arizona Revised
Statutes. If no designation is made of the place at which an annual or special
meeting will be held in the notice for such meeting, the place of the meeting
will be at the principal place of business of the corporation.

                  (b) ADJOURNED MEETING. If any shareholders meeting is
adjourned to a different date, time or place, notice need not be given of the
new date, time and place if the new date, time and place are announced at the
meeting before adjournment. But if a new record date for the adjourned meeting
is fixed or must be fixed in accordance with law or these Bylaws, then notice of
the adjourned meeting shall be given to those persons who are shareholders as of
the new record date and who are entitled to such notice pursuant to Section
3.03(a) above.

                  (c) WAIVER OF NOTICE. Any shareholder may waive notice of a
meeting (or any notice of any other action required to be given by the Arizona
Business Corporation Act, the corporation's Articles or these Bylaws) at any
time before, during or after the meeting or other action, by a writing signed by
the shareholder entitled to the notice. Each such waiver shall be delivered to
the corporation for inclusion in the minutes or filing with the corporate
records. Under certain circumstances, a shareholder's attendance at a


                                      -2-
<PAGE>   3
meeting may constitute a waiver of notice, unless the shareholder takes certain
actions to preserve his/her objections as described in the Arizona Business
Corporation Act.

               (d) CONTENTS OF NOTICE. The notice of each special shareholders
meeting shall include a description of the purpose or purposes for which the
meeting is called. Except as required by law or the corporation's Articles, the
notice of an annual shareholders meeting need not include a description of the
purpose or purposes for which the meeting is called.

         3.04 FIXING OF RECORD DATE. For the purpose of determining shareholders
of any voting group entitled to notice of or to vote at any meeting of
shareholders, or shareholders entitled to receive any distribution or dividend,
or in order to make a determination of shareholders for any other proper
purpose, the Board of Directors may fix in advance a date as the record date.
Such record date shall not be more than seventy (70) days prior to the date on
which the particular action requiring such determination of shareholders is to
be taken. If no record date is so fixed by the Board of Directors, the record
date for the determination of shareholders shall be as provided in the Arizona
Business Corporation Act.

                  When a determination of shareholders entitled to notice of or
to vote at any meeting of shareholders has been made as provided in this
Section, such determination shall apply to any adjournment thereof, unless the
Board of Directors fixes a new record date, which it must do if the meeting is
adjourned to a date more than one hundred twenty (120) days after the date fixed
for the original meeting.

         3.05 SHAREHOLDER LIST. The corporation shall make a complete record of
the shareholders entitled to notice of each meeting of shareholders thereof,
arranged in alphabetical order, listing the address and the number of shares
held by each. The list shall be arranged by voting group and within each voting
group by class or series of shares. The shareholder list shall be available for
inspection by any shareholder, beginning two (2) business days after notice of
the meeting is given for which the list was prepared and continuing through the
meeting. The list shall be available at the corporation's principal office or at
another place identified in the meeting notice in the city where the meeting is
to be held. Failure to comply with this section shall not affect the validity of
any action taken at the meeting.

         3.06     SHAREHOLDER QUORUM AND VOTING REQUIREMENTS.

                  (a) If the Articles or the Arizona Business Corporation Act
provide for voting by a single voting group on a matter, action on that matter
is taken when voted upon by that voting group.


                                      -3-
<PAGE>   4
                  (b) If the Articles or the Arizona Business Corporation Act
provide for voting by two (2) or more voting groups on a matter, action on that
matter is taken when voted upon by each of those voting groups counted
separately.

                  (c) Shares entitled to vote as a separate voting group may
take action on a matter at a meeting only if a quorum of those shares exists
with respect to that matter. Unless the Articles or the Arizona Business
Corporation Act provide otherwise, a majority of the votes entitled to be cast
on the matter by the voting group constitutes a quorum of that voting group for
action on that matter.

                  (d) Once a share is represented for any purpose at a meeting,
it is deemed present for quorum purposes for the remainder of the meeting and
for any adjournment of that meeting, unless a new record date is or must be set
for that adjourned meeting.

                  (e) If a quorum exists, action on a matter (other than the
election of directors) by a voting group is approved if the votes cast within
the voting group favoring the action exceed the votes cast opposing the action,
unless the Articles or the Arizona Business Corporation Act require a greater
number of affirmative votes.

                  (f) Voting will be by ballot on any question as to which a
ballot vote is demanded prior to the time the voting begins by any person
entitled to vote on such question; otherwise, a voice vote will suffice. No
ballot or change of vote will be accepted after the polls have been declared
closed following the ending of the announced time for voting.

         3.07 PROXIES. At all meetings of shareholders, a shareholder may vote
in person or by proxy duly executed in writing by the shareholder or the
shareholder's duly authorized attorney-in-fact. Such proxy shall comply with law
and shall be filed with the Secretary of the corporation or other person
authorized to tabulate votes before or at the time of the meeting. No proxy
shall be valid after eleven (11) months from the date of its execution unless
otherwise provided in the proxy. The burden of proving the validity of any
undated, irrevocable or otherwise contested proxy at a meeting of the
shareholders will rest with the person seeking to exercise the same. A facsimile
appearing to have been transmitted by a shareholder or by such shareholder's
duly authorized attorney-in-fact may be accepted as a sufficiently written and
executed proxy.

         3.08 VOTING OF SHARES. Unless otherwise provided in the Articles or the
Arizona Business Corporation Act, each outstanding share entitled to vote shall
be entitled to one (1) vote upon each matter submitted to a vote at a meeting of
shareholders.

         3.09 CUMULATIVE VOTING. At all elections for directors, each
shareholder shall be entitled to as many votes as shall equal the number of its
shares of stock multiplied by the number of directors to be elected, and it may
cast all of such votes for a single director or


                                      -4-
<PAGE>   5
may distribute them among the number to be voted for, or any two or more of
them, as it may see fit.

         3.10 ELECTION INSPECTORS. The Board of Directors, in advance of any
meeting of the shareholders, may appoint an election inspector or inspectors to
act at such meeting (and at any adjournment thereof). If an election inspector
or inspectors are not so appointed, the chairman of the meeting may, or upon
request of any person entitled to vote at the meeting will, make such
appointment. If any person appointed as an inspector fails to appear or to act,
a substitute may be appointed by the chairman of the meeting. If appointed, the
election inspector or inspectors (acting through a majority of them if there be
more than one) will determine the number of shares outstanding, the
authenticity, validity and effect of proxies and the number of shares
represented at the meeting in person and by proxy; will receive and count votes,
ballots and consents and announce the results thereof; will hear and determine
all challenges and questions pertaining to proxies and voting; and, in general,
will perform such acts as may be proper to conduct elections and voting with
complete fairness to all shareholders. No such election inspector need be a
shareholder of the corporation.

         3.11 ORGANIZATION AND CONDUCT OF MEETINGS. Each meeting of the
shareholders will be called to order and thereafter chaired by the Chairman of
the Board of Directors if there is one, or, if not or if the Chairman of the
Board is absent or so requests, then by the President, or if both the Chairman
and the President are unavailable, then by such officer of the corporation or
such shareholder as may be appointed by the Board of Directors. The
corporation's Secretary or, in his or her absence, an Assistant Secretary will
act as secretary of each meeting of the shareholders. If neither the Secretary
nor an Assistant Secretary is in attendance, the chairman of the meeting may
appoint any person (whether a shareholder or not) to act as secretary for the
meeting. After calling a meeting to order, the chairman thereof may require the
registration of all shareholders intending to vote in person and the filing of
all proxies with the election inspector or inspectors, if one or more have been
appointed (or, if not, with the secretary of the meeting). After the announced
time for such filing of proxies has ended, no further proxies or changes,
substitutions or revocations of proxies will be accepted. If directors are to be
elected, a tabulation of the proxies so filed will, if any person entitled to
vote in such election so requests, be announced at the meeting (or adjournment
thereof) prior to the closing of the election polls. Absent a showing of bad
faith on his or her part, the chairman of a meeting will, among other things,
have absolute authority to fix the period of time allowed for the registration
of shareholders and the filing of proxies, to determine the order of business to
be conducted at such meeting and to establish reasonable rules for expediting
the business of the meeting and preserving the orderly conduct thereof
(including any informal or question and answer portions thereof).

         3.12 SHAREHOLDER APPROVAL OR RATIFICATION. The Board of Directors may
submit any contract or act for approval or ratification of the shareholders at a
duly constituted meeting of the shareholders. Except as otherwise required by
law, if any contract or act so


                                      -5-
<PAGE>   6
submitted is approved or ratified by a majority of the votes cast thereon at
such meeting, the same will be valid and as binding upon the corporation and all
of its shareholders as it would be if it were the act of its shareholders.

         3.13 INFORMALITIES AND IRREGULARITIES. All informalities or
irregularities in any call or notice of a meeting of the shareholders or in the
areas of credentials, proxies, quorums, voting and similar matters will be
deemed waived if no objection is made at the meeting.

         3.14 SHAREHOLDER ACTION BY WRITTEN CONSENT. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if one (1) or more consents in writing, setting forth the action so
taken shall be signed by all of the shareholders entitled to vote with respect
to the subject matter thereof. The consents shall be delivered to the
corporation for inclusion in the minutes or filing with the corporate record.
Action taken by consent is effective when the last shareholder signs the consent
unless the consent specifies a different effective date, except that if, by law,
the action to be taken requires that notice be given to shareholders who are not
entitled to vote on the matter, the effective date shall not be prior to ten
(10) days after which the corporation shall give such shareholders written
notice of the proposed action, which notice shall contain or be accompanied by
the same material that would have been required if a formal meeting had been
called to consider the action. A consent signed under this section has the
effect of a meeting vote and may be described as such in any document.

                             IV. BOARD OF DIRECTORS

         4.01 GENERAL POWERS. All corporate powers shall be exercised by or
under the authority of, and the business and affairs of the corporation shall be
managed under the direction of, the Board of Directors.

         4.02 NUMBER, TENURE AND QUALIFICATION OF DIRECTORS. Unless otherwise
provided in the Articles of Incorporation, the authorized number of directors
shall be not less than one (1) nor more than five (5). The number of directors
in office from time to time shall be within the limits specified above, as
prescribed from time to time by resolution adopted by either the shareholders or
the Board of Directors. The directors will regularly be elected at each annual
meeting of the shareholders, but directors may be elected at any other meeting
of the shareholders. Each director shall hold office until the annual meeting of
shareholders following his/her election, subject to his/her earlier resignation
or removal. However, if a director's term expires, he/she shall continue to
serve until his/her successor shall have been elected and qualified, until
his/her resignation or removal or until there is a decrease in the number of
directors. Unless required by the Articles, directors do not need to be
residents of the State of Arizona or shareholders of the corporation.

         4.03 REGULAR MEETINGS OF THE BOARD OF DIRECTORS. A regular annual
meeting of the Board of Directors is to be held as soon as practicable after the
adjournment of each


                                      -6-
<PAGE>   7
annual meeting of the shareholders, either at the place of the shareholders
meeting or at such other place as the directors elected at the shareholders
meeting may have been informed of at or prior to the time of their election.
Additional regular meetings may be held at regular intervals at such places and
at such times as the Board of Directors may determine.

         4.04 SPECIAL MEETINGS OF THE BOARD OF DIRECTORS. Special meetings of
the Board of Directors may be held whenever and wherever called for by the
Chairman of the Board, the President or the number of directors that would be
required to constitute a quorum.

         4.05 NOTICE OF AND WAIVER OF NOTICE FOR DIRECTORS MEETINGS. No notice
need be given of regular meetings of the Board of Directors. Notice of the time
and place of any special directors meeting shall be given at least forty-eight
(48) hours prior thereto. Notice shall be given in accordance with and shall be
deemed to be effective at the time and in the manner described in Arizona
Revised Statutes Section 10-141. Any director may give notice of any meeting and
any adjournment thereof at any time before, during or after it is held. Except
as provided in the next sentence below, the waiver must be in writing, signed by
the director entitled to the notice and filed with the minutes or corporate
records. The attendance of a director at or participation of a director in a
meeting shall constitute a waiver of notice of such meeting, unless the director
at the beginning of the meeting (or promptly upon his/her arrival) objects to
holding the meeting or transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting.

         4.06 DIRECTOR QUORUM. A majority of the number of directors prescribed
according to Section 4.02 above or, if no number is so prescribed, the number in
office immediately before the meeting begins, shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors unless the
Articles require a greater number.

         4.07     DIRECTORS, MANNER OF ACTING.

                  (a) If a quorum is present when a vote is taken, the
affirmative vote of a majority of the directors present shall be the act of the
Board of Directors unless the Articles require a greater percentage.

                  (b) Unless the Articles provide otherwise, any or all
directors may participate in a regular or special meeting by, or conduct the
meeting through the use of, any means of communication by which all directors
participating may simultaneously hear each other during the meeting, in which
case, any required notice of the meeting may generally describe the arrangements
(rather than or in addition to the place) for the holding thereof. A director
participating in a meeting by this means is deemed to be present in person at
the meeting.


                                      -7-
<PAGE>   8
                  (c) A director who is present at a meeting of the Board of
Directors or a committee of the Board of Directors when corporate action is
taken is deemed to have assented to the action taken unless: (1) the director
objects at the beginning of the meeting (or promptly upon his/her arrival) to
holding it or transacting business at the meeting; or (2) his/her dissent or
abstention from the action taken is entered in the minutes of the meeting; or
(3) he/she delivers written notice of his/her dissent or abstention to the
presiding officer of the meeting before its adjournment or to the corporation
before 5:00 pm. on the next business day after the meeting. The right of dissent
or abstention is not available to a director who votes in favor of the action
taken.

         4.08 DIRECTOR ACTION WITHOUT A MEETING. Unless the Articles provide
otherwise, any action required or permitted to be taken by the Board of
Directors at a meeting may be taken without a meeting if the action is taken by
unanimous written consent of the Board of Directors as evidenced by one (1) or
more written consents describing the action taken, signed by each director and
filed with the minutes or corporate records. Action taken by consent is
effective when the last director signs the consent, unless the consent specifies
a different effective date. A signed consent has the effect of a meeting vote
and may be described as such in any document.

         4.09 REMOVAL OF DIRECTORS BY SHAREHOLDERS. The shareholders may remove
one (1) or more directors at a meeting called for that purpose if notice has
been given that a purpose of the meeting is such removal. The removal may be
with or without cause unless the Articles provide that directors may only be
removed with cause. If a director is elected by a voting group of shareholders,
only the shareholders of that voting group may participate in a shareholder vote
to remove him/her. If less than the entire Board of Directors is to be removed,
a director may not be removed if the number of votes sufficient to elect the
director under cumulative voting is voted against the director's removal.

         4.10     BOARD OF DIRECTORS.

                  (a) Unless the Articles provide otherwise, if a vacancy occurs
on the Board of Directors, including a vacancy resulting from an increase in the
number of directors, either the shareholders or the Board of Directors may fill
the vacancy.

                  (b) If the vacant office was held by a director elected by a
voting group of shareholders, only the holders of that voting group are entitled
to vote to fill the vacancy if it is filled by the shareholders.

                  (c) A vacancy that will occur at a specific later date (by
reason of resignation effective at a later date) may be filled before the
vacancy occurs, but the new director may not take office until the vacancy
occurs.


                                      -8-
<PAGE>   9
                  (d) The term of a director elected to fill a vacancy expires
at the next shareholders meeting at which directors are elected.

         4.11 DIRECTOR COMPENSATION. Unless otherwise provided in the Articles
by resolution of the Board of Directors, each director may be paid his/her
expenses, if any, of attendance at each meeting of the Board of Directors or any
committee thereof, and may be paid a stated salary as director or a fixed sum
for attendance at each meeting of the Board of Directors or any committee
thereof, or both. No such payment shall preclude any director from serving the
corporation in any capacity and receiving compensation therefor.

         4.12     DIRECTOR COMMITTEES.

                  (a) CREATION OF COMMITTEES. Unless the Articles provide
otherwise, the Board of Directors may create one (1) or more committees and
appoint members of the Board of Directors to serve on them. Each committee shall
have one (1) or more members, who serve at the pleasure of the Board of
Directors.

                  (b) SELECTION OF MEMBERS. The creation of a committee and
appointment of members to it shall be approved by the greater of (1) a majority
of all the directors in office when the action is taken or (2) the number of
directors required by the Articles to take such action.

                  (c) REQUIRED PROCEDURES. Sections 4.03 through 4.08 of this
Article IV, which govern meetings, action without meetings, notice and waiver of
notice and quorum and voting requirements of the Board of Directors, apply to
committees and their members.

                  (d) AUTHORITY. Unless limited by the Articles, each committee
may exercise those aspects of the authority of the Board of Directors which the
Board of Directors confers upon such committee in the resolution creating the
committee; provided, however, that a committee may not: (1) authorize
distributions; (2) approve or propose to shareholders action that requires
shareholder approval under the Arizona Business Corporation Act; (3) fill
vacancies on the Board of Directors or on any of its committees; (4) amend the
Articles of Incorporation without shareholder action as provided by law; (5)
adopt, amend or repeal these Bylaws; (6) approve a plan of merger not requiring
shareholder approval; (7) authorize or approve reacquisition of shares, except
according to a formula or method prescribed by the Board of Directors; (8)
authorize or approve the issuance or sale or contract for sale of shares or
determine the designation and relative rights, preferences and limitations of a
class or series of shares except within limits specifically prescribed by the
Board of Directors; or (9) fix the compensation of directors for serving on the
Board of Directors or any committee of the Board of Directors.

         4.13 DIRECTOR RESIGNATIONS. Any director or committee may resign from
his or her office at any time by written notice delivered to the Board of
Directors, the Chairman of the


                                      -9-
<PAGE>   10
Board or the corporation at its known place of business. Any such resignation
will be effective upon its receipt unless some later time is therein fixed, and
then from that time. The acceptance of a resignation will not be required to
make it effective.

                                   V. OFFICERS

         5.01 NUMBER OF OFFICERS. The officers of the corporation shall be a
President, a Secretary and a Treasurer, each of whom shall be appointed by the
Board of Directors. Such other officers and assistant officers as may be deemed
necessary, including any Vice Presidents, may be appointed by the Board of
Directors. If specifically authorized by the Board of Directors, an officer may
appoint one (1) or more other officers or assistant officers. The same
individual may simultaneously hold more than one (1) office in the corporation.

         5.02 APPOINTMENT AND TERM OF OFFICE. The officers of the corporation
shall be appointed by the Board of Directors for a term as determined by the
Board of Directors. The designation of a specified term grants to the officer no
contract rights, and the Board of Directors can remove the officer at any time
prior to the termination of such term. If no term is specified, an officer of
the corporation shall hold office until her or she resigns or dies or until he
or she is removed in the manner provided by law or in Section 5.03 of this
Article V. The regular election or appointment of officers will take place at
each annual meeting of the Board of Directors, but elections of officers may be
held at any other meeting of the Board.

         5.03 RESIGNATION AND REMOVAL OF OFFICERS. An officer may resign at any
time by delivering written notice to the corporation at its known place of
business. A resignation is effective when the notice is delivered unless the
notice specifies a later effective date or event. Any officer may be removed by
the Board of Directors at any time, with or without cause. Such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Appointment of an officer shall not of itself create contract rights.

         5.04 DUTIES OF OFFICERS. Officers of the corporation shall have
authority to perform such duties as may be prescribed from time to time by law,
in these Bylaws or by the Board of Directors, the President or the superior
officer of any such officer. Each officer of the corporation (in the order
designated herein or by the Board) will be vested with all of the powers and
charged with all of the duties of his or her superior officer in the event of
such superior officer's absence, death or disability.

         5.05 BONDS AND OTHER REQUIREMENTS. The Board of Directors may require
any officer to give bond to the corporation (with sufficient surety and
conditioned for the faithful performance of the duties of his or her office) and
to comply with such other conditions as may from time to time be required of him
or her by the Board of Directors.


                                      -10-
<PAGE>   11
         5.06 PRESIDENT. Unless otherwise specified by resolution of the Board
of Directors, the President shall be the principal executive officer of the
corporation and, subject to the control of the Board of Directors, shall
supervise and control all of the business and affairs of the corporation and the
performance by all of its other officers of their respective duties and in
general shall perform all duties incident to the office of President and such
other duties as may be prescribed by the Board of Directors from time to time.
The President shall, when present and in the absence of a Chairman of the Board,
preside at all meetings of shareholders and of the Board of Directors. The
President will be a proper officer to sign on behalf of the corporation any
deed, bill of sale, assignment, option, mortgage, pledge, note, bond, evidence
of indebtedness, application, consent (to service of process or otherwise),
agreement, indenture, contract or other instrument, except in each such case
where the signing and execution thereof shall be expressly delegated by the
Board of Directors or by these Bylaws to some other officer or agent of the
corporation, or shall be required by law to be otherwise signed or executed. The
President may represent the corporation at any meeting of the shareholders or
members of any other corporation, association, partnership, joint venture or
other entity in which the corporation then holds shares of capital stock or has
an interest and may vote such shares of capital stock or other interest in
person or by proxy appointed by him or her, provided that the Board of Directors
may from time to time confer the foregoing authority upon any other person or
persons.

         5.07 VICE-PRESIDENT. If appointed, in the absence of the President or
in the event of his/her death or disability, the Vice-President (or in the event
there be more than one Vice- President, the Vice-Presidents in the order
designated at the time of their election, or in the absence of any such
designation, then in the order of their appointment) shall perform the duties of
the President, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the President. If there is no Vice-President or in
the event of the death or disability of all Vice-Presidents, then the Treasurer
shall perform such duties of the President in the event of his or her absence,
death or disability. Each Vice-President will be a proper officer to sign on
behalf of the corporation any deed, bill of sale, assignment, option, mortgage,
pledge, note, bond, evidence of indebtedness, application, consent (to service
of process or otherwise), agreement, indenture, contract or other instrument,
except in each such case where the signing and execution thereof shall be
expressly delegated by the Board of Directors or by these Bylaws to some other
officer or agent of the corporation, or shall be required by law to be otherwise
signed or executed. Any Vice-President may represent the corporation at any
meeting of the shareholders or members of any other corporation, association,
partnership, joint venture or other entity in which the corporation then holds
shares of capital stock or has an interest and may vote such shares of capital
stock or other interest in person or by proxy appointed by him or her, provided
that the Board of Directors may from time to time confer the foregoing authority
upon any other person or persons. A Vice-President shall perform such other
duties as from time to time may be assigned to him/her by the President or the
Board of Directors.


                                      -11-
<PAGE>   12
         5.08 SECRETARY. The Secretary shall: (a) keep the minutes of the
proceedings of the shareholders and of the Board of Directors and any committee
of the Board of Directors and all unanimous written consents of the
shareholders, Board of Directors and any committee of the Board of Directors in
one (1) or more books provided for that purpose; (b) see that all notices are
duly given in accordance with the provisions of these Bylaws or as required by
law; (c) be custodian of the corporate records and of any seal of the
corporation; (d) when requested or required, authenticate any records of the
corporation; (e) keep a register of the address of each shareholder which shall
be furnished to the Secretary by such shareholder; and (f) in general perform
all duties assigned to him/her by the President or by the Board of Directors.
Except as may otherwise be specifically provided in a resolution of the Board of
Directors, the Secretary will be a proper officer to take charge of the
corporation's stock transfer books and to compile the voting record pursuant to
Section 3.05 above, and to impress the corporation's seal, if any, on any
instrument signed by the President, any Vice- President or any other duly
authorized person, and to attest to the same. In the absence of the Secretary, a
secretary pro tempore may be chosen by the director or shareholders, as
appropriate, to perform the duties of the Secretary.

         5.09 TREASURER. The Treasurer shall: (a) have charge and custody of and
be responsible for all funds and securities of the corporation; (b) receive and
give receipts for moneys due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the corporation in such
bank, trust companies or other depositories as shall be selected by the Board of
Directors or any proper officer; (c) keep full and accurate accounts of receipts
and disbursements in books and records of the corporation; and (d) in general
perform all of the duties incident to the office of Treasurer and such other
duties as from time to time may be assigned to him/her by the President or by
the Board of Directors. The Treasurer will render to the President, the
directors and the shareholders at proper times an account of all of his or her
transactions as Treasurer and of the financial condition of the corporation. The
Treasurer shall be responsible for preparing and filing such financial reports,
financial statements and returns as may be required by law.

         5.10 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The Assistant
Secretaries and the Assistant Treasurers, when authorized by the Board of
Directors, may sign with the President or a Vice-President certificates for
shares of the corporation, the issuance of which shall have been authorized by a
resolution of the Board of Directors. The Assistant Secretaries and Assistant
Treasurers, in general, shall perform such duties as shall be assigned to them
by the Secretary or the Treasurer, respectively, or by the President or the
Board of Directors.

         5.11 CHAIRMAN OF THE BOARD. The Board of Directors may elect a Chairman
to serve as a general executive officer of the corporation and, if specifically
designated as such by the Board of Directors, as the chief executive officer of
the corporation. If elected, the


                                      -12-
<PAGE>   13
Chairman will preside at all meetings of the Board of Directors and be vested
with such other powers and duties as the Board of Directors may from time to
time delegate to him or her.

         5.12 SALARIES. The salaries of the officers of the corporation may be
fixed from time to time by the Board of Directors or (except as to the
President's own) left to the discretion of the President. No officer will be
prevented from receiving a salary by reason of the fact that he or she is also a
director of the corporation.

         5.13 ADDITIONAL APPOINTMENTS. In addition to the officers contemplated
in this Article V, the Board of Directors may appoint other agents of the
corporation with such authority to perform such duties as may be prescribed from
time to time by the Board of Directors.

VI.  CERTIFICATES FOR SHARES AND THEIR TRANSFER

         6.01     CERTIFICATES FOR SHARES.

                  (a) CONTENT. Certificates representing shares of the
corporation shall, at a minimum, state on their face the name of the issuing
corporation and that it is formed under the laws of the State of Arizona, the
name of the person to whom issued, and the number and class of shares and the
designation of the series, if any, the certificate represents. Such certificates
shall be signed (either manually or by facsimile to the extent allowable by law)
by one or more officers of the corporation as determined by the Board of
Directors or, if no such determination is made, by any of the Chairman of the
Board (if any), the President, any Vice- President, the Secretary or the
Treasurer of the corporation, and may be sealed with a corporate seal or a
facsimile thereof, if any. Each certificate for shares shall be consecutively
numbered or otherwise identified and will exhibit such information as may be
required by law. If a supply of unissued certificates bearing the facsimile
signature of a person remains when that person ceases to hold the office of the
corporation indicated on such certificates or ceases to be the transfer agent or
registrar of the corporation, they may still be issued by the corporation and
countersigned, registered, issued and delivered by the corporation's transfer
agent and/or registrar thereafter, as though such person had continued to hold
the office indicated on such certificate.

                  (b) LEGEND AS TO CLASS OR SERIES. If the corporation is
authorized to issue different classes of shares or different series within a
class, the designations, relative rights, preferences and limitations applicable
to each class and the variations in rights, preferences and limitations
determined for each series (and the authority of the Board of Directors to
determine variations for future series) shall be summarized on the front or back
of each certificate. Alternatively, each certificate may state conspicuously on
its front or back that the corporation will furnish a shareholder this
information upon request in writing and without charge.


                                      -13-
<PAGE>   14
                  (c) SHAREHOLDER LIST. The name and address of the person to
whom shares are issued, with the number of shares and date of issue, shall be
entered on the stock transfer books of the corporation.

                  (d) LOST CERTIFICATES. In the event of the loss, theft or
destruction of any certificate representing shares of the corporation or of any
predecessor corporation, the corporation may issue (or, in the case of any such
shares as to which a transfer agent and/or registrar have been appointed, may
direct such transfer agent and/or registrar to countersign, register and issue)
a new certificate, and cause the same to be delivered to the registered owner of
the shares represented thereby; provided that such owner shall have submitted
such evidence showing the circumstances of the alleged loss, theft or
destruction and his, her or its ownership of the certificate as the corporation
considers satisfactory, together with any other facts that the corporation
considers pertinent; and further provided that, if so required by the
corporation, the owner shall provide a bond or other indemnity in form and
amount satisfactory to the corporation (and to its transfer agent and/or
registrar, if applicable).

         6.02 REGISTRATION OF THE TRANSFER OF SHARES. Registration of the
transfer of shares of the corporation shall be made only on the stock transfer
books of the corporation. In order to register a transfer, the record owner
shall surrender the shares to the corporation for cancellation, properly
endorsed by the appropriate person or persons with reasonable assurances that
the endorsements are genuine and effective. Unless the corporation has
established a procedure by which a beneficial owner of shares held by a nominee
is to be recognized by the corporation as the owner, the corporation will be
entitled to treat the registered owner of any share of the capital stock of the
corporation as the absolute owner thereof and, accordingly, will not be bound to
recognize any beneficial, equitable or other claim to, or interest in, such
share on the part of any other person, whether or not it has notice thereof,
except as may expressly be provided by applicable law.

         6.03 SHARES WITHOUT CERTIFICATES. The Board of Directors may authorize
the issuance of uncertificated shares by the corporation and may prescribe
procedures for the issuance and registration of transfer thereof and with
respect to such other matters as the Board of Directors shall deem necessary or
appropriate.

                               VII. DISTRIBUTIONS

         Subject to such restrictions or requirements as may be imposed by
applicable law or the corporation's Articles or as may otherwise be binding upon
the corporation, the Board of Directors may from time to time declare, and the
corporation may pay or make, dividends or other distributions to its
shareholders.

                              VIII. CORPORATE SEAL


                                      -14-
<PAGE>   15
         The Board of Directors may provide for a corporate seal of the
corporation that will have inscribed thereon any designation, including the name
of the corporation, Arizona as the state of incorporation, the year of
incorporation and the words "Corporate Seal".

                                 IX. AMENDMENTS

         The corporation's Board of Directors may amend or repeal the
corporation's Bylaws unless:

                  (a)      The Articles or the Arizona Business Corporation Act
                           reserve this power exclusively to the shareholders in
                           whole or part; or

                  (b)      The shareholders, in adopting, amending or repealing
                           a particular bylaw, provide expressly that the Board
                           of Directors may not amend or repeal that bylaw.

The corporation's shareholders may amend or repeal the corporation's Bylaws even
though the Bylaws may also be amended or repealed by its Board of Directors.

                                    * * * * *

                                  CERTIFICATION

                  The undersigned Secretary of Meritage Construction, Inc.
hereby certifies that the foregoing Bylaws of the Corporation were duly adopted
pursuant to the Action by Unanimous Consent of the Board of Directors in Lieu of
First Meeting dated_____ , 2001.

                                    ________________________________
                                    Larry W. Seay


                                      -15-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-5.1
<SEQUENCE>26
<FILENAME>p65173ex5-1.txt
<DESCRIPTION>EX-5.1
<TEXT>

<PAGE>   1
                                                                     EXHIBIT 5.1

                                  July 2, 2001

Meritage Corporation
6613 North Scottsdale Road, Suite 200
Scottsdale, Arizona 85250

Monterey Homes Arizona, Inc.
Meritage Paseo Crossing, LLC
Monterey Homes Construction, Inc.
Meritage Paseo Construction, LLC
Meritage Homes of Arizona, Inc.
Meritage Homes Construction, Inc.
MTH-Texas GP, Inc.
MTH-Texas LP, Inc.
Legacy/Monterey Homes, LP
Meritage Homes of Northern California, Inc.
Hancock-MTH Builders, Inc.
Hancock-MTH Communities, Inc
Legacy Operating Company, L.P.

each c/o Meritage Corporation
6613 North Scottsdale Road, Suite 200
Scottsdale, Arizona 85250


Ladies and Gentlemen:

         Reference is made to the Registration Statement on Form S-4, including
amendments and exhibits thereto (the "Registration Statement"), for the proposed
offer to exchange (the "Exchange Offer") by Meritage Corporation (the "Company")
and Monterey Homes Arizona, Inc., Meritage Paseo Crossing, LLC, Monterey Homes
Construction, Inc., Meritage Paseo Construction, LLC, Meritage Homes of Arizona,
Inc., Meritage Homes Construction, Inc., MTH-Texas GP, Inc., MTH-Texas LP, Inc.,
Legacy/Monterey Homes L.P., Meritage Homes of Northern California, Inc.,
Hancock-MTH Builders, Inc., Legacy Operating Company, L.P. and Hancock-MTH
Communities, Inc (collectively, the "Guarantors"), of up to an aggregate of $165
million in principal amount of its 9.75% Senior Notes due 2011 (the "Exchange
Notes") for an equal principal amount of its outstanding 9.75 Senior Notes due
2011 (the "Outstanding Notes") and the guarantees by the Guarantors of the
Exchange Notes. The Outstanding Notes were issued, and the Exchanges Notes are
issuable, pursuant to an Indenture, dated May 30, 2001, by and among the
Company, the Guarantors and Wells Fargo Bank, National Association, as Trustee
(the "Indenture").

         Based on the foregoing, and subject to the qualifications and
limitations set forth herein, we advise you that:
<PAGE>   2
         1.       The Exchange Notes, when issued, authenticated and delivered
by the Company and the Trustee in accordance with the terms of the Indenture,
and when issued in exchange for Outstanding Notes as contemplated in the
Registration Statement, will be legally binding and valid obligations of the
Company, entitled to the benefits of the Indenture and enforceable against the
Company in accordance with their terms.

         2.       The guarantees by the Guarantors to be endorsed on the
Exchange Notes, when the Exchange Notes are issued, authenticated and delivered
by the Company and the Trustee in accordance with the terms of the Indenture,
and when issued as contemplated in the Registration Statement, will be legally
binding and valid obligations of the Guarantors enforceable against each of them
in accordance with their terms.

         In rendering this opinion, we have reviewed and relied upon the
Indenture, the Outstanding Notes, the form of Exchange Notes and such documents,
records, and other instruments of the Company and the Guarantors as we have
deemed necessary.

         The opinions set forth above are subject to the following
qualifications:

                  (i) The opinions are subject to and may be limited by (a)
applicable bankruptcy, insolvency, liquidation, fraudulent conveyance or
transfer, moratorium, reorganization, or other similar laws affecting creditors'
rights generally; (b) general equitable principles and rules of law governing
specific performance, estoppel, waiver, injunctive relief, and other equitable
remedies (regardless of whether enforcement is sought in a proceeding at law or
in equity), and the discretion of any court before which a proceeding may be
brought; (c) duties and standards of good faith, reasonableness and fair dealing
imposed on creditors and parties to contracts; (d) the limitation in certain
circumstances of provisions imposing liquidated damages, penalties, forfeitures,
late payment charges or increases in interest rates upon delinquency in payment
or the occurrence of a default; and (e) a court determination that any fees
payable pursuant to a provision requiring the payment of attorneys' fees is
reasonable. Further, we express no opinion regarding the enforceability of
Section 4.03 of the Indenture.

                  (ii) We express no opinion with respect to the validity and
enforceability of indemnification or contribution provisions to the extent they
purport to provide indemnity against (or contribution in respect of) any
violation by the indemnified party of any state or federal securities laws or
regulations, or against the gross negligence, willful misconduct, or illegal
acts of the indemnified party, or release such party from the consequences
thereof, or with respect to provisions purporting to waive access to legal or
equitable remedies or defenses (including proper jurisdiction, venue and forum
non conveniens).

                  (iii) We have assumed: (a) the genuineness of the signatures
and the authenticity of documents submitted to us as originals, and the
conformity to originals of all documents submitted to us as certified or
photostatic copies; (b) that such documents accurately describe the mutual
understanding of the parties as to all matters contained therein and that no
other agreements or undertakings exist between the parties that would affect the
documents relating to the transactions contemplated by such documents and
agreements; (c) the due authorization, execution, and delivery of the documents
discussed herein by all parties thereto except the Company and the Guarantors,
that such documents will be valid and binding upon, and enforceable in
<PAGE>   3
accordance with their terms against, all parties thereto except the Company and
the Guarantors, and that the execution, delivery, and performance of such
documents by parties other than the Company and the Guarantors will not violate
any provision of any charter document, law, rule, regulation, judgment, order,
decree, agreement or other document binding upon or applicable to such other
parties or their respective assets; (d) the accuracy, completeness, and
genuineness of all representations and certifications made to or obtained by us,
including those of public officials; (e) the accuracy and completeness of
records of the Company and the Guarantors; and (f) that no fraud or dishonesty
exists with respect to any matters relevant to our opinions.

                  (iv) We express no opinion regarding compliance by the Company
or any Guarantor with any financial covenants required to be maintained by them
under any agreement or document, or as to the financial ability of the Company
or any Guarantors to meet its obligations under the documents described herein.

                  (v) Except as otherwise provided herein, the opinions herein
are limited solely to the laws of the State of Arizona and the laws of the
United States of America which are, in our experience, normally applicable to
transactions of the type contemplated by the note documents, including the
issuance and sale of the Outstanding Notes and the Exchange Notes. Because
certain of the documents referred to herein are governed by New York and other
laws, we have assumed, without investigation, that the laws of the State of New
York or such other jurisdictions are the same as the laws of the State of
Arizona. We express no opinion on the law of any other jurisdiction or
principles of conflicts of law and can assume no responsibility for the
applicability or effect of any such laws or principles. Further, we express no
opinion as to compliance with statutes and ordinances, the administrative
decisions, and the rules and regulations of counties, towns, municipalities and
special political subdivisions (whether created or enabled through legislative
action at the federal, state or regional level), and judicial decisions to the
extent that they deal with any of the foregoing, or as to compliance with any
fiduciary duties, whether arising under state or federal laws.

                  (vi) This opinion letter is limited to the matters stated
herein and no opinion is implied or may be inferred beyond the matters expressly
stated. Without limiting the foregoing, the opinions expressed in this letter
are based upon the law and facts as we understand them in effect on the date
hereof, and we assume no obligation to revise or supplement this opinion should
such law be changed by legislative action, judicial decision, or otherwise, or
should any facts or other matters upon which we have relied be changed.

         We hereby consent to the filing of the opinion as an exhibit to the
Registration Statement and to the use of our name in the Registration Statement.

                                              Very truly yours,



                                              /s/ Snell & Wilmer L.L.P.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1.2
<SEQUENCE>27
<FILENAME>p65173ex10-1_2.txt
<DESCRIPTION>EX-10.1.2
<TEXT>

<PAGE>   1
                                                                  Exhibit 10.1.2


                  SECOND MODIFICATION AND ASSUMPTION AGREEMENT


DATE:             June 1, 2001
----
<TABLE>
<CAPTION>
PARTIES:
--------
<S>                        <C>                             <C>
Existing Borrower:         MHC:                            MONTEREY HOMES CONSTRUCTION, INC., an Arizona
                                                           corporation

                           MHA:                            MONTEREY HOMES ARIZONA, INC., an Arizona corporation

                           Paseo Construction              MERITAGE PASEO CONSTRUCTION, LLC, an Arizona limited liability company,
                                                           formerly known as Chandler 110, LLC

                           MHNC:                           MERITAGE HOMES OF NORTHERN CALIFORNIA, INC., a California corporation

                           Paseo Crossing:                 MERITAGE PASEO CROSSING, LLC, an Arizona limited liability company

                           Meritage Construction:          MERITAGE HOMES CONSTRUCTION, INC., an Arizona
                                                           corporation

                           Meritage Arizona:               MERITAGE HOMES OF ARIZONA, INC., an Arizona corporation

Additional
Borrower:                  Hancock Communities:            HANCOCK-MTH COMMUNITIES, INC., an Arizona corporation

                           Hancock Builders:               HANCOCK-MTH BUILDERS, INC., an Arizona corporation

Lender:                    WELLS FARGO BANK ARIZONA, NATIONAL ASSOCIATION, a national banking association, formerly known as Norwest
                           Bank Arizona, National Association

                           CALIFORNIA BANK & TRUST, a California banking corporation
</TABLE>
<PAGE>   2
<TABLE>
<CAPTION>
<S>                        <C>
Administrative Agent
and Sole Lead
Arranger:                  WELLS FARGO BANK ARIZONA, NATIONAL ASSOCIATION, a
                           national banking association, formerly known as Norwest Bank Arizona,
                           National Association
Documentation
and Syndication
Agent:                     CALIFORNIA BANK & TRUST, a California banking corporation
</TABLE>

                                    RECITALS:
                                    ---------

         A. Lenders have extended to Existing Borrower credit ("Loan") in the
principal amount of $100,000,000.00 pursuant to the Loan Agreement, dated
December 29, 1999, as modified by that First Modification Agreement (the "First
Modification") dated May 16, 2000 and assumed pursuant to that Assumption
Agreement (the "Assumption Agreement") dated April 6, 2001 (as modified and
assumed, the "Loan Agreement"), and evidenced by two (2) Replacement Promissory
Notes, dated May 16, 2000 (collectively, the "Notes"). Capitalized terms used
herein and not otherwise defined shall have the meanings ascribed to such terms
in the Loan Agreement. The unpaid principal of the Loan as of May 30, 2001 was
$77,564,842.37.

         B. The Loan is secured by, among other things, the following (the
"Deeds of Trust"):

                  (i) An Amended and Restated Deed of Trust, Assignment of
         Rents, Security Agreement and Fixture Filing (Maricopa) dated December
         29, 1999, by MHC and MHA, as trustor, for the benefit of Administrative
         Agent, as beneficiary, recorded on December 30, 1999, at Recorder's No.
         99-1165935, records of Maricopa County, Arizona, as thereafter amended
         and/or supplemented from time to time;

                  (ii) A Deed of Trust, Assignment of Rents, Security Agreement
         and Fixture Filing (Val Vista Meadows Option Property) dated December
         29, 1999, by MHC and MHA, as trustor, for the benefit of Administrative
         Agent, as beneficiary, recorded on December 30, 1999, at Recorder's No.
         99-1165936, records of Maricopa County, Arizona, as thereafter amended
         and/or supplemented from time to time;

                  (iii) A Deed of Trust, Assignment of Rents, Security Agreement
         and Fixture Filing (Paseo Crossing) dated February 8, 2000, by Paseo
         Construction, as trustor, for the benefit of Administrative Agent, as
         beneficiary, recorded on February 25, 2000, at Recorder's No.
         00-0140216, records of Maricopa County, Arizona, as thereafter amended
         and/or supplemented from time to time;

                  (iv) An Amended and Restated Deed of Trust, Assignment of
         Rents, Security Agreement and Fixture Filing (Pima) dated December 29,
         1999, by MHC and MHA, as trustor, for the benefit of Administrative
         Agent, as beneficiary, recorded on December 30, 1999, in Docket 11204,
         page 6460, records of Pima County, Arizona, as thereafter amended
         and/or supplemented from time to time;

                                     - 2 -
<PAGE>   3
                  (v) A Deed of Trust, Assignment of Leases and Rents, Security
         Agreement and Fixture Filing (Black Diamond Knolls) dated September 13,
         1999, by MHNC, as trustor, for the benefit of Administrative Agent, as
         beneficiary, recorded on October 5, 1999, as Series No. 99-264104,
         records of Contra Costa County, California, as thereafter amended
         and/or supplemented from time to time;

                  (vi) A Deed of Trust, Assignment of Leases and Rents, Security
         Agreement and Fixture Filing (Black Diamond Knolls Option Property)
         dated September 13, 1999, by MHNC, as trustor, for the benefit of
         Administrative Agent, as beneficiary, recorded on October 5, 1999, as
         Series No. 99-264105, records of Contra Costa County, California, as
         thereafter amended and/or supplemented from time to time;

                  (vii) A Deed of Trust, Assignment of Leases and Rents,
         Security Agreement and Fixture Filing (Black Diamond Estates) dated
         April 12, 1999, by MHNC, as trustor, for the benefit of Administrative
         Agent, as beneficiary, recorded on May 7, 1999, as Series No.
         99-123453, records of Contra Costa County, California, as thereafter
         amended and/or supplemented from time to time;

                  (viii) A Deed of Trust, Assignment of Leases and Rents,
         Security Agreement and Fixture Filing (Wildhorse No. 1) dated November
         18, 1998, by MHNC, as trustor, for the benefit of Administrative Agent,
         as beneficiary, recorded on November 24, 1998, as Instrument No.
         98-0034610, records of Yolo County, California, as thereafter amended
         and/or supplemented from time to time;

                  (ix) A Deed of Trust, Assignment of Leases and Rents, Security
         Agreement and Fixture Filing (Whitney Oaks) dated October 2, 1998, by
         MHNC, as trustor, for the benefit of Administrative Agent, as
         beneficiary, recorded on November 24, 1998, as Instrument No.
         98-0097765, records of Placer County, California, as thereafter amended
         and/or supplemented from time to time;

                  (x) A Deed of Trust, Assignment of Leases and Rents, Security
         Agreement and Fixture Filing (Empire Ranch) dated November 15, 1999, by
         MHNC, as trustor, for the benefit of Administrative Agent, as
         beneficiary, recorded on December 2, 1999, in Book 9912-02, page 0995,
         records of Sacramento County, California, as thereafter amended and/or
         supplemented from time to time;

                  (xi) A Deed of Trust, Assignment of Leases and Rents, Security
         Agreement and Fixture Filing (Sterling Park - Phase I) dated April 30,
         1999, by MHNC, as trustor, for the benefit of Administrative Agent, as
         beneficiary, recorded on May 3, 1999, as Instrument No. 99058301,
         records of San Joaquin County, California, as thereafter amended and/or
         supplemented from time to time; and

                                     - 3 -
<PAGE>   4
                  (xii) A Deed of Trust, Assignment of Leases and Rents,
         Security Agreement and Fixture Filing (Villa Francais) dated April 25,
         2001, by MHNC, as trustor, for the benefit of Administrative Agent, as
         beneficiary, recorded on May 2, 2001, at Recorder's No. 2001-44309,
         records of Stanislaus County, California, as thereafter amended and/or
         supplemented from time to time

The agreements, documents, and instruments securing the Loan and the Notes are
referred to individually and collectively as the "Security Documents."

         C. The Notes, the Loan Agreement, the Security Documents, the side
letter regarding the Agency Fee (the "Agency Fee Letter"), any environmental
indemnity agreement, and all other agreements, documents, and instruments
evidencing, securing, or otherwise relating to the Loan, as modified by the
First Modification and assumed pursuant to the Assumption Agreement, are
sometimes referred to individually and collectively as the "Loan Documents."

         D. A Continuing Guarantee dated December 29, 1999 guaranteeing all
indebtedness of Borrower to Lenders, as modified by the Consent and Agreement of
Guarantor(s) attached to the First Modification and the Assumption Agreement (as
modified, the "Guarantee Agreement") was executed and delivered to Lenders by
MERITAGE CORPORATION, a Maryland corporation, MTH - TEXAS GP, INC., an Arizona
corporation, MTH - TEXAS LP, INC., an Arizona corporation, LEGACY/MONTEREY HOMES
L.P., an Arizona limited partnership, and TEXAS HOME MORTGAGE CORPORATION, a
Texas corporation (hereinafter collectively called "Guarantors").

         E. Existing Borrower has requested that Lenders, Administrative Agent
and Sole Lead Arranger (hereinafter, "Administrative Agent"), and Documentation
and Syndication Agent permit Additional Borrower to become an additional
borrower under the Loan and assume the obligations of Existing Borrower as an
additional obligor under the Loan. Lenders, Administrative Agent and
Documentation and Syndication Agent are willing to permit Additional Borrower to
become an additional borrower under the Loan and assume the obligations of
Existing Borrower as an additional obligor under the Loan, subject to the terms
and conditions herein. Existing Borrower and Additional Borrower are hereinafter
jointly and severally called "Borrower."

         F. In addition, Borrower has requested that Lenders, Administrative
Agent and Documentation and Syndication Agent modify the Loan and the Loan
Documents as provided herein. Lenders, Administrative Agent and Documentation
and Syndication Agent are willing to so modify the Loan and the Loan Documents,
subject to the terms and conditions herein.

                                   AGREEMENT:
                                   ---------

         For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Borrower, Lenders, Administrative Agent and
Documentation and Syndication Agent agree as follows:

                                     - 4 -
<PAGE>   5
SECTION 1. ACCURACY OF RECITALS.

         Borrower acknowledges the accuracy of the Recitals.

SECTION 2. ASSUMPTION, MODIFICATION OF LOAN DOCUMENTS AND OTHER AGREEMENTS.


         2.1 Additional Borrower hereby joins in the Loan Agreement as a
"Borrower" and assumes, severally and collectively with Existing Borrower, the
obligation for payment of the indebtedness evidenced by the Notes and for the
performance of all covenants, conditions, provisions and agreements under the
Loan Agreement and the other Loan Documents. Such assumption shall in no way
affect the liability or obligations of Existing Borrower under the Notes, the
Loan Agreement and the other Loan Documents, the priority of any of Lender's
liens and security interests securing repayment of the Loan, nor the liability
of any Guarantor.

         2.2 Additional Borrower hereby severally and collectively covenants,
promises and agrees (i) to pay the Notes at the times, in the manner and in all
other respects as therein provided or as it may be modified in writing between
the obligor and the holder thereof; (ii) to perform each and all of the
covenants, conditions, provisions and agreements in the Loan Agreement and the
other Loan Documents to be performed by Existing Borrower, at the time, in the
manner and in all other respects as therein provided; and (iii) to be bound by
each and every term, condition, representation, warranty and provision of the
Notes, the Loan Agreement and the other Loan Documents as though such documents
and instruments had originally been made, executed and delivered by Additional
Borrower severally and collectively with Existing Borrower.

         2.3 From and after the date hereof, the terms "Borrower" and "Maker" in
the Loan Documents shall mean, severally and collectively, MHC, MHA, Paseo
Construction, MHNC, Paseo Crossing, Meritage Construction, Meritage Arizona,
Hancock Communities and Hancock Builders. Each Borrower shall be jointly and
severally obligated under the Loan, the Loan Agreement, the Notes and the other
Loan Documents.

         2.4 The following definitions set forth in Section 2 of the Loan
Agreement are hereby amended in their entirety to read as follows:

                  "ADJUSTED TANGIBLE NET WORTH" means, as of any date of
         determination, the amount of consolidated Owners' Equity of the
         Meritage Group as shown on its consolidated balance sheet, minus the
         Net Book Value (after deducting reserves applicable thereto) of all
         assets classified as intangible assets under GAAP, including, without
         limitation, goodwill, trademarks, trade names, service marks,
         copyrights, patents, licenses, permits, covenants not to compete, and
         rights related thereto.

                  "FEES" shall mean the Facility Fee, the Agency Fee, the Letter
         of Credit Fee, the Fronting Bank Fee, the Extension Fee, the Nonusage
         Fee, the Conversion Fee and all other fees and charges, if any (other
         than interest), payable hereunder or otherwise payable in connection
         with the Loan.

                                     - 5 -
<PAGE>   6
                  "LIABILITIES" of a Person means all items included in the
         liability section of a balance sheet of that person prepared in
         accordance with GAAP applied as of the date of calculation. Without
         limiting the generality of the foregoing, the term "Liabilities" shall
         include outstanding balances owed by any parent or subsidiary thereof,
         including but not limited to the Loan, notes payable to other financial
         institutions whether secured or unsecured, private or public bonds,
         seller financing, letters of credit outstanding, all guarantees of
         third party indebtedness, and accounts payable, subordinated debt,
         accrued expenses, and customer deposits.

                  "LIBOR MARGIN" shall mean the following amounts per annum as
         in effect from time to time, based upon the Leverage Ratio as set forth
         in the most recent Compliance Certificate received by Administrative
         Agent pursuant to Section 18.3(f):

<TABLE>
<CAPTION>
                  <S>                                                  <C>
                  If Leverage Ratio is:                                The LIBOR Margin is:
                  -------------------------------------------------------------------------
                  Tier 1.  Less than 1.60 to 1                         1.75% per annum
                  -------------------------------------------------------------------------
                  Tier 2.  Equal to or greater than 1.60 to 1          2.00% per annum
</TABLE>

         Each LIBOR Margin shall be in effect from the date the most recent
         Compliance Certificate is received by Administrative Agent to but
         excluding the date the next Compliance Certificate is received;
         provided, however, that if Borrower fails to timely deliver the next
         Compliance Certificate, the LIBOR Margin in effect from the date such
         Compliance Certificate was due to but excluding the date such
         Compliance Certificate is received by Administrative Agent shall be the
         LIBOR Margin shown in Tier 2 above, and, thereafter, the pricing level
         indicated by such Compliance Certificate when received. Notwithstanding
         the foregoing, the LIBOR Margin commencing on June 1, 2001 and
         continuing through the date the next Compliance Certificate is received
         by Administrative Agent shall be the LIBOR Margin shown in Tier 2
         above.

                  "SIGNIFICANT DEBT AGREEMENT" means all documents, instruments
         and agreements executed by any member of the Meritage Group,
         evidencing, securing or ensuring any public or private Indebtedness of
         any member of the Meritage Group or any guaranty, in each case in
         excess of $5,000,000 in outstanding principal (or principal equivalent)
         amount, including, without limitation, that $75,000,000 revolving line
         of credit from Guaranty Federal FSB to Legacy/Monterey Homes L.P. and
         Legacy Operating Company, L.P., the $165,000,000 9-3/4% Senior Notes
         due 2011 and any refinancings thereof, but excluding any Indebtedness
         that is Non-Recourse Debt.

                  "VARIABLE RATE" means a fluctuating rate per annum equal to
         the higher of (i) the Federal Funds Rate plus one-half of one percent
         (.5%) and (ii) the Prime Rate.


                                     - 6 -
<PAGE>   7
         The Variable Rate shall change from time to time on the effective date
         of, and in conformity with, changes in the Federal Funds Rate and the
         Prime Rate.

         2.5 The following new definitions are hereby added to Section 2 of the
Loan Agreement:

                  "ANNIVERSARY DATE": See Section 3.15 hereof.

                  "COMPLIANCE CERTIFICATE" means the certificate required to be
         delivered to Administrative Agent pursuant to Section 18.3(f).

                  "CONVERSION DATE" means June 1, 2003; provided, however, that
         the Banks may, in the Banks' sole and absolute discretion, extend the
         Conversion Date pursuant to Section 3.15.

                  "CONVERSION FEE": See Section 8.7 hereof.

                  "EXTENSION FEE": See Section 3.15 hereof.

                  "FEDERAL FUNDS RATE" means, for any day, the rate per annum
         (rounded upwards to the nearest 1/100 of 1%) equal to the weighted
         average of the rates on overnight Federal funds transactions with
         members of the Federal Reserve System arranged by Federal funds brokers
         on such day, as published by the Federal Reserve Bank of New York on
         the Business Day next succeeding such day; provided that (i) if such
         day is not a Business Day, the Federal Funds Rate for such day shall be
         such rate on such transactions on the next preceding Business Day as so
         published on the next succeeding Business Day, and (ii) if no such rate
         is so published on such next succeeding Business Day, the Federal Funds
         Rate for such day shall be the average rate charged to Wells Fargo Bank
         Arizona, National Association, on such day on such transactions as
         determined by Administrative Agent.

                  "FRONTING BANK FEE": See Section 6.3(b) hereof.

                  "LEVERAGE RATIO" means, as of any date of determination, the
         ratio of (i) the Meritage Group's consolidated Liabilities to (ii)
         Adjusted Tangible Net Worth.

                  "NONUSAGE FEE": See Section 8.6 hereof.

         2.6 Section 3.15 of the Loan Agreement is hereby amended in its
entirety to read as follows:

                  3.15 Conversion Date. On June 1, 2002 and upon each
         anniversary of such date thereafter (each such date, including June 1,
         2002, is hereinafter called an "Anniversary Date"), the Banks may, at
         the request of Borrower, in the Bank's sole and absolute discretion
         after conducting an annual meeting of the Banks with the Borrower not
         less than sixty (60) days prior to the Anniversary Date, extend the


                                     - 7 -
<PAGE>   8
         Conversion Date for a period of twelve (12) months, with such changes
         to this Agreement or the terms and conditions herein as the Banks may
         require, in their sole and absolute discretion, and upon such terms and
         conditions as the Banks may require, in their sole and absolute
         discretion, including, without limitation, the following:

                           (a) Borrower at least ninety (90) days prior to the
                  applicable Anniversary Date shall have given Administrative
                  Agent written notice that Borrower desires such extension.

                           (b) For each Anniversary Date commencing with the
                  Anniversary Date on June 1, 2003, Borrower shall have paid to
                  Administrative Agent in cash or immediately available funds
                  for distribution to Banks in accordance with their Pro Rata
                  Shares, a non-refundable extension fee (the "Extension Fee")
                  at the rate of one-quarter of one percent (.25%) per annum of
                  the maximum Commitment Amount calculated for the extension
                  period, which fee shall be payable in advance on or before the
                  applicable Anniversary Date.

                           (c) Administrative Agent, in its reasonable
                  discretion, shall have determined that no Material Adverse
                  Change has occurred.

                           (d) No Event of Default or no Unmatured Event of
                  Default shall have occurred and be continuing on the date of
                  Borrower's notice of extension to Administrative Agent or on
                  the applicable Anniversary Date.

         If Banks holding aggregate Commitments of less than one hundred percent
         (100%) of the Commitment Amount, but at least eighty percent (80%) of
         the Commitment Amount, agree to such extension, then (i) the approving
         Banks may, but shall have no obligation to, require the dissenting
         Banks to transfer and assign to the approving Banks without recourse
         (in accordance with and subject to the restrictions contained herein
         and in the Co-Lender Agreement) all their interests, rights and
         obligations under this Agreement, or (ii) Borrower may (A) terminate
         the Commitments of the dissenting Banks or (B) require the dissenting
         Banks to transfer and assign without recourse (in accordance with and
         subject to the restrictions contained herein and in the Co-Lender
         Agreement) all their interests, rights and obligations under this
         Agreement to another financial institution reasonably acceptable to
         Administrative Agent which shall assume such obligations; provided that
         upon the exercise of the rights described in clause (i) or (ii) above
         the approving Banks, Borrower or the assignee, as the case may be,
         shall pay to the dissenting Banks in immediately available funds on the
         date of such termination or assignment the principal of and interest
         accrued to the date of payment on the Loans made by them hereunder and
         all other amounts accrued for their account or owed to them hereunder.
         From and after


                                     - 8 -
<PAGE>   9
         the Conversion Date, the Loan shall cease to be a revolving line of
         credit and the Commitment Amount shall be automatically reduced on the
         last day of the third Calendar Month in the Conversion Period and on
         the last day of each third Calendar Month thereafter, with the amount
         of each such reduction to be equal to one-eighth of the Commitment
         Amount in effect as of the day prior to commencement of the Conversion
         Period.

         2.7 Section 3.17 of the Loan Agreement is hereby amended in its
entirety to read as follows:

                  3.17 Mandatory Prepayments. If for any reason at any time the
         Loan Balance exceeds the Available Commitment, Borrower shall within
         two (2) Business Days after receipt of notice from Administrative Agent
         make a payment to Administrative Agent in an amount equal to the sum of
         (i) such excess principal, and (ii) accrued and unpaid interest
         thereon. Administrative Agent, in its sole discretion, may suspend the
         commitment to make any further Advances until Administrative Agent
         shall have received such payment.

         2.8 Section 6.3(b) of the Loan Agreement is hereby amended in its
entirety to read as follows:

                  (b) Borrower further agrees to pay to the Issuing Bank for its
         own account (i) a non-refundable fee (the "Fronting Bank Fee") equal to
         one-quarter percent (.25%) per annum on the Stated Amount of each
         Letter of Credit, computed on a daily basis, during the Outstanding
         Period, and (ii) a charge for all reasonable administrative expenses of
         the Issuing Bank in connection with the issuance, amendment or
         modification (if any) and administration of the Letter of Credit upon
         demand from time to time. The Fronting Bank Fee shall be payable in
         advance upon the issuance of a Letter of Credit.

         2.9 Section 8 of the Loan Agreement is hereby amended in its entirety
to read as follows:

         SECTION 8. FEES

                  As additional consideration for the Commitment, Borrower
         agrees to pay to Administrative Agent for distribution to
         Administrative Agent and the Banks in accordance with the Co-Lender
         Agreement and/or the terms and provisions hereof the following fees,
         from Borrower's own funds (unless otherwise indicated), which shall be
         earned on the date due under the Loan Documents and shall be
         non-refundable to Borrower:

                  8.1 Facility Fee. A fee for the Commitment (the "Facility
         Fee") at the rate of one-quarter of one percent (.25%) per annum of the
         maximum Commitment Amount then in effect shall be due and payable
         quarterly in advance on each January 1, April 1, July 1 and October 1,
         provided that the initial Facility Fee shall


                                     - 9 -
<PAGE>   10
         be payable on the date of this Agreement and shall be prorated for the
         period commencing on the date of this Agreement and ending on December
         31, 1999 at the per annum rate set forth above.

                  8.2 Agency Fee. The Agency Fee in accordance with terms and
         conditions set forth in a side letter between Borrower and
         Administrative Agent.

                  8.3 Letter of Credit Fee and Fronting Bank Fee. See Section
         6.3 hereof.

                  8.4 Attorneys' Costs, Expenses, and Fees. Attorneys' costs,
         expenses, and fees for Administrative Agent's counsel and the Banks'
         counsel as provided in the Loan Documents, payable on or before the
         date hereof and during the term of the Commitment, from time to time
         upon the presentation by Administrative Agent of statements therefor.

                  8.5 Appraisal Fees, Title Insurance Premium, and Other Costs,
         Expenses, and Fees. Appraisal fees, appraisal review fees, title
         insurance premiums, and other costs, expenses, and fees that Borrower
         is obligated to pay pursuant to the Loan Documents, in the amounts
         specified by Administrative Agent, payable on or before the date
         hereof, and monthly thereafter during the term of the Commitment.

                  8.6 Nonusage Fee. For the period commencing on June 1, 2001,
         and continuing thereafter, a nonusage fee (the "Nonusage Fee") computed
         at the rate per annum of fifteen-hundredths of one percent (.15%) per
         annum of the unused Commitment Amount, shall be payable quarterly in
         arrears commencing on July 1, 2001, and on each October 1, January 1,
         April 1 and July 1 thereafter. For each quarter (or portion thereof)
         the Nonusage Fee shall be equal to: (i) the Commitment Amount (as in
         effect at the beginning of such quarter) minus (ii) the "average
         quarterly outstandings" for the quarter (or portion thereof) with
         respect to which the Nonusage Fee is being computed, with the resulting
         number multiplied by (iii) one-quarter (1/4th) of the rate per annum of
         fifteen-hundredths of one percent (.15%). As used herein, "average
         quarterly outstandings" means the sum of the outstanding Loan balance
         at the end of each week (on each Friday) during the quarter (or portion
         thereof) for which the Nonusage Fee is being computed, divided by the
         number of weeks in that quarter (or portion thereof). If the Nonusage
         Fee is being computed for less than a full quarter, the percentage used
         in clause (iii) above shall be computed on a weekly basis for the
         number of weeks for which the fee is being computed. The Nonusage Fee
         shall be distributed to the Banks in accordance with their Pro Rata
         Shares.

                  8.7 Extension Fee. See Section 3.15 hereof.

                  8.8 Conversion Fee. A conversion fee (the "Conversion Fee") at
         the rate of one-half of one percent (.5%) per annum of the Commitment
         Amount then in effect, calculated for the entire Conversion Period,
         shall be due and payable in full


                                     - 10 -
<PAGE>   11
         in advance on the Conversion Date. The Conversion Fee shall be
         distributed to the Banks in accordance with their Pro Rata Shares.

         2.9 Section 18.3(b) of the Loan Agreement is hereby amended in its
entirety to read as follows:

                  (b) Consolidating and Consolidated Annual Statements of the
         Meritage Group. As soon as available and in any event within one
         hundred twenty (120) days after the close of each fiscal year of the
         Meritage Group, audited consolidated financial statements of the
         Meritage Group, including its consolidated balance sheet as of the
         close of such fiscal year and consolidated statements of income and
         cash flows of the Meritage Group for such fiscal year, in each case
         setting forth in comparative form the figures for the preceding fiscal
         year, all in reasonable detail and accompanied by an unqualified
         opinion thereon of independent public accountants of recognized
         national standing selected by the Meritage Group and acceptable to
         Administrative Agent, to the effect that such financial statements have
         been prepared in accordance with GAAP (except for changes in which such
         accountants concur) and that the examination of such accounts in
         connection with such financial statements has been made in accordance
         with generally accepted auditing standards and, accordingly, includes
         such tests of the accounting records and such other auditing procedures
         as were considered necessary in the circumstances. As soon as available
         and in any event within ninety (90) days after the close of each fiscal
         year of the Meritage Group, company prepared consolidating financial
         statements of the Meritage Group, including its consolidating balance
         sheet as of the close of such fiscal year and consolidating statements
         of income and cash flows of the Meritage Group for such fiscal year, in
         each case setting forth in comparative form the figures for the
         preceding fiscal year, all in reasonable detail and prepared in
         accordance with GAAP. Within sixty (60) days prior to each fiscal year
         of the Meritage Group, a projection, in reasonable detail and in form
         and substance satisfactory to Administrative Agent, on a quarterly
         basis of the cash flow and of the earnings of the Meritage Group for
         the next two (2) fiscal years, together with gross and net margin
         analysis of each project by quarter. As soon as available and in any
         event within one hundred twenty (120) days after the end of the
         Meritage Group's fiscal year, a copy of the Meritage Group's annual
         report on Form 10-K filed with the SEC. Within fifteen (15) Business
         Days after filing, copies of all filings with the SEC by any member of
         the Meritage Group.

         2.10 Section 19.3 of the Loan Agreement is hereby amended in its
entirety to read as follows:

                  19.3 Financial Covenants. Borrower shall not permit:

                  (a) Maximum Leverage Ratio. The Leverage Ratio to be greater
         than the following:


                                     - 11 -
<PAGE>   12
                           (i) 3.00 to 1.0 for the fiscal quarter ending June
                  30, 2001.

                           (ii) 2.75 to 1.0 for the fiscal quarter ending
                  September 30, 2001.

                           (iii) 2.50 to 1.0 for the fiscal quarter ending
                  December 31, 2001 and as of the end of the first three fiscal
                  quarters of each fiscal year of the Meritage Group thereafter.

                           (iv) 2.25 to 1.0 for the fiscal quarter ending
                  December 31, 2002 and as of the end of the fourth fiscal
                  quarter of each fiscal year of the Meritage Group thereafter.

                  (b) Minimum Fixed Charge Coverage. The ratio of the Meritage
         Group's consolidated EBITDA to total interest incurred plus any
         regularly scheduled principal payments (excluding balloon payments
         and/or maturing loans) due on public or private debt or debt owed to
         any financial institution, to be less than 2.0 to 1.0, determined as of
         the end of each fiscal quarter of the Meritage Group's fiscal year for
         the immediately preceding four fiscal quarters.

                  (c) Minimum Adjusted Tangible Net Worth. The consolidated
         Adjusted Tangible Net Worth of the Meritage Group determined as of the
         end of each quarter of the Meritage Group's fiscal year to be less than
         the following:

                           (i) $85,000,000 as of June 30, 2001.

                           (ii) $100,000,000 as of September 30, 2001.

                           (iii) $120,000,000 as of December 31, 2001.

                           (iv) For each fiscal quarter commencing with the
                  quarter ending March 31, 2002 and continuing thereafter, the
                  sum of (A) $120,000,000, (b) fifty percent (50%) of
                  Consolidated Net Income for each fiscal quarter of the
                  Meritage Group in which Consolidated Net Income is positive
                  (without offset for any fiscal quarter in which the Meritage
                  Group's Consolidated Net Income is negative), and (C)


                                     - 12 -
<PAGE>   13
                  seventy-five percent (75%) of any new stated capital or paid
                  in capital acquired by the Meritage Group.

                           (d) Guaranties. The Meritage Group to make or suffer
                  to exist any Contingent Obligation (including, without
                  limitation, any Contingent Obligation with respect to the
                  obligations of a Subsidiary or joint venture that is not a
                  Loan Party) or otherwise assume, guarantee or in any way
                  become contingently liable or responsible for obligations of
                  any other Person, whether by agreement to purchase those
                  obligations of any other Person, or by agreement for the
                  furnishing of funds through the purchase of goods, supplies or
                  services (whether by way of stock purchase, capital
                  contribution, advance or loan) for the purpose of paying or
                  discharging the obligations of any other Person that, in the
                  aggregate, exceeds twenty percent (20%) of the consolidated
                  Adjustable Tangible Net Worth of the Meritage Group.

         Any failure to comply with the foregoing financial covenants shall
         constitute an Event of Default.

         2.11 Section 24.12 of the Loan Agreement is hereby amended in its
entirety to read as follows:

                  24.12 Participations and Assignments. Each Bank, at any time,
         shall have the right (subject to the terms of the Co-Lender Agreement)
         to sell, assign, transfer, negotiate or grant participation interests
         in the Loan and in any documents and instruments executed in connection
         herewith. In connection with any assignment by a Bank of all or a
         portion of its interest in the Loan (i) except in the case of an
         assignment to a Bank or an affiliate of any Bank, or if an Unmatured
         Event of Default or an Event of Default shall be continuing, Borrower
         must give its prior written consent to such assignment (which consent
         shall not be unreasonably withheld or delayed), (ii) Administrative
         Agent must give its prior written consent to such assignment (which
         consent shall not be unreasonably withheld or delayed), (iii) the
         amount of the Commitment of the assigning Bank subject to each such
         assignment shall not be less than $10,000,000.00 or such lesser amount
         if such amount is the entire Commitment of the assigning Bank, and (iv)
         any assignee shall have a net worth of at least $350,000,000 and total
         assets of a least $2.5 billion. Within five Business Days after receipt
         of notice of any assignment of a Bank's interest the Loan, the Borrower
         shall execute and deliver to Administrative Agent, in exchange for the
         surrendered Note or Notes (A) a new Note or Notes to the order of such
         assigning Bank in a principal amount equal to the applicable Commitment
         retained by it, if any, and (B) a new Note or Notes, to the order of
         the assignee Bank in a principal amount equal to the applicable
         Commitment assigned to it. Such new Note


                                     - 13 -
<PAGE>   14
         or Notes shall be in an aggregate principal amount equal to the
         aggregate principal amount of such surrendered Note or Notes; such new
         Notes shall be dated the date of the surrendered Notes which they
         replace and shall otherwise be in substantially the form of EXHIBIT
         "A". Canceled Notes shall be returned to the Borrower. Each Bank is
         authorized to furnish to any participant or prospective participant any
         information or document that such Bank may have or obtain regarding the
         Loan, Borrower or any guarantor of the Loan.

         2.12 Borrower hereby acknowledges and agrees that by executing the
attached Consent and Agreement of Guarantor(s), Legacy Operating Company, L.P.,
a Texas limited partnership, assumes on a joint and several basis the
obligations and liabilities of Guarantors under the Guarantee Agreement and the
other applicable Loan Documents.

         2.13 Each reference in the Loan Documents to any of the Loan Documents
is hereby amended to be a reference to such document as assumed and modified
herein.

SECTION 3. RATIFICATION OF LOAN DOCUMENTS AND COLLATERAL.

         The Loan Documents and each and every term, condition, representation,
warranty and provision thereof are ratified and affirmed by Borrower and shall
remain in full force and effect as assumed and modified herein. Any property or
rights to or interests in property granted as security in the Loan Documents
shall remain as security for the Loan and the obligations of Borrower in the
Loan Documents.

SECTION 4. BORROWER REPRESENTATIONS AND WARRANTIES.

         Borrower represents and warrants to Lenders, Administrative Agent, and
Documentation and Syndication Agent:

         4.1 No default or event of default under any of the Loan Documents as
assumed and modified herein, nor any event, that, with the giving of notice or
the passage of time or both, would be a default or an event of default under the
Loan Documents as assumed and modified herein has occurred and is continuing.

         4.2 There has been no material adverse change in the financial
condition of Borrower, any Guarantor or any other person whose financial
statement has been delivered to Administrative Agent in connection with the Loan
from the most recent financial statement received by Administrative Agent.

         4.3 Each and all representations and warranties of Borrower in the Loan
Documents are accurate on the date hereof.

         4.4 Borrower has no claims, counterclaims, defenses, or set-offs with
respect to the Loan or the Loan Documents as assumed and modified herein.

                                     - 14 -
<PAGE>   15
         4.5 The Loan Documents as assumed and modified herein are the legal,
valid, and binding obligation of Borrower, enforceable against Borrower in
accordance with their terms.

         4.6 Each Borrower is validly existing under the laws of the State of
its formation or organization and has the requisite power and authority to
execute and deliver this Agreement and to perform the Loan Documents as assumed
and modified herein. The execution and delivery of this Agreement and the
performance of the Loan Documents as assumed and modified herein have been duly
authorized by all requisite action by or on behalf of each Borrower. This
Agreement has been duly executed and delivered on behalf of each Borrower.

SECTION 5. BORROWER COVENANTS.

         Borrower covenants with Lenders, Administrative Agent, and
Documentation and Syndication Agent:

         5.1 Borrower shall execute, deliver, and provide to Lenders,
Administrative Agent, and Documentation and Syndication Agent such additional
agreements, documents, and instruments as reasonably required by Administrative
Agent to effectuate the intent of this Agreement.

         5.2 Borrower fully, finally, and absolutely and forever releases and
discharges Lenders, Administrative Agent, and Documentation and Syndication
Agent and their present and former directors, shareholders, officers, employees,
agents, representatives, successors and assigns, and their separate and
respective heirs, personal representatives, successors and assigns, from any and
all actions, causes of action, claims, debts, damages, demands, liabilities,
obligations, and suits, of whatever kind or nature, in law or equity of
Borrower, whether now known or unknown to Borrower, and whether contingent or
matured, in respect of the Loan, the Loan Documents, or the actions or omissions
of Lenders, Administrative Agent, and/or Documentation and Syndication Agent in
respect of the Loan or the Loan Documents and which arise from events occurring
prior to the date of this Agreement.

SECTION 6. CONDITIONS PRECEDENT.

         The agreements of Lenders, Administrative Agent, and Documentation and
Syndication Agent and the assumptions and modifications contained herein shall
not be binding upon Lenders, Administrative Agent, and Documentation and
Syndication Agent until Lenders, Administrative Agent, and Documentation and
Syndication Agent have executed and delivered this Agreement and Administrative
Agent has received, at Borrower's expense, all of the following, all of which
shall be in form and content satisfactory to Administrative Agent and shall be
subject to approval by Administrative Agent:

         6.1 An original of this Agreement fully executed by the Borrower and
all Guarantors;

                                     - 15 -
<PAGE>   16
         6.2 An original modification of the side letter executed by Borrower in
connection with the Agency Fee, fully executed by Borrower and the payment of
all fees as required therein for the effectiveness of this Agreement;

         6.3 A legal opinion of Borrower's counsel covering such issues as shall
be required by Administrative Agent;

         6.4 Copies of the documentation executed or to be executed or issued in
connection with the $165,000,000 public debt issue of Meritage;

         6.5 If any Borrower or any Guarantor is a corporation, limited
liability company, partnership or trust, such resolutions or authorizations and
such other documents as Administrative Agent may require relating to the
existence and good standing of that corporation, partnership or trust, and the
authority of any person executing this Agreement or other documents on behalf of
that corporation, limited liability company, partnership or trust;

         6.6 A commitment from the title insurance companies that issued the
lender's ALTA extended coverage title insurance policies in connection with the
Loan (the "Title Policies") to issue endorsements, in form satisfactory to
Administrative Agent, to the Title Policies, insuring that the modifications
contained herein do not affect the lien priority of the Deeds of Trust; and

         6.7 Payment of all the internal and external costs and expenses
incurred by Lenders, Administrative Agent, and Documentation and Syndication
Agent in connection with this Agreement (including, without limitation, inside
and outside attorneys, processing and title costs, expenses, and fees).

SECTION 7. INTEGRATION, ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR
           WAIVER.

         The Loan Documents as assumed and modified herein contain the complete
understanding and agreement of Borrower, Lenders, Administrative Agent, and
Documentation and Syndication Agent in respect of the Loan and supersede all
prior representations, warranties, agreements, arrangements, understandings, and
negotiations. No provision of the Loan Documents as assumed and modified herein
may be changed, discharged, supplemented, terminated, or waived except in a
writing signed by the parties thereto.

SECTION 8. BINDING EFFECT.

         The Loan Documents as assumed and modified herein shall be binding upon
and shall inure to the benefit of Borrower, Lenders, Administrative Agent, and
Documentation and Syndication Agent and their successors and assigns and the
executors, legal administrators, personal representatives, heirs, devisees, and
beneficiaries of Borrower, provided, however, Borrower may not assign any of its
right or delegate any of its obligation under the Loan Documents and any
purported assignment or delegation shall be void.

                                     - 16 -
<PAGE>   17
SECTION 9. CHOICE OF LAW.

         This Agreement shall be governed by and construed in accordance with
the laws of the State of Arizona, without giving effect to conflicts of law
principles.

SECTION 10. COUNTERPART EXECUTION.

         This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which together shall constitute one
and the same document. Signature pages may be detached from the counterparts and
attached to a single copy of this Agreement to physically form one document.

         DATED as of the date first above stated.

                      MONTEREY HOMES CONSTRUCTION, INC., an Arizona Corporation



                      By:
                         -------------------------------------------------------
                      Name:
                           -----------------------------------------------------
                      Title:
                            ----------------------------------------------------


                      MONTEREY HOMES ARIZONA, INC., an Arizona corporation



                      By:
                         -------------------------------------------------------
                      Name:
                           -----------------------------------------------------
                      Title:
                            ----------------------------------------------------


                                     - 17 -
<PAGE>   18
                      MERITAGE PASEO CONSTRUCTION, LLC, an Arizona limited
                      liability company, formerly known as Chandler 110, LLC

                      BY:      MERITAGE HOMES CONSTRUCTION,
                               INC., an Arizona corporation, Member



                               By:
                                  ----------------------------------------------
                               Name:
                                    --------------------------------------------
                               Title:
                                     -------------------------------------------


                      MERITAGE HOMES OF NORTHERN CALIFORNIA, INC., a California
                      corporation



                      By:
                         -------------------------------------------------------
                      Name:
                           -----------------------------------------------------
                      Title:
                            ----------------------------------------------------


                      MERITAGE PASEO CROSSING, LLC, an Arizona limited liability
                      company

                      BY:      MERITAGE HOMES OF ARIZONA, INC., an
                      Arizona corporation, Member



                               By:
                                  ----------------------------------------------
                               Name:
                                    --------------------------------------------
                               Title:
                                     -------------------------------------------


                      MERITAGE HOMES CONSTRUCTION, INC., an Arizona corporation



                      By:
                         -------------------------------------------------------
                      Name:
                           -----------------------------------------------------
                      Title:
                            ----------------------------------------------------


                                     - 18 -
<PAGE>   19
                      MERITAGE HOMES OF ARIZONA, INC., an Arizona corporation



                      By:
                         -------------------------------------------------------
                      Name:
                           -----------------------------------------------------
                      Title:
                            ----------------------------------------------------


                      HANCOCK-MTH COMMUNITIES, INC., an Arizona corporation


                      By:
                         -------------------------------------------------------
                      Name:
                           -----------------------------------------------------
                      Title:
                            ----------------------------------------------------


                      HANCOCK-MTH BUILDERS, INC., an Arizona corporation


                      By:
                         -------------------------------------------------------
                      Name:
                           -----------------------------------------------------
                      Title:
                            ----------------------------------------------------

                       BORROWER


                      WELLS FARGO BANK ARIZONA, NATIONAL ASSOCIATION, a national
                      banking association, formerly known as Norwest Bank
                      Arizona, National Association


                      By:
                         -------------------------------------------------------
                      Name:
                           -----------------------------------------------------
                      Title:
                            ----------------------------------------------------

                                         ADMINISTRATIVE AGENT,
                                 SOLE LEAD ARRANGER AND LENDER



                                     - 19 -
<PAGE>   20
                      CALIFORNIA BANK & TRUST, a California banking corporation


                      By:
                         -------------------------------------------------------
                      Name:
                           -----------------------------------------------------
                      Title:
                            ----------------------------------------------------

                                DOCUMENTATION AND
                                  SYNDICATION AGENT AND LENDER




                                     - 20 -
<PAGE>   21
                      CONSENT AND AGREEMENT OF GUARANTOR(S)

         With respect to the Second Modification and Assumption Agreement, dated
May 31, 2001 ("Agreement"), between MONTEREY HOMES CONSTRUCTION, INC., an
Arizona corporation, MONTEREY HOMES ARIZONA, INC., an Arizona corporation,
MERITAGE PASEO CONSTRUCTION, LLC, an Arizona limited liability company, formerly
known as Chandler 110, LLC, MERITAGE HOMES OF NORTHERN CALIFORNIA, INC., a
California corporation, MERITAGE PASEO CROSSING, LLC, an Arizona limited
liability company, MERITAGE HOMES CONSTRUCTION, INC., an Arizona corporation,
MERITAGE HOMES OF ARIZONA, INC., an Arizona corporation, HANCOCK-MTH
COMMUNITIES, INC., an Arizona corporation, and HANCOCK-MTH BUILDERS, INC., an
Arizona corporation (severally and collectively, "Borrower"), WELLS FARGO BANK
ARIZONA, NATIONAL ASSOCIATION, a national banking association, formerly known as
Norwest Bank Arizona, National Association and CALIFORNIA BANK & TRUST, a
California banking corporation (severally and collectively, "Lenders"), WELLS
FARGO BANK ARIZONA, NATIONAL ASSOCIATION, a national banking association,
formerly known as Norwest Bank Arizona, National Association, in its capacity as
Administrative Agent and Sole Lead Arranger ("Administrative Agent"), and
CALIFORNIA BANK & TRUST, a California banking corporation ("Documentation and
Syndication Agent") the undersigned (individually and, if more than one,
collectively "Guarantor") agrees for the benefit of Lenders, Administrative
Agent, and Documentation and Syndication Agent as follows:

         1. Guarantor acknowledges (i) receiving a copy of and reading the
Agreement, (ii) the accuracy of the Recitals in the Agreement, and (iii) the
effectiveness of (A) the Guarantee Agreement as modified herein, and (B) any
other agreements, documents, or instruments securing or otherwise relating to
the Guarantee Agreement (including, without limitation, any environmental
indemnity agreement previously executed and delivered by the undersigned), as
modified herein. The Guarantee Agreement and such other agreements, documents,
and instruments, as modified herein, are referred to individually and
collectively as the "Guarantor Documents." Capitalized terms used herein and not
otherwise defined shall have the meanings assigned to such terms in the
Agreement.

         2. Legacy Operating Company, L.P., a Texas limited partnership ("Legacy
OC"), hereby joins in the Guarantee Agreement and all other Guarantor Documents
as a "Guarantor" and assumes, severally and collectively with all other
Guarantors, the obligations and liabilities under the Guarantee Agreement and
the other Guarantor Documents. Such assumption shall in no way affect the
liability or obligations of any other Guarantor under the Guarantee Agreement
and the other Guarantor Documents, nor the liability of any Borrower under the
Loan Documents.

         3. Legacy OC hereby covenants, promises and agrees to be bound by each
and every term, condition, representation, warranty and provision of the
Guarantee Agreement and the other Guarantor Documents as though such documents
and instruments had originally been made, executed and delivered by Legacy OC
severally and collectively with the other Guarantors.

         4. From and after the date hereof, the term "Guarantor" in the
Guarantee Agreement and the other Guarantor Documents shall mean, severally and
collectively, MERITAGE CORPORATION, a Maryland corporation, MTH - TEXAS GP,
INC., an Arizona corporation,


                                     - 21 -
<PAGE>   22
MTH - TEXAS LP, INC., an Arizona corporation, LEGACY/MONTEREY HOMES L.P., an
Arizona limited partnership, TEXAS HOME MORTGAGE CORPORATION, a Texas
corporation, and Legacy OC. Each Guarantor shall be jointly and severally
obligated under the Guarantee Agreement and the other Guarantor Documents.

         5. Each Guarantor hereby consents and agrees to the foregoing
transaction and the addition of Hancock Communities and Hancock Builders as
additional Borrowers under the Loan, and agrees that nothing contained in the
Agreement shall in any manner affect or impair any of the obligations or
liabilities of the undersigned Guarantors to Lender. Each reference in the
Guarantee Agreement to the term "Borrower" shall mean, severally and
collectively, MHC, MHA, Paseo Construction, MHNC, Paseo Crossing, Meritage
Construction, Meritage Arizona, Hancock Communities and Hancock Builders.

         6. Guarantor consents to the modification of the Loan Documents and all
other matters in the Agreement.

         7. Guarantor fully, finally, and forever releases and discharges
Lenders, Administrative Agent, and Documentation and Syndication Agent and their
successors, assigns, directors, officers, employees, agents, and representatives
from any and all actions, causes of action, claims, debts, demands, liabilities,
obligations, and suits of whatever kind or nature, in law or equity, that
Guarantor has or in the future may have, whether known or unknown, in respect of
the Loan, the Loan Documents, the Guarantor Documents, or the actions or
omissions of Lenders, Administrative Agent, and/or Documentation and Syndication
Agent in respect of the Loan, the Loan Documents, or the Guarantor Documents and
which arise from events occurring prior to the date hereof.

         8. Guarantor agrees that all references, if any, to the Notes, the Loan
Agreement, the Deeds of Trust, the Security Documents, and the Loan Documents in
the Guarantor Documents shall be deemed to refer to such agreements, documents,
and instruments as modified by the Agreement.

         9. Guarantor reaffirms the Guarantor Documents and agrees that the
Guarantor Documents continue in full force and effect and remain unchanged,
except as specifically modified by this Consent and Agreement of Guarantor(s).

         10. Guarantor agrees that the Loan Documents, as modified by the
Agreement, and the Guarantor Documents, as modified by this Consent and
Agreement of Guarantor(s), are the legal, valid, and binding obligations of
Borrower and the undersigned, respectively, enforceable in accordance with their
terms against Borrower and the undersigned, respectively.

         11. Guarantor agrees that Guarantor has no claims, counterclaims,
defenses, or offsets with respect to the enforcement against Guarantor of the
Guarantor Documents.

         12. Guarantor represents and warrants that there has been no material
adverse change in the financial condition of any Guarantor from the most recent
financial statement received by Administrative Agent.

                                     - 22 -
<PAGE>   23
         13. Guarantor agrees that this Consent and Agreement of Guarantor(s)
may be executed in one or more counterparts, each of which shall be deemed an
original and all of which together shall constitute one and the same document.
Signature and acknowledgment pages may be detached from the counterparts and
attached to a single copy of this Consent and Agreement of Guarantor(s) to
physically form one document.

         DATED as of the date of the Agreement.

                      MERITAGE CORPORATION, a Maryland corporation



                      By:
                         -------------------------------------------------------
                      Name:
                           -----------------------------------------------------
                      Title:
                            ----------------------------------------------------


                      MTH - TEXAS GP, INC., an Arizona corporation



                      By:
                         -------------------------------------------------------
                      Name:
                           -----------------------------------------------------
                      Title:
                            ----------------------------------------------------


                      MTH - TEXAS LP, INC., an Arizona corporation



                      By:
                         -------------------------------------------------------
                      Name:
                           -----------------------------------------------------
                      Title:
                            ----------------------------------------------------


                                     - 23 -
<PAGE>   24
                      LEGACY/MONTEREY HOMES L.P., an Arizona limited partnership

                      BY:      MTH - TEXAS GP, INC., an Arizona corporation,
                      General Partner



                               By:
                                  ----------------------------------------------
                               Name:
                                    --------------------------------------------
                               Title:
                                     -------------------------------------------


                      TEXAS HOME MORTGAGE CORPORATION, a Texas corporation



                      By:
                         -------------------------------------------------------
                      Name:
                           -----------------------------------------------------
                      Title:
                            ----------------------------------------------------


                      LEGACY OPERATING COMPANY, L.P., a Texas limited
                      partnership

                      By:      MTH - TEXAS GP, INC., an Arizona
                               corporation, General Partner



                               By:
                                  ----------------------------------------------
                               Name:
                                    --------------------------------------------
                               Title:
                                     -------------------------------------------

                      GUARANTOR



                                     - 24 -
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2.5
<SEQUENCE>28
<FILENAME>p65173ex10-2_5.txt
<DESCRIPTION>EX-10.2.5
<TEXT>

<PAGE>   1
                                                                  Exhibit 10.2.5


                         SEVENTH MODIFICATION AGREEMENT

         This SEVENTH MODIFICATION AGREEMENT (this "Agreement") is made and
entered into as of ___________________, 2001, by and between LEGACY/MONTEREY
HOMES L.P., an Arizona limited partnership ("Borrower"), and GUARANTY BANK, a
federal savings bank (formerly known as "Guaranty Federal Bank, F.S.B.")
("Lender").

                                   WITNESSETH:

         WHEREAS, pursuant to a certain Master Loan Agreement (the "Loan
Agreement") dated as of January 31, 1993, between Lender and Borrower, Lender
made a loan (the "Loan") to Borrower, evidenced by a certain Revolving
Promissory Note (the "Note") dated as of January 31, 1993, payable to Lender in
the stated principal amount of SIXTY-FIVE MILLION AND NO/100 DOLLARS
($65,000,000.00), with interest and principal payable as set forth therein; and

         WHEREAS, to secure the Note and Loan, Master Form Deed(s) of Trust
(With Security Agreement and Assignment of Rents and Leases) (hereinafter
collectively referred to as the "Master Deeds of Trust," whether one or more),
which Master Deeds of Trust have been recorded in certain counties in the State
of Texas as more particularly described on Exhibit A attached hereto; and which
Master Deeds of Trust are incorporated by reference pursuant to the terms and
provisions of certain Deeds of Trust Incorporating by Reference a Master Form
Deed of Trust (With Security Agreement and Assignment of Rents and Leases)
(hereafter collectively referred to as the "Supplemental Deeds of Trust,"
whether one or more) recorded in such counties and encumbering certain real and
other property (the "Property") described in such Supplemental Deeds of Trust
(such Master Deeds of Trust and Supplemental Deeds of Trust hereafter
collectively referred to as the "Deeds of Trust," whether one or more); and

         WHEREAS, the Deeds of Trust were modified pursuant to a Modification
Agreement (the "First Modification"), and recorded in various counties in Texas,
which First Modification modified certain terms and provisions of the Loan as
set forth therein; and

         WHEREAS, the Deeds of Trust were further pursuant to a Second
Modification Agreement (the "Second Modification") dated as of May 19, 1998, and
recorded in various counties in Texas, which Second Modification modified
certain terms and provisions of the Loan as set forth therein; and

         WHEREAS, the Deeds of Trust were further pursuant to a Third
Modification Agreement (the "Third Modification") dated as of March 30, 1999,
and recorded in various counties in Texas, which Third Modification modified
certain terms and provisions of the Loan as set forth therein; and

         WHEREAS, the Deeds of Trust were further pursuant to a Fourth
Modification Agreement (the "Fourth Modification") dated as of July 31, 1999,
and recorded in various counties in Texas, which Fourth Modification modified
certain terms and provisions of the Loan as set forth therein; and

         WHEREAS, the Deeds of Trust were further pursuant to a Fifth
Modification Agreement (the "Fifth Modification") dated March 24, 2000, and
recorded in various counties in Texas, which Fifth Modification modified certain
terms and provisions of the Loan as set forth therein; and

         WHEREAS, the Deeds of Trust were further pursuant to a Sixth
Modification Agreement (the "Sixth Modification") dated as of July 31, 2000, and
recorded in various counties in Texas, which Sixth Modification modified certain
terms and provisions of the Loan as set forth therein; and

         WHEREAS, the Note and the Loan are guaranteed pursuant to that certain
Guaranty Agreement dated as of June 30, 1997 (the "Guaranty"), executed by
MTH-Texas GP, Inc., an Arizona corporation, MTH-Texas LP, Inc., an Arizona
corporation, and Meritage Corporation, a Maryland corporation ("Guarantor,"
whether one or more); and


SEVENTH MODIFICATION AGREEMENT - Page 1
<PAGE>   2

         WHEREAS, the Loan Agreement, the Note, the First Modification, the
Second Modification, the Third Modification, the Fourth Modification, the Fifth
Modification, the Sixth Modification, the Deeds of Trust and all other documents
evidencing and/or securing the Loan are hereinafter collectively called the
"Loan Instruments"; and

         WHEREAS, Lender, the owner and holder of the Note and the Deeds of
Trust and all rights and titles evidenced thereby, and Borrower, the record
owner of the Property and being liable for the payment of the Note and Loan,
desire to modify the Loan Instruments as herein provided.

         NOW, THEREFORE, in consideration of Ten and No/100 Dollars ($10.00) and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:

         1. The stated maturity date of the Note is hereby extended to and
including May 31, 2002, when the entire unpaid principal balance of the Note,
together with all accrued and unpaid interest shall be due and payable;
provided, however, such date may be extended as set forth in the Loan Agreement.

         2. Borrower shall execute and deliver to Lender a letter agreement (in
form and substance satisfactory to Lender in its sole discretion) (the "Letter
Agreement") dated as of the date hereof amending certain other terms and
provisions of the Loan Instruments. (Hereafter, this Agreement and the Letter
Agreement shall be included in the defined term "Loan Instruments.")

         3. The Loan is hereby increased from $65,000,000.00 to $75,000,000.00.
All references in the Loan Instruments to the amount of $65,000,000.00 are
hereby increased to $75,000,000.00.

         4. Borrower acknowledges and agrees, that as an accommodation to
Borrower, Exhibit A hereto (which exhibit describes the recording information of
the Master Deeds of Trust) shall be attached to this Agreement (and to any and
all other documents which may require the attachment of a description of the
recording information of the Master Deeds of Trust) after Borrower's execution
of same. Accordingly, Borrower hereby authorizes and directs Lender to attach
such Exhibit A to this Agreement.

         5. Notwithstanding anything to the contrary in any of the Loan
Instruments, Borrower acknowledges and agrees, that to the extent that Lender is
relying on Chapter 303 of the Texas Finance Code to determine the Maximum Lawful
Rate (hereafter defined) payable on the Note and/or the Related Indebtedness
(hereafter defined) Lender will utilize the weekly ceiling from time to time in
effect as provided in such Chapter 303, as amended. To the extent United States
federal law permits Lender to contract for, charge, take, receive or reserve a
greater amount of interest than under Texas law, Lender will rely on United
States federal law instead of such Chapter 303 for the purpose of determining
the Maximum Lawful Rate. Additionally to the extent permitted by applicable law
now or hereafter in effect, Lender may, at its option and from time to time,
utilize any other method of establishing the Maximum Lawful Rate under such
Chapter 303 or under other applicable law by giving notice, if required, to
Borrower as provided by applicable law now or hereafter in effect. As used
herein, the term "Maximum Lawful Rate" shall mean the maximum lawful rate of
interest which may be contracted for, charged, taken, received or reserved by
Lender in accordance with the applicable laws of the State of Texas (or
applicable United States federal law to the extent that it permits Lender to
contract for, charge, take, receive or reserve a greater amount of interest than
under Texas law), taking into account all Charges (as hereafter defined) made in
connection with the transaction evidenced by the Note and the other Loan
Instruments. As used herein, the term "Charges" shall mean all fees, charges
and/or any other things of value, if any, contracted for, charged, received,
taken or reserved by Lender in connection with the transactions relating to the
Note and the other Loan Instruments, which are treated as interest under
applicable law. As used herein, the term "Related Indebtedness" shall mean any
and all debt paid or payable by Borrower to Lender pursuant to the Loan
Instruments or any other communication or writing by or between Borrower and
Lender related to the transaction or transactions that are the subject mater of
the Loan Instruments, except such debt which has been paid or is payable by
Borrower to Lender.


SEVENTH MODIFICATION AGREEMENT - Page 2

<PAGE>   3


         6. Notwithstanding anything to the contrary contained in the Deeds of
Trust or other Loan Instruments, with respect to any amendment to the Master
Deeds of Trust, the following terms and provisions shall apply:

         With respect to any amendment or modification of the Master Deeds of
         Trust now or hereafter executed by Borrower (or any future owner of the
         Property if different from Borrower) and duly recorded in the
         appropriate official public records, Borrower acknowledges and agrees
         that such amendment or modification of the Master Deeds of Trust shall
         constitute an amendment or modification to the terms and provisions of
         any such Supplemental Deeds of Trust (and shall be incorporated into
         any such Supplemental Deeds of Trust and made a part thereof for all
         purposes, as though such amendment or modification of the Master Deeds
         of Trust specifically referred to such Supplemental Deeds of Trust)
         without the necessity of any specific reference in such amendment or
         modification to any such Supplemental Deeds of Trust; and no such
         amendment or modification of the Master Deeds of Trust shall impair the
         obligations of Borrower under any such Supplemental Deeds of Trust or
         any other of the Loan Instruments.

         7. Borrower hereby expressly promises to pay to the order of Lender,
the principal amount of the Note (as modified and extended) and all accrued and
unpaid interest now or hereafter to become due and payable under the Note, and
Borrower hereby expressly promises to perform all of the obligations of Borrower
under the Loan Instruments (as modified and extended).

         8. The liens of the Deeds of Trust are hereby acknowledged by Borrower
to be good, valid and subsisting liens, and such liens are hereby renewed and
extended so as to secure the payment of the Note and Loan (as modified and
extended).

         9. Borrower hereby represents and warrants to Lender that (a) Borrower
is the sole legal and beneficial owner of the Property; (b) Borrower has the
full power and authority to make the agreements contained in this Agreement
without joinder or consent of any other party; (c) the execution, delivery and
performance of this Agreement will not contravene or constitute an event which
itself or which with the passing of time or giving of notice or both would
constitute a default under any deed of trust, loan agreement, indenture or other
agreement to which Borrower or Guarantor is a party or by which Borrower or any
of its property is bound; and (d) there exists no default under the Loan
Instruments (as modified). BORROWER HEREBY AGREES TO INDEMNIFY AND HOLD LENDER
HARMLESS AGAINST ANY LOSS, CLAIM, DAMAGE, LIABILITY OR EXPENSE (INCLUDING
WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED AS A RESULT OF ANY REPRESENTATION
OR WARRANTY MADE BY BORROWER HEREIN PROVING TO BE UNTRUE IN ANY MATERIAL
RESPECT.

         10. The terms and conditions hereof may not be modified, amended,
altered or otherwise affected except by instrument in writing executed by Lender
and Borrower.

         11. All Loan Instruments are hereby amended and modified in a manner
consistent with the modifications, terms and/or provisions contained herein.
Except as expressly modified hereby, the terms and conditions of the Loan
Instruments are and shall remain in full force and effect.

         12. Borrower agrees to pay to Lender, contemporaneously with the
execution and delivery hereof, all costs and expenses incurred in connection
with this transaction, title insurance endorsement premiums, reasonable fees of
Lender's counsel and recording fees.

         13. Borrower hereby agrees to execute and deliver to Lender such
further documents and instruments evidencing or pertaining to the Loan, as
modified and increased hereby, as may be reasonably requested by Lender from
time to time so as to evidence the terms and conditions hereof.

             [The balance of this page is intentionally left blank.]


SEVENTH MODIFICATION AGREEMENT - Page 3

<PAGE>   4

         EXECUTED on the date(s) set forth in the acknowledgment(s) below to be
EFFECTIVE as of the date first above written.

                                     BORROWER:

                                     LEGACY/MONTEREY HOMES L.P.,
                                     an Arizona limited partnership

                                     BY:      MTH-TEXAS GP, INC.,
                                              an Arizona corporation,
                                              General Partner


                                              By:
                                                   -----------------------------
                                                   Name:
                                                          ----------------------
                                                    Title:
                                                          ----------------------

                                     LENDER:

                                     GUARANTY BANK
                                     a federal savings bank
                                     (formerly known as "Guaranty Federal Bank,
                                     F.S.B.")



                                     By:
                                          --------------------------------------
                                          Name:
                                                 -------------------------------
                                           Title:
                                                 -------------------------------


SEVENTH MODIFICATION AGREEMENT - Page 4

<PAGE>   5


STATE OF _____________            }
                                  }
COUNTY OF ___________             }

         This instrument was ACKNOWLEDGED before me on _________________, 2001,
by _________________________________________, _______________________________ of
MTH-TEXAS GP, INC., an Arizona corporation, as General Partner of
LEGACY/MONTEREY HOMES L.P., an Arizona limited partnership, on behalf of said
limited partnership.


[S E A L]
                                        ________________________________________
                                        Notary Public

My Commission Expires:

_____________________                   ________________________________________
                                        Printed Name of Notary Public




STATE OF TEXAS                        }
                                      }
COUNTY OF DALLAS                      }

         This instrument was acknowledged before me on the _____ day of
________________, 2001, by _________________________________,
___________________ of GUARANTY BANK, a federal savings bank, on behalf of said
federal savings bank.



                                        ________________________________________
                                         Notary Public in and for the
                                         above county and state

My Commission Expires:

_____________________                   ________________________________________
                                         Printed Name of Notary Public


SEVENTH MODIFICATION AGREEMENT - Page 5

<PAGE>   6


                              CONSENT OF GUARANTOR

         Each of the undersigned, as a guarantor ("Guarantor," whether one or
more) of the loan (the "Loan"), evidenced by the Note and secured by the Deeds
of Trust described in the foregoing Seventh Modification Agreement (the
"Agreement") to which this Consent is attached, hereby acknowledge and consent
(jointly and severally) to the terms of the Agreement and agree (jointly and
severally) that the execution and delivery of the Agreement will in no way
change or modify Guarantor's respective obligations under their respective
Guaranty (as defined in the Agreement); and each Guarantor acknowledges and
agrees (jointly and severally) that the Indebtedness (as defined in the
respective instruments comprising the Guaranty) includes the Loan, together with
any and all other Indebtedness now or at any time hereafter owing by Guarantor
to Lender; and each Guarantor (jointly and severally) hereby unconditionally and
absolutely guarantees to Lender the payment when due of such Indebtedness, and
hereby acknowledge and agree that their respective Guaranty is in full force and
effect, and that there are no claims, counterclaims, offsets or defenses to
their respective Guaranty; and each Guarantor acknowledges and consents (jointly
and severally) to the terms of any and all prior modifications to the terms of
the Loan (including, without limitation, any and all extensions of the term
thereof and increases in the principal thereof prior to the date hereof, if
any).

         EXECUTED on the date(s) set forth in the acknowledgment(s) below to be
EFFECTIVE as of the ______ day of ___________, 2001.

                                   GUARANTOR:

                                   MERITAGE CORPORATION,
                                   a Maryland corporation



                                   By:
                                      ------------------------------------------
                                        Name:
                                             -----------------------------------
                                        Title:
                                              ----------------------------------


                                   MTH-TEXAS GP, INC.,
                                   an Arizona corporation



                                   By:
                                      ------------------------------------------
                                        Name:
                                             -----------------------------------
                                        Title:
                                              ----------------------------------


                                   MTH-TEXAS LP, INC.,
                                   an Arizona corporation

                                   By:
                                      ------------------------------------------
                                        Name:
                                             -----------------------------------
                                        Title:
                                              ----------------------------------


SEVENTH MODIFICATION AGREEMENT - Page 6

<PAGE>   7


STATE OF TEXAS                        }
                                      }
COUNTY OF DALLAS                      }

         This instrument was ACKNOWLEDGED before me on _________________, 2000,
by _________________________________________, _______________________________ of
MERITAGE CORPORATION, a Maryland corporation, on behalf of said corporation.

[S E A L]
                                       _________________________________________
                                       Notary Public
My Commission Expires:

_____________________                  Printed Name of Notary Public


STATE OF TEXAS                        }
                                      }
COUNTY OF DALLAS                      }

         This instrument was ACKNOWLEDGED before me on _________________, 2000,
by _________________________________________, _______________________________ of
MTH-TEXAS GP, INC., an Arizona corporation, on behalf of said corporation.

[S E A L]
                                      __________________________________________
                                      Notary Public
My Commission Expires:

_____________________                 Printed Name of Notary Public


SEVENTH MODIFICATION AGREEMENT - Page 7

<PAGE>   8
                                    EXHIBIT A

                       Description of the Deed(s) of Trust


LEGACY/MONTEREY, L.P.

Collin County  Recorded September 4, 1996, Clerk File 96-0075977

Dallas         Recorded September 5, 1996, Volume 96175 Page 00192

Denton         Recorded September 5, 1996, Clerk File 96-R0061921

Fort Bend      Recorded January 28, 1999, Clerk File 199900703

Harris         Recorded August 6, 1997, Clerk File No. S579911

Hays           Recorded September 21, 2000, Clerk File No. 22586

Rockwall       Recorded August 19, 1997, Clerk File No. 176219

Tarrant        Recorded September 5, 1996, Clerk File D196175179

Travis         Recorded September 6, 1996,Volume 12766, Page 1157

Williamson     Recorded September 9, 1996, Clerk File 9648096


EXHIBIT A, Description of the Deeds of Trust - Page 1
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.1
<SEQUENCE>29
<FILENAME>p65173ex12-1.txt
<DESCRIPTION>EX-12.1
<TEXT>

<PAGE>   1


                                                                    EXHIBIT 12.1


          MERITAGE CORPORATION
     COMPUTATION OF RATIO OF EARNINGS TO FIXED
                    CHARGES
       (IN THOUSANDS, EXCEPT RATIO OF EARNINGS TO FIXED CHARGES)


<TABLE>
<CAPTION>

                                                                 Years ended December 31,
                                                  ------------------------------------------------------          Three months
                                                  Predecessor   Monterey        Meritage Corporation            ended March 31,
                                                   Company       Homes     -----------------------------       ------------------
COMPUTATION OF EARNINGS:                            1996         1997       1998          1999      2000       2000          2001
------------------------                            ----         ----       ----          ----      ----       ----          ----

<S>                                               <C>          <C>        <C>          <C>        <C>        <C>          <C>
       Earnings before income taxes and           $    322     $ 15,199   $ 30,500     $ 32,215   $ 56,762   $  7,523     $ 12,181
          extraordinary item

       Add:
       Interest expense, including amortization
          of deferred debt costs                       238          165        490           96         98   $     24     $     24
       Interest portion of rent expense(1)             184          593        538          557        804        201          485
                                                  --------     --------   --------     --------   --------   --------     --------
       EARNINGS, AS ADJUSTED:                     $    744     $ 15,957   $ 31,528     $ 32,868   $ 57,664   $  7,747     $ 12,690
                                                  ========     ========   ========     ========   ========   ========     ========

COMPUTATION OF FIXED CHARGES:

       Interest expense, including amortization   $    238     $    165   $    490     $     96   $     98   $     24     $     24
         of deferred debt costs
       Interest portion of rent expense(1)             184          593        538          557        804        201          485
       Capitalized interest                          3,700        3,679      3,711        7,025     10,626      1,868        3,074
                                                  --------     --------   --------     --------   --------   --------     --------
       TOTAL FIXED CHARGES:                       $  4,122     $  4,437   $  4,739     $  7,678   $ 11,528   $  2,092     $  3,583
                                                  ========     ========   ========     ========   ========   ========     ========
RATIO OF EARNINGS TO FIXED CHARGES:                  0.18x(2)     3.60x      6.65x        4.28x      5.00x      3.70x        3.54x
                                                  ========     ========   ========     ========   ========   ========     ========
</TABLE>



                      (1) represents 50% of rental expense

                      (2) For the year ended December 31, 1996, earnings were
                          inadequate to cover fixed charges by approximately
                          $3.4 million, since the 1996 results are those of our
                          predecessor company (Homeplex Mortgage Investment
                          Co.) and our operations were substantially different
                          than our current homebuilding operations.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21.1
<SEQUENCE>30
<FILENAME>p65173ex21-1.txt
<DESCRIPTION>EX-21.1
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 21.1

                             MERITAGE CORPORATION
                             LIST OF SUBSIDIARIES

<TABLE>
<CAPTION>
                                                      JURISDICTION OF
                                                      INCORPORATION OR
   NAME OF ENTITY                                     ORGANIZATION
   --------------                                  -----------------
<S>                                                <C>
Monterey Homes Arizona, Inc.                            Arizona
Meritage Paseo Crossing, LLC                            Arizona
Monterey Homes Construction, Inc.                       Arizona
Meritage Paseo Construction, LLC                        Arizona
Meritage Homes of Arizona, Inc.                         Arizona
Meritage Homes Construction, Inc.                       Arizona
MTH-Texas GP, Inc.                                      Arizona
MTH-Texas LP, Inc.                                      Arizona
Legacy/Monterey Homes L.P.                              Arizona
Meritage Homes of Northern California, Inc.             California
Hancock-MTH Builders, Inc.                              Arizona
Hancock-MTH Communities, Inc.                           Arizona
Legacy Operating Company, L.P.                          Texas
Texas Home Mortgage Corporation                         Texas
</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>31
<FILENAME>p65173ex23-1.txt
<DESCRIPTION>EX-23.1
<TEXT>

<PAGE>   1
                                                                    Exhibit 23.1


The Board of Directors
Meritage Corporation:

We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the prospectus.


                                        /s/ KPMG LLP

Phoenix, Arizona
July 2, 2001

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.2
<SEQUENCE>32
<FILENAME>p65173ex23-2.txt
<DESCRIPTION>EX-23.2
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 23.2

                         INDEPENDENT AUDITOR'S CONSENT

We consent to the use in this Registration Statement of Meritage Corporation on
Form S-4 filed on or about July 2, 2001 of our report, dated March 29, 2001,
appearing in the Prospectus, which is part of this Registration Statement.

We also consent to the reference to our Firm under the caption "Experts" in such
Prospectus.

/s/ McGLADREY & PULLEN, LLP

Las Vegas, Nevada
July 2, 2001
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-25.1
<SEQUENCE>33
<FILENAME>p65173ex25-1.txt
<DESCRIPTION>EX-25.1
<TEXT>

<PAGE>   1

                                                                   EXHIBIT 25.1


                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


                                    FORM T-1

                            STATEMENT OF ELIGIBILITY
                   UNDER THE TRUST INDENTURE ACT OF 1939 OF A
                    CORPORATION DESIGNATED TO ACT AS TRUSTEE


     CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT
-----
                              TO SECTION 305(b)(2)

                WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION
              (Exact name of trustee as specified in its charter)

A U.S. NATIONAL BANKING ASSOCIATION                             41-1592157
(Jurisdiction of incorporation or                            (I.R.S. Employer
organization if not a U.S. national                         Identification No.)
bank)

SIXTH STREET AND MARQUETTE AVENUE
Minneapolis, Minnesota                                             55479
(Address of principal executive offices)                        (Zip code)

                       Stanley S. Stroup, General Counsel
                WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION
                       Sixth Street and Marquette Avenue
                          Minneapolis, Minnesota 55479
                                 (612) 667-1234
                              (Agent for Service)


                              MERITAGE CORPORATION
              (Exact name of obligor as specified in its charter)

DELAWARE                                                       86-0611231
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                              Identification No.)

6613 NORTH SCOTTSDALE RD., SUITE 200
SCOTTSDALE, ARIZONA                                               85250
(Address of principal executive offices)                          (Zip code)


                          9-3/4% SENIOR NOTES DUE 2001
                      (Title of the indenture securities)


<PAGE>   2


Item 1. General Information. Furnish the following information as to the
        trustee:

            (a)   Name and address of each examining or supervising
                  authority to which it is subject.

                  Comptroller of the Currency
                  Treasury Department
                  Washington, D.C.

                  Federal Deposit Insurance Corporation
                  Washington, D.C.

                  The Board of Governors of the Federal Reserve System
                  Washington, D.C.

            (b)   Whether it is authorized to exercise corporate trust
                  powers.

                  The trustee is authorized to exercise corporate trust powers.

Item 2. Affiliations with Obligor. If the obligor is an affiliate of the
        trustee, describe each such affiliation.

            None with respect to the trustee.

No responses are included for Items 3-14 of this Form T-1 because the obligor is
not in default as provided under Item 13.

Item 15. Foreign Trustee.    Not applicable.


Item 16. List of Exhibits.   List below all exhibits filed as a part of this
                             Statement of Eligibility. Wells Fargo Bank
                             incorporates by reference into this Form T-1 the
                             exhibits attached hereto.

      Exhibit 1.  a.         A copy of the Articles of Association of the
                             trustee now in effect.***

      Exhibit 2.  a.       A copy of the certificate of authority of the
                           trustee to commence business issued June 28, 1872,
                           by the Comptroller of the Currency to The
                           Northwestern National Bank of Minneapolis.*

                  b.       A copy of the certificate of the Comptroller of the
                           Currency dated January 2, 1934, approving the
                           consolidation of The Northwestern National Bank of
                           Minneapolis and The Minnesota Loan and Trust
                           Company of Minneapolis, with the surviving entity
                           being titled Northwestern National Bank and Trust
                           Company of Minneapolis.*

                  c.       A copy of the certificate of the Acting Comptroller
                           of the Currency dated January 12, 1943, as to
                           change of corporate title of Northwestern National
                           Bank and Trust Company of Minneapolis to
                           Northwestern National Bank of Minneapolis.*

                  d.       A copy of the letter dated May 12, 1983 from the
                           Regional Counsel, Comptroller of the Currency,
                           acknowledging receipt of notice of name
<PAGE>   3

                           change effective May 1, 1983 from Northwestern
                           National Bank of Minneapolis to Norwest Bank
                           Minneapolis, National Association.*

                  e.       A copy of the letter dated January 4, 1988 from the
                           Administrator of National Banks for the Comptroller
                           of the Currency certifying approval of consolidation
                           and merger effective January 1, 1988 of Norwest Bank
                           Minneapolis, National Association with various other
                           banks under the title of "Norwest Bank Minnesota,
                           National Association."*

                  f.       A copy of the letter dated July 10, 2000 from the
                           Administrator of National Banks for the Comptroller
                           of the Currency certifying approval of consolidation
                           effective July 8, 2000 of Norwest Bank Minnesota,
                           National Association with various other banks under
                           the title of "Wells Fargo Bank Minnesota, National
                           Association."****

         Exhibit 3.   A copy of the authorization of the trustee to exercise
                      corporate trust powers issued January 2, 1934, by the
                      Federal Reserve Board.*

         Exhibit 4.   Copy of By-laws of the trustee as now in effect.***

         Exhibit 5.   Not applicable.

         Exhibit 6.   The consent of the trustee required by Section 321(b) of
                      the Act.

         Exhibit 7.   A copy of the latest report of condition of the trustee
                      published pursuant to law or the requirements of its
                      supervising or examining authority. **

         Exhibit 8.   Not applicable.

         Exhibit 9.   Not applicable.


      *     Incorporated by reference to exhibit number 25 filed with
            registration statement number 33-66026.

      **    Incorporated by reference to exhibit number 25 filed with
            registration statement number 333-56748

      ***   Incorporated by reference to exhibit T3G filed with registration
            statement number 022-22473.

      ****  Incorporated by reference to exhibit number 25.1 filed with
            registration statement number 001-15891.


<PAGE>   4

                                    SIGNATURE


Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the
trustee, Wells Fargo Bank Minnesota, National Association, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Minneapolis and State of Minnesota on the 29th day of June 2001.

                              WELLS FARGO BANK MINNESOTA,
                              NATIONAL ASSOCIATION


                              /s/ Jeanie Mar
                              --------------
                              Jeanie Mar
                              Vice President

<PAGE>   5





June 29, 2001



Securities and Exchange Commission
Washington, D.C.  20549

Gentlemen:

In accordance with Section 321(b) of the Trust Indenture Act of 1939, as
amended, the undersigned hereby consents that reports of examination of the
undersigned made by Federal, State, Territorial, or District authorities
authorized to make such examination may be furnished by such authorities to the
Securities and Exchange Commission upon its request therefor.

                                            Very truly yours,

                                            WELLS FARGO BANK MINNESOTA,
                                            NATIONAL ASSOCIATION
                                            /s/ Jeanie Mar
                                            --------------------------------
                                            Jeanie Mar
                                            Vice President
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>34
<FILENAME>p65173ex99-1.txt
<DESCRIPTION>EX-99.1
<TEXT>

<PAGE>   1

                                                                    EXHIBIT 99.1

                              LETTER OF TRANSMITTAL

                             TO TENDER FOR EXCHANGE
                          9 3/4% SENIOR NOTES DUE 2011

                                       OF

                              MERITAGE CORPORATION
                                   PURSUANT TO
                         PROSPECTUS DATED JULY __, 2001

       THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON
    AUGUST __, 2001, UNLESS EXTENDED. TENDERS OF 9 3/4% SENIOR NOTES DUE 2011
  MAY ONLY BE WITHDRAWN UNDER THE CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS AND
                                     HEREIN.

                  THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
                      WELLS FARGO BANK, NATIONAL ASSOCIATION

           By Registered or Certified Mail:  By Overnight Courier:

           Wells Fargo Bank, National        Wells Fargo Bank, National
           Association                       Association
           707 Wilshire Boulevard,           707 Wilshire Boulevard,
           17th Floor                        17th Floor
           Los Angeles, CA 90017             Los Angeles, CA 90017
           Attention: Jeanie Mar             Attention: Jeanie Mar

           By Hand before 4:30 P.M.:         By Facsimile:

           Wells Fargo Bank, National        Fax: (213) 614-3355
p           Association                       Wells Fargo Bank, National
           707 Wilshire Boulevard,           Association
           17th Floor                        Attention: Jeanie Mar
           Los Angeles, CA 90017             Phone: (213) 614-3349
           Attention: Jeanie Mar

                  PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
                     CAREFULLY BEFORE CHECKING ANY BOX BELOW



                    DESCRIPTION OF OUTSTANDING NOTES TENDERED
<TABLE>
<CAPTION>
                                                                       TOTAL PRINCIPAL
 NAMES(S) AND ADDRESS(ES) OF                       TOTAL PRINCIPAL        AMOUNT OF
HOLDER(S) (PLEASE FILL IN, IF                           AMOUNT        OUTSTANDING NOTES
  BLANK, EXACTLY AS NAME(S)                         REPRESENTED BY    TENDERED (MUST BE
   APPEAR(S) ON OUTSTANDING       CERTIFICATE       CERTIFICATE(S)       IN INTEGRAL
            NOTES)                 NUMBER(S)        (IF ENCLOSING        MULTIPLES OF
                                                    CERTIFICATES)        $1,000) (A)
<S>                               <C>               <C>               <C>

                                     Total

</TABLE>


(a)   Unless indicated in the column labeled "Total Principal Amount of
      Outstanding Notes Tendered," any tendering Holder of Outstanding Notes
      will be deemed to have tendered the entire aggregate principal amount
      represented by the column labeled "Total Principal Amount Represented by
      Certificate(s)."

      If the space provided above is inadequate, list the certificate numbers
      and principal amounts on a separate signed schedule and affix the list to
      this Letter of Transmittal.

      The minimum permitted is $1,000 in principal amount of Outstanding Notes.
      All other tenders must be integral multiples of $1,000.
<PAGE>   2
     THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE PROSPECTUS, DATED JULY __, 2001
(THE "PROSPECTUS"), OF MERITAGE CORPORATION, A MARYLAND CORPORATION (THE
"COMPANY"), RELATING TO THE OFFER (THE "EXCHANGE OFFER") OF THE COMPANY, UPON
THE TERMS AND SUBJECT TO THE CONDITIONS SET FORTH IN THE PROSPECTUS AND HEREIN
AND THE INSTRUCTIONS HERETO, TO EXCHANGE $1,000 PRINCIPAL AMOUNT OF ITS 9 3/4%
SENIOR NOTES DUE 2011 (THE "EXCHANGE NOTES") FOR EACH $1,000 PRINCIPAL AMOUNT OF
ITS OUTSTANDING 9 3/4% SENIOR NOTES DUE 2011 (THE "OUTSTANDING NOTES"), OF WHICH
$165 MILLION AGGREGATE PRINCIPAL AMOUNT IS OUTSTANDING. THE MINIMUM PERMITTED
TENDER IS $1,000 PRINCIPAL AMOUNT OF OUTSTANDING NOTES, AND ALL OTHER TENDERS
MUST BE IN INTEGRAL MULTIPLES OF $1,000.

     DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION BY
FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.

     The Exchange Offer will expire at 5:00 p.m., New York City time, on August
__, 2001 (the "Expiration Date"), unless extended.

     HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE EXCHANGE NOTES PURSUANT TO THE
EXCHANGE OFFER MUST VALIDLY TENDER THEIR OUTSTANDING NOTES TO THE EXCHANGE AGENT
PRIOR TO 5:00 P.M. ON THE EXPIRATION DATE.

     This Letter of Transmittal should be used only to exchange the Outstanding
Notes, pursuant to the Exchange Offer as set forth in the Prospectus.

     This Letter of Transmittal is to be used (a) if Outstanding Notes are to be
physically delivered to the Exchange Agent or (b) if delivery of Outstanding
Notes is to be made by book-entry transfer to the account maintained by the
Exchange Agent at The Depository Trust Company ("DTC" or the "Book-Entry
Transfer Facility") pursuant to the procedures set forth in the Prospectus under
the caption "The Exchange Offer -- Procedures for Tendering." Delivery of
documents to the Book-Entry Transfer Facility does not constitute delivery to
the Exchange Agent.

     Holders whose Outstanding Notes are not available or who cannot deliver
their Outstanding Notes and all other documents required hereby to the Exchange
Agent by 5:00 p.m. on the Expiration Date nevertheless may tender their
Outstanding Notes in accordance with the guaranteed delivery procedures set
forth in the Prospectus under the caption "The Exchange Offer -- Guaranteed
Delivery Procedures."

     THE EXCHANGE OFFER IS NOT BEING MADE TO (NOR WILL THE SURRENDER OF
OUTSTANDING NOTES FOR EXCHANGE BE ACCEPTED FROM OR ON BEHALF OF) HOLDERS IN ANY
JURISDICTION IN WHICH THE MAKING OR ACCEPTANCE OF THE EXCHANGE OFFER WOULD NOT
BE IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION.

     All capitalized terms used herein and not defined herein shall have the
meanings ascribed to them in the Prospectus.

     HOLDERS WHO WISH TO EXCHANGE THEIR OUTSTANDING NOTES MUST COMPLETE ALL THE
COLUMNS IN THE BOX ENTITLED "DESCRIPTION OF OUTSTANDING NOTES TENDERED" ON THE
PRIOR PAGE, COMPLETE THE BOX BELOW ENTITLED "METHOD OF DELIVERY" AND SIGN WHERE
INDICATED BELOW.

     THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OUTSTANDING
NOTES TENDERED" AND SIGNING THIS LETTER OF TRANSMITTAL, WILL BE DEEMED TO HAVE
TENDERED THE OUTSTANDING NOTES AND MADE CERTAIN REPRESENTATIONS DESCRIBED IN THE
PROSPECTUS AND HEREIN.



                                       2
<PAGE>   3
                               METHOD OF DELIVERY

[ ]  CHECK HERE IF CERTIFICATES FOR TENDERED OUTSTANDING NOTES ARE ENCLOSED
     HEREWITH.

[ ]  CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED BY BOOK-ENTRY
     TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
     BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:

     Name of Tendering Institution: ______________________________________

     Account Number: ________________   Transaction Code Number: _____________


[ ]  CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED PURSUANT TO A
     NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
     COMPLETE THE FOLLOWING (SEE INSTRUCTIONS 1 AND 4):

     Name(s) of Registered Holder(s): _________________________________________


     Window Ticket Number (if any): ___________________________________________

     Date of Execution of Notice of Guaranteed Delivery: ______________________

     Name of Eligible Institution which Guaranteed Delivery: __________________

     IF DELIVERED BY THE BOOK-ENTRY TRANSFER FACILITY, PROVIDE THE FOLLOWING
     INFORMATION:

     [ ]  The Depository Trust Company

     Account Number: _______________   Transaction Code Number: ______________


[  ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE TEN ADDITIONAL
     COPIES OF THE PROSPECTUS AND COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
     THERETO.

Name: ________________________________________________________________________

Address: _____________________________________________________________________

                     NOTE: SIGNATURES MUST BE PROVIDED BELOW
               PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY


                                       3
<PAGE>   4
Ladies and Gentlemen:

     Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the principal amount of Outstanding
Notes indicated in the box entitled "Description of Outstanding Notes Tendered."
Subject to, and effective upon, the acceptance for exchange of the Outstanding
Notes tendered hereby, the undersigned hereby irrevocably sells, assigns and
transfers to or upon the order of the Company all right, title and interest in
and to such Outstanding Notes, and hereby irrevocably constitutes and appoints
the Exchange Agent the true and lawful agent and attorney-in-fact of the
undersigned (with full knowledge that said Exchange Agent also acts as the agent
of the Company and as Trustee under the indenture governing the Outstanding
Notes and the Exchange Notes) with respect to such Outstanding Notes, with full
power of substitution (such power of attorney being deemed to be an irrevocable
power coupled with an interest) to (a) deliver certificates representing such
Outstanding Notes, and to deliver all accompanying evidences of transfer and
authenticity to or upon the order of the Company upon receipt by the Exchange
Agent, as the undersigned's agent, of the Exchange Notes to which the
undersigned is entitled upon the acceptance by the Company of such Outstanding
Notes for exchange pursuant to the Exchange Offer, (b) receive all benefits and
otherwise to exercise all rights of beneficial ownership of such Outstanding
Notes, all in accordance with the terms of the Exchange Offer, and (c) present
such Outstanding Notes for transfer on the register for such Outstanding Notes.

     The undersigned acknowledges that prior to this Exchange Offer, there has
been no public market for the Outstanding Notes or the Exchange Notes. If a
market for the Exchange Notes should develop, the Exchange Notes could trade at
a discount from their principal amount. The undersigned is aware that the
Company does not intend to list the Exchange Notes on a national securities
exchange and that there can be no assurance that an active market for the
Exchange Notes will develop.

     If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange
Notes, it represents that the Outstanding Notes to be exchanged for Exchange
Notes were acquired as a result of market-making activities or other trading
activities and it acknowledges that it will deliver a prospectus in connection
with any resale of such Exchange Notes; however, by so acknowledging and by
delivering a prospectus, the undersigned will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.

     THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL TENDERS BE ACCEPTED FROM
OR ON BEHALF OF, HOLDERS OF THE OUTSTANDING NOTES IN ANY JURISDICTION IN WHICH
THE MAKING OF THE OFFER OR ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH
THE LAWS OF SUCH JURISDICTION OR WOULD OTHERWISE NOT BE IN COMPLIANCE WITH ANY
PROVISION OF ANY APPLICABLE SECURITY LAW.

     The undersigned represents that (a) it is not an "affiliate," as defined
under Rule 405 of the Securities Act, of the Company or any of the Guarantors
(as defined in the Prospectus), (b) it is not engaged in, and does not intend to
engage in, and has no arrangement or understanding with any person to
participate in, a distribution of the Exchange Notes, and (c) it is acquiring
the Exchange Notes in the ordinary course of business.

     The undersigned understands and acknowledges that the Company reserves the
right, in its sole discretion, to purchase or make offers for any Outstanding
Notes that remain outstanding subsequent to the Expiration Date or to terminate
the Exchange Offer and, to the extent permitted by applicable law, purchase
Outstanding Notes in the open market, in privately negotiated transactions or
otherwise. The terms of any such purchases or offers will differ from the terms
of the Exchange Offer.

     The undersigned hereby represents and warrants that (a) the undersigned
accepts the terms and conditions of the Exchange Offer, (b) the undersigned has
a net long position within the meaning of Rule 14e-4 under the Exchange Act
("Rule 14e-4") equal to or greater than the principal amount of Outstanding
Notes tendered hereby, (c) the tender of such Outstanding Notes complies with
Rule 14e-4 (to the extent that Rule 14e-4 is applicable to such exchange), (d)
the undersigned has full power and authority to tender, exchange, assign and
transfer the Outstanding Notes tendered hereby, and (e) when the same are
accepted for exchange by the Company, the Company will acquire good and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and not subject to any adverse claim or right. The undersigned
will, upon request, execute and deliver any additional documents deemed by the
Exchange Agent or the Company to be necessary or desirable to complete the sale,
assignment and transfer of the Outstanding Notes tendered hereby.

     The undersigned agrees that all authority conferred or agreed to be
conferred by this Letter of Transmittal and every obligation of the undersigned
hereunder shall be binding upon the successors, assigns, heirs, executors,
administrators, trustees in bankruptcy and legal representatives of the
undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. The undersigned also agrees that, except as
stated in the Prospectus, the Outstanding Notes tendered hereby cannot be
withdrawn.

     The undersigned understands that tenders of the Outstanding Notes pursuant
to any one of the procedures described in the Prospectus under the caption "The
Exchange Offer -- Procedures for Tendering" and in the instructions hereto will
constitute a

                                       4
<PAGE>   5
binding agreement between the undersigned and the Company in accordance with the
terms and subject to the conditions of the Exchange Offer.

     The undersigned understands that by tendering Outstanding Notes pursuant to
one of the procedures described in the Prospectus and the instructions thereto,
the tendering holder will be deemed to have waived the right to receive any
payment in respect of interest on the Outstanding Notes accrued up to the date
of issuance of the Exchange Notes.

     The undersigned recognizes that, under certain circumstances set forth in
the Prospectus, the Company may not be required to accept for exchange any of
the Outstanding Notes tendered. Outstanding Notes not accepted for exchange or
withdrawn will be returned to the undersigned at the address set forth below
unless otherwise indicated under "Special Delivery Instructions" below.

     Unless otherwise indicated herein under the box entitled "Special Issuance
Instructions" below, Exchange Notes, and Outstanding Notes not validly tendered
or accepted for exchange, will be issued in the name of the undersigned.
Similarly, unless otherwise indicated under the box entitled "Special Delivery
Instructions" below, Exchange Notes, and Outstanding Notes not validly tendered
or accepted for exchange, will be delivered to the undersigned at the address
shown below the signature of the undersigned. The undersigned recognizes that
the Company has no obligation pursuant to the "Special Issuance Instructions' to
transfer any Outstanding Notes from the name of the registered holder thereof if
the Company does not accept for exchange any of the principal amount of such
Outstanding Notes so tendered.

     All questions as to the validity, form, eligibility (including time of
receipt), and withdrawal of the tendered Outstanding Notes will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all
Outstanding Notes not properly tendered or any Outstanding Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right to waive any irregularities or
conditions of tender as to particular Outstanding Notes. The Company's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in this Letter of Transmittal) will be final and binding. Unless
waived, any defects or irregularities in connection with tenders of Outstanding
Notes must be cured within such time as the Company shall determine. Neither the
Company, the Exchange Agent nor any other person shall be under any duty to give
notification of defects or irregularities with respect to tenders of Outstanding
Notes, nor shall any of them incur any liability for failure to give such
notification. Tenders of Outstanding Notes will not be deemed to have been made
until such irregularities have been cured or waived. Any Outstanding Notes
received by the Exchange Agent that are not properly tendered and as to which
the defects or irregularities have not been cured or waived will be returned
without cost to such holder by the Exchange Agent to the tendering holders of
Outstanding Notes, unless otherwise provided in this Letter of Transmittal, as
soon as practicable following the Expiration Date.


                                       5
<PAGE>   6
                                PLEASE SIGN HERE
                   (TO BE COMPLETED BY ALL TENDERING HOLDERS)

X ____________________________________________   _______________________, 2001

X ____________________________________________   _______________________, 2001
            SIGNATURE(S) OF OWNER                              DATE


Area code and Telephone Number ________________________________________________

     If a Holder is tendering any Outstanding Notes, this Letter must be signed
by the registered Holder(s) as the name(s) appear(s) on the certificate(s) for
the Outstanding Notes or by any person(s) authorized to become registered
Holder(s) by endorsements and documents transmitted herewith. If signature is by
a trustee, executor, administrator, guardian, officer or other person acting in
a fiduciary or representative capacity, please set forth full title. See
Instruction 3.

Name(s):  ___________________________________________________________________

_____________________________________________________________________________
                             (PLEASE TYPE OR PRINT)


Capacity: ___________________________________________________________________

_____________________________________________________________________________

Address: _____________________________________________________________________

_____________________________________________________________________________
                              (INCLUDING ZIP CODE)


                               SIGNATURE GUARANTEE
                              (IF REQUIRED BY INSTRUCTION 3)

Signature(s) Guaranteed by an Eligible Institution: _________________________
                                                     (AUTHORIZED SIGNATURE)

_____________________________________________________________________________
                                     (TITLE)

_____________________________________________________________________________
                                 (NAME AND FIRM)

Dated: ___________________________ , 2001


                                       6
<PAGE>   7
                          SPECIAL ISSUANCE INSTRUCTIONS
                              (SEE INSTRUCTIONS 3, 4 AND 6)

     To be completed ONLY if certificates for Outstanding Notes in a principal
amount not exchanged and/or certificates for Exchange Notes are to be issued in
the name of someone other than the undersigned, or if Outstanding Notes are to
be returned by credit to an account maintained by the Book-Entry Transfer
Facility.

Issue (check appropriate box)
[  ]  Exchange Notes to:
[  ]  Outstanding Notes to:

Name:   __________________________________________________________
                               (PLEASE PRINT)

   Address:  _____________________________________________________

             _____________________________________________________

             _____________________________________________________
                                ZIP CODE


             _____________________________________________________
                          TAXPAYER IDENTIFICATION NUMBER


                                 (YOU MUST ALSO COMPLETE
                               SUBSTITUTE FORM W-9 BELOW.)

   Credit unaccepted Outstanding Notes tendered by book-entry transfer to:

   [  ]  The Depository Trust Company account set forth below


             _____________________________________________________
                               (DTC ACCOUNT NUMBER)


                          SPECIAL DELIVERY INSTRUCTIONS
                              (SEE INSTRUCTIONS 3, 4 AND 6)

        To be completed ONLY if certificates for Outstanding Notes in a
principal amount not exchanged and/or certificates for Exchange Notes are to be
sent to someone other than undersigned at an address other than that shown
above.

   Deliver (check appropriate box)
   [  ]  Exchange Notes to:
   [  ]  Outstanding Notes to:

   Name:  _____________________________________________________

                           (PLEASE PRINT)

   Address: _____________________________________________________


             _____________________________________________________
                             ZIP CODE

             _____________________________________________________
                     TAXPAYER IDENTIFICATION NUMBER

                   (YOU MUST ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW.)

             _____________________________________________________


                                       7
<PAGE>   8
INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER AND THE
SOLICITATION

     1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED
DELIVERY PROCEDURES. To be effectively tendered pursuant to the Exchange Offer,
the Outstanding Notes, together with a properly completed Letter of Transmittal
(or facsimile thereof), duly executed by the registered holder thereof, and any
other documents required by this Letter of Transmittal, must be received by the
Exchange Agent at one of its addresses set forth on the first page of this
Letter of Transmittal. If the beneficial owner of any Outstanding Notes is not
the registered holder, then such person may validly tender his or her
Outstanding Notes only by obtaining and submitting to the Exchange Agent a
properly completed Letter of Transmittal from the registered holder. OUTSTANDING
NOTES SHOULD BE DELIVERED ONLY TO THE EXCHANGE AGENT AND NOT TO THE COMPANY OR
TO ANY OTHER PERSON.

     THE METHOD OF DELIVERY OF OUTSTANDING NOTES AND ALL OTHER REQUIRED
DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER.

     SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY TO THE EXCHANGE
AGENT BY 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.

     If a holder desires to tender Outstanding Notes and such holder's
Outstanding Notes are not immediately available or time will not permit such
holder's Letter of Transmittal, Outstanding Notes or other required documents to
reach the Exchange Agent on or before the Expiration Date, such holder's tender
may be effected if:

     (a)  the tender is made through an Eligible Institution (as defined
          herein);

     (b)  prior to the Expiration Date, the Exchange Agent receives from such
          Eligible Institution a properly completed and duly executed Notice of
          Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
          setting forth the name and address of the holder of the Outstanding
          Notes, the certificate number or numbers of such Outstanding Notes and
          the principal amount of Outstanding Notes tendered, stating that the
          tender is being made thereby, and guaranteeing that, within three
          business days after the Expiration Date, the Letter of Transmittal (or
          facsimile thereof) together with the certificate(s) representing the
          Outstanding Notes to be tendered in proper form for transfer or a
          Book-Entry Confirmation, as the case may be, and any other documents
          required by the Letter of Transmittal will be deposited by the
          Eligible Institution with the Exchange Agent; and

     (c)  such properly completed and executed Letter of Transmittal (or
          facsimile thereof) together with the certificate(s) representing all
          tendered Outstanding Notes in proper form for transfer and all other
          documents required by the Letter of Transmittal are received by the
          Exchange Agent within three business days after the Expiration Date.

     2. WITHDRAWAL OF TENDERS. Tendered Outstanding Notes may be withdrawn at
any time prior to 5:00 p.m., New York City time, on the Expiration Date, unless
previously accepted for exchange.

     To be effective, a written or facsimile transmission notice of withdrawal
must (a) be received by the Exchange Agent at one of its addresses set forth on
the first page of this Letter of Transmittal prior to 5:00 p.m., New York City
time, on the Expiration Date, unless previously accepted for exchange, (b)
specify the name of the person who tendered the Outstanding Notes, (c) contain
the description of the Outstanding Notes to be withdrawn, the certificate
numbers shown on the particular certificates evidencing such Outstanding Notes
and the aggregate principal amount represented by such Outstanding Notes and (d)
be signed by the holder of such Outstanding Notes in the same manner as the
original signature appears on this Letter of Transmittal (including any required
signature guarantees) or be accompanied by evidence sufficient to have the
Trustee with respect to the Outstanding Notes register the transfer of such
Outstanding Notes into the name of the holder withdrawing the tender. The
signature(s) on the notice of withdrawal must be guaranteed by an Eligible
Institution unless such Outstanding Notes have been tendered (a) by a registered
holder of Outstanding Notes who has not completed either the box entitled
"Special Issuance Instructions" or the box entitled "Special Delivery
Instructions" on this Letter of Transmittal or (b) for the account of an
Eligible Institution. All questions as to the validity, form and eligibility
(including time of receipt) of such withdrawal notices shall be determined by
the Company, whose determination shall be final and binding on all parties. If
the Outstanding Notes to be withdrawn have been delivered or otherwise
identified to the Exchange Agent, a signed notice of withdrawal is effective
immediately upon receipt by the Exchange Agent of a written or facsimile
transmission notice of withdrawal even if physical release is not yet effected.
In addition, such notice must specify, in the case of Outstanding Notes tendered
by delivery of certificates for such Outstanding Notes, the name of the
registered holder (if different from that of the tendering holder) to be
credited with the withdrawn Outstanding Notes. Withdrawals may not be rescinded,
and any Outstanding Notes withdrawn will thereafter be deemed not validly
tendered for purposes of the Exchange Offer. However, properly withdrawn
Outstanding Notes may be retendered by following one of the procedures described
under "The Exchange Offer -- Procedures for Tendering" in the Prospectus at any
time on or prior to the applicable Expiration Date.


                                       8
<PAGE>   9
     3. SIGNATURES ON THIS LETTER OF TRANSMITTAL, BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the
registered holder(s) of the Outstanding Notes tendered hereby, the signature
must correspond exactly with the name(s) as written on the face of the
certificates without any change whatsoever.

     If any Outstanding Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.

     If any Outstanding Notes tendered hereby are registered in different names
on several certificates, it will be necessary to complete, sign and submit as
many separate copies of this Letter of Transmittal as there are different
registrations of certificates.

     When this Letter of Transmittal is signed by the registered holder or
holders specified herein and tendered hereby, no endorsements of certificates or
separate bond powers are required unless Exchange Notes are to be issued, or
certificates for any untendered principal amount of Outstanding Notes are to be
reissued, to a person other than the registered holder.

     If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any certificate(s) specified herein, such
certificates(s) must be endorsed or accompanied by appropriate bond powers, in
either case signed exactly as the name(s) of the registered holder(s) appear(s)
on the certificate(s).

     If this Letter of Transmittal or a Notice of Guaranteed Delivery or any
certificates or bond powers are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing, and unless waived by the Company, evidence satisfactory to the Company
of their authority so to act must be submitted with this Letter of Transmittal.

     Except as described below, signatures on this Letter of Transmittal or a
notice of withdrawal, as the case may be, must be guaranteed by an Eligible
Institution. Signatures on this Letter of Transmittal or a notice of withdrawal,
as the case may be, need not be guaranteed if the Outstanding Notes tendered
pursuant hereto are tendered (a) by a registered holder of Outstanding Notes who
has not completed either the box entitled "Special Issuance Instructions" or the
box entitled "Special Delivery Instructions" on this Letter of Transmittal or
(b) for the account of an Eligible Institution. In the event that signatures on
this Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a firm which is a member of
a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust company
having an office or correspondent in the United States (each as "Eligible
Institutions").

     Endorsements on certificates for Outstanding Notes or signatures on bond
powers required by this Instruction 3 must be guaranteed by an Eligible
Institution.

     4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate in the applicable box the name and address to which certificates for
Exchange Notes and/or substitute certificates evidencing Outstanding Notes for
the principal amounts not exchanged are to be issued or sent, if different from
the name and address of the person signing this Letter of Transmittal. In the
case of issuance in a different name, the employer identification or social
security number of the person named must also be indicated. If no such
instructions are given, any Outstanding Notes not exchanged will be returned to
the name and address of the person signing this Letter of Transmittal.

     5. TAX IDENTIFICATION NUMBER WITHHOLDING. Federal income tax law of the
United States requires that a holder of Outstanding Notes whose Outstanding
Notes are accepted for exchange provide the Company with the holder's correct
taxpayer identification number, which, in the case of a holder who is an
individual, is his or her social security number, or otherwise establish an
exemption from backup withholding. If the Company is not provided with the
correct taxpayer identification number, the exchanging holder of Outstanding
Notes may be subject to a $50 penalty imposed by the Internal Revenue Service
(the "IRS"). In addition, interest on the Exchange Notes acquired pursuant to
the Exchange Offer may be subject to backup withholding in an amount equal to
31% of any interest payment. If withholding occurs and results in an overpayment
of taxes, a refund may be obtained.

     To prevent backup withholding, an exchanging holder of Outstanding Notes
must provide his correct taxpayer identification number by completing the
Substitute Form W-9 provided in this Letter of Transmittal, certifying that the
taxpayer identification number provided is correct (or that the exchanging
holder of Outstanding Notes is awaiting a taxpayer identification number) and
that either (a) the exchanging holder has not yet been notified by the IRS that
such holder is subject to backup withholding as a result of failure to report
all interest or dividends or (b) the IRS has notified the exchanging holder that
such holder is no longer subject to backup withholding.

     Certain exchanging holders of Outstanding Notes (including, among others,
all corporations and certain foreign individuals) are not subject to these
backup withholding requirements. A foreign individual and other exempt holders
other than foreign individuals (e.g., corporations) should certify, in
accordance with the enclosed "Guidelines for Certification of Taxpayer
Identification Number on

                                       9
<PAGE>   10
Substitute Form W-9," to such exempt status on the Substitute Form W-9 provided
in this Letter of Transmittal. Foreign individuals should complete and provide
Form W-8 to indicate their foreign status.

     6. TRANSFER TAXES. Holders tendering pursuant to the Exchange Offer will
not be obligated to pay brokerage commissions or fees or to pay transfer taxes
with respect to their exchange under the Exchange Offer unless the box entitled
"Special Issuance Instructions" in this Letter of Transmittal has been
completed, or unless the Exchange Notes are to be issued to any person other
than the holder of the Outstanding Notes tendered for exchange. The Company will
pay all other charges or expenses in connection with the Exchange Offer. If
holders tender Outstanding Notes for exchange and the Exchange Offer is not
consummated, certificates representing the Outstanding Notes will be returned to
the holders at the Company's expense.

     Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificate(s) specified in this Letter
of Transmittal.

     7. INADEQUATE SPACE. If the space provided herein is inadequate, the
aggregate principal amount of the Outstanding Notes being tendered and the
certificate numbers (if available) should be listed on a separate schedule
attached hereto and separately signed by all parties required to sign this
Letter of Transmittal.

     8. PARTIAL TENDERS. Tenders of Outstanding Notes will be accepted only in
integral multiples of $1,000. If tenders are to be made with respect to less
than the entire principal amount of any Outstanding Notes, fill in the total
principal amount of Outstanding Notes which are tendered in the appropriate box
on the cover entitled "Description of Outstanding Notes Tendered." In the case
of partial tenders, new certificates representing the Outstanding Notes in fully
registered form for the remainder of the principal amount of the Outstanding
Notes will be sent to the person(s) signing this Letter of Transmittal, unless
otherwise indicated in the appropriate place on this Letter of Transmittal, as
promptly as practicable after the expiration or termination of the Exchange
Offer.

     9. MUTILATED, LOST, STOLEN OR DESTROYED OUTSTANDING NOTES. Any holder whose
Outstanding Notes have been mutilated, lost, stolen or destroyed should contact
the Exchange Agent at the address indicated above for further instructions.

     10. REQUEST FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance or
additional copies of the Prospectus or this Letter of Transmittal may be
obtained from the Exchange Agent at its telephone number set forth on the first
page of this Letter of Transmittal.


                                       10
<PAGE>   11
                                      PAYER'S NAME:
<TABLE>
<S>                    <C>                                                          <C>
SUBSTITUTE                      Part 1 -- PLEASE PROVIDE YOUR TIN IN THE            _______________________
FORM W-9                        BOX AT RIGHT AND CERTIFY BY SIGNING AND             Social Security Number
DEPARTMENT OF THE               DATING BELOW.
TREASURY                                                                                     or
INTERNAL REVENUE                                                                    _______________________
SERVICE                                                                             Employer Identification
                                                                                    Number
                       Part 2 -- Certification - Under penalties                    Part 3 - Awaiting TIN [ ]
                                 of perjury, I certify that:

                        (1)  The number shown on this form is my correct
                             Taxpayer Identification Number (or I am waiting
                             for a number to be issued to me) and

                        (2)  I am not subject to backup withholding because
                             (a) I am exempt from backup withholding or (b) I       Part 4 - Exempt [  ]
                             have not been notified by the Internal Revenue
                             Service (the "IRS") that I am subject to backup
                             as a result of failure to report all interest or
                             dividends or (c) the IRS has notified me that I
                             am no longer subject to backup withholding.

                             Certification Instructions - You must cross out
PAYER'S REQUEST FOR          item (2) in Part 2 above if you have been notified
TAXPAYER                     by the IRS that you are subject to backup
IDENTIFICATION NUMBER        withholding because of under reporting interest or
(TIN)                        dividends on your tax returns. However, if after
                             being notified by the IRS that you were subject to
                             backup withholding you received another
                             notification from the IRS stating that you are no
                             longer subject to backup withholding, do not cross
                             out such item (2). If you are exempt from backup
                             withholding, check the box in Part 4 above.
</TABLE>



         Signature ______________________      Date _____________  , 2001


         ____________________________________________________________________
         Name (Please Print)

NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
      OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER AND THE
      SOLICITATION PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
      TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
      DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE
      BOX IN PART II OF THE SUBSTITUTE FORM W-9.


                                       11
<PAGE>   12
                   YOU MUST COMPLETE THE FOLLOWING CERTIFICATE
             IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9

             CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER

I certify under penalty of perjury that a taxpayer identification number has not
been issued to me, and either (a) I have mailed or delivered an application to
receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (b) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number within 60 days, 31% of all reportable
payments made to me thereafter will be withheld until I provide a number.


________________________________
             Signature

                 Date __________  , 2001


________________________________
     Name (Please Print)


                                       12
<PAGE>   13
                          NOTICE OF GUARANTEED DELIVERY

                             TO TENDER FOR EXCHANGE
                          9 3/4% SENIOR NOTES DUE 2011

                                       OF

                              MERITAGE CORPORATION
                                   PURSUANT TO
                         PROSPECTUS DATED JULY __, 2001

     This Notice of Guaranteed Delivery or a form substantially equivalent
hereto must be used to accept the offer (the "Exchange Offer") of Meritage
Corporation, a Maryland corporation (the "Company"), to exchange $1,000
principal amount of its 9 3/4% Senior Notes due 2011 (the "Exchange Notes") for
each $1,000 principal amount of its outstanding 9 3/4% Senior Notes due 2011
(the "Outstanding Notes") if (a) certificates representing the Outstanding Notes
are not immediately available or (b) time will not permit the Outstanding Notes
and all other required documents to reach the Exchange Agent on or prior to the
Expiration Date. This form may be delivered by an Eligible Institution (as
defined) by mail or hand delivery, or transmitted via facsimile, telegram or
telex, to the Exchange Agent as set forth below. All capitalized terms used
herein but not defined herein shall have the meanings ascribed to them in the
Prospectus dated July __, 2001 (the "Prospectus").

     THE EXCHANGE OFFER IS NOT BEING MADE TO (NOR WILL THE SURRENDER OF
OUTSTANDING NOTES BE ACCEPTED FROM OR ON BEHALF OF) HOLDERS OF OUTSTANDING NOTES
IN ANY JURISDICTION IN WHICH THE MAKING OR ACCEPTANCE OF THE EXCHANGE OFFER
WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION.

THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON AUGUST ___,
2001, UNLESS EXTENDED. TENDERS OF 9 3/4% SENIOR NOTES DUE 2011 MAY ONLY BE
WITHDRAWN UNDER THE CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS AND THE LETTER OF
TRANSMITTAL.

                   THE EXCHANGE AGENT FOR THE EXCHANGE OFFER:

           By Registered or Certified Mail:  By Overnight Courier:

           Wells Fargo Bank, National        Wells Fargo Bank, National
           Association                       Association
           707 Wilshire Boulevard,           707 Wilshire Boulevard,
           17th Floor                        17th Floor
           Los Angeles, CA 90017             Los Angeles, CA 90017
           Attention: Jeanie Mar             Attention: Jeanie Mar

           By Hand before 4:30 P.M.:         By Facsimile:

           Wells Fargo Bank, National        Fax: (213) 614-3355
           Association                       Wells Fargo Bank, National
           707 Wilshire Boulevard,           Association
           17th Floor                        Attention: Jeanie Mar
           Los Angeles, CA 90017             Phone: (213) 614-3349
           Attention: Jeanie Mar

     DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR
TRANSMISSION VIA FACSIMILE, TELEGRAM OR TELEX, OTHER THAN AS SET FORTH ABOVE,
WILL NOT CONSTITUTE A VALID DELIVERY.

     This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.


                                       13
<PAGE>   14
Ladies and Gentlemen:

     The undersigned hereby tender(s) to the Company, upon the terms and subject
to the conditions set forth in the Prospectus, receipt of which is hereby
acknowledged, the principal amount of Outstanding Notes set forth below,
pursuant to the guaranteed delivery procedures set forth in the Prospectus under
the caption "The Exchange Offer -- Guaranteed Delivery Procedures."

     Subject to and effective upon acceptance for exchange of the Outstanding
Notes tendered herewith, the undersigned hereby sells, assigns and transfers to
or upon the order of the Company all right, title and interest in and to, and
any and all claims in respect of or arising or having arisen as a result of the
undersigned's status as a holder of, all Outstanding Notes tendered hereby. In
the event of a termination of the Exchange Offer, the Outstanding Notes tendered
pursuant thereto will be returned promptly to the tendering Outstanding Note
holder.

     The undersigned hereby represents and warrants that the undersigned accepts
the terms and conditions of the Prospectus and the Letter of Transmittal, has
full power and authority to tender, sell, assign and transfer the Outstanding
Notes tendered hereby and that the Company will acquire good and unencumbered
title thereto, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim. The undersigned will, upon
request, execute and deliver any additional documents deemed by the Exchange
Agent or the Company to be necessary or desirable to complete the sale,
assignment and transfer of the Outstanding Notes tendered.

     All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned and
every obligation of the undersigned under this Notice of Guaranteed Delivery
shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.


                                       14
<PAGE>   15
                            PLEASE SIGN AND COMPLETE


<TABLE>
<S>                                            <C>
Signature(s) of Registered Holder(s) or        Address(es):
Authorized Signatory:



Name(s) of Registered Holder(s):               Area Code and Telephone No.:


Principal Amount of Outstanding Notes          If Outstanding Notes will be delivered by a
Tendered:                                      book-entry transfer, provide the following
                                               information

Certificate No(s) of Outstanding Notes (if     Transaction Code No.:
available)

                                               Depository Account No.:

</TABLE>


This Notice of Guaranteed Delivery must be signed by the registered holder(s) of
Outstanding Notes exactly as their name(s) appear(s) on the Outstanding Notes or
by person(s) authorized to become registered holder(s) by endorsements and
documents transmitted with this Notice of Guaranteed Delivery. If signature is
by a trustee, guardian, attorney-in-fact, officer of a corporation, executor,
administrator, agent or other representative, such person must provide the
following information:

                      PLEASE PRINT NAME(S) AND ADDRESS(ES)

Name(s):________________________________________________________________


Capacity: ________________________________________________________________


Address(es):________________________________________________________________



                                       15
<PAGE>   16
                                    GUARANTEE
                         (NOT TO BE USED FOR SIGNATURE GUARANTEE)

     The undersigned, a member of a registered national securities exchange or a
member of the National Association of Securities Dealers, Inc. or a commercial
bank or trust company having an office or correspondent in the United States
(each, an "Eligible Institution"), hereby guarantees that, within three business
days from the date of this Notice of Guaranteed Delivery, a properly completed
and validly executed Letter of Transmittal (or a facsimile thereof), together
with Outstanding Notes tendered hereby in proper form for transfer (or
confirmation of the book-entry transfer of such Outstanding Notes into the
Exchange Agent's account at a Book-Entry Transfer Facility) and all other
required documents will be deposited by the undersigned with the Exchange Agent
at one of its addresses set forth above.



Name of Firm:
              ----------------------      -----------------------------------
                                          Authorized Signature

Address:                                  Name:
        ----------------------------            -----------------------------

                                          Title:
                                                 ----------------------------

Area Code and Telephone No.:              Date:
                            --------            -----------------------------


DO NOT SEND OUTSTANDING NOTES WITH THIS FORM. ACTUAL SURRENDER OF OUTSTANDING
NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY COMPLETED AND
VALIDLY EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.


                                       16
<PAGE>   17
                              MERITAGE CORPORATION

                                OFFER TO EXCHANGE
                          9 3/4% SENIOR NOTES DUE 2011
                           FOR ANY AND ALL OUTSTANDING
                          9 3/4% SENIOR NOTES DUE 2011

       THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON
      AUGUST __, 2001, UNLESS EXTENDED. TENDERS OF 9 3/4% SENIOR NOTES DUE
      2011 MAY ONLY BE WITHDRAWN UNDER THE CIRCUMSTANCES DESCRIBED IN THE
                   PROSPECTUS AND THE LETTER OF TRANSMITTAL.

                                ___________, 2001

To Our Clients:

     Enclosed for your consideration is the Prospectus dated July __, 2001 (the
"Prospectus") and the related Letter of Transmittal and instructions thereto
(the "Letter of Transmittal") in connection with the offer (the "Exchange
Offer") of Meritage Corporation, a Maryland corporation ("the Company"), to
exchange $1,000 principal amount of its 9 3/4% Senior Notes due 2011 (the
"Exchange Notes") for each $1,000 principal amount of its outstanding 9 3/4%
Senior Notes due 2011 (the "Outstanding Notes").

     Consummation of the Exchange Offer is subject to certain conditions
described in the Prospectus. Capitalized terms used herein but not defined shall
have the meanings ascribed to them in the Prospectus.

     WE ARE THE REGISTERED HOLDER OF OUTSTANDING NOTES HELD BY US FOR YOUR
ACCOUNT. A TENDER OF ANY SUCH OUTSTANDING NOTES CAN BE MADE ONLY BY US AS THE
REGISTERED HOLDER AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL
IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO
TENDER OUTSTANDING NOTES HELD BY US FOR YOUR ACCOUNT.

     Accordingly, we request instructions as to whether you wish us to tender
any or all such Outstanding Notes held by us for your account pursuant to the
terms and conditions set forth in the Prospectus and the Letter of Transmittal.
We urge you to read carefully the Prospectus and the Letter of Transmittal
before instructing us to tender your Outstanding Notes.

     Your instructions to us should be forwarded as promptly as possible in
order to permit us to tender Outstanding Notes on your behalf in accordance with
the provisions of the Exchange Offer. THE EXCHANGE OFFER WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME ON AUGUST __, 2001 (THE "EXPIRATION DATE"), UNLESS
EXTENDED. Outstanding Notes tendered pursuant to the Exchange Offer may only be
withdrawn under the circumstances described in the Prospectus and the Letter of
Transmittal.

     Your attention is directed to the following:

          1.  The Exchange Offer is for the entire aggregate principal amount of
Outstanding Notes.

          2. Consummation of the Exchange Offer is conditioned upon the
conditions set forth in the Prospectus under the caption "The Exchange Offer -
Conditions of the Exchange Offer."

          3.  Tendering holders may withdraw their tender at any time until the
Expiration Date.

          4. Any transfer taxes incident to the transfer of Outstanding Notes
from the tendering holder to the Company will be paid by the Company, except as
provided in the Prospectus and the instructions to the Letter of Transmittal.

          5. The Exchange Offer is not being made to (nor will the surrender of
Outstanding Notes for exchange be accepted from or on behalf of) holders of
Outstanding Notes in any jurisdiction in which the making or acceptance of the
Exchange Offer would not be in compliance with the laws of such jurisdiction.

          6. The acceptance for exchange of Outstanding Notes validly tendered
and not validly withdrawn and the issuance of Exchange Notes will be made as
promptly as practicable after the Expiration Date. However, subject to rules
promulgated pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Company expressly reserves the right to delay acceptance of
any of the Outstanding Notes or to terminate the Exchange Offer and not accept
for purchase any Outstanding Notes not theretofore

                                       17
<PAGE>   18
accepted if any of the conditions set forth in the Prospectus under the caption
"The Exchange Offer - Conditions of the Exchange Offer" shall not have been
satisfied or waived by the Company.

          7. The Company expressly reserves the right, in its sole discretion,
(i) to delay accepting any Outstanding Notes, (ii) to extend the Exchange Offer,
(iii) to amend the terms of the Exchange Offer or (iv) to terminate the Exchange
Offer. Any delay, extension, amendment or termination will be followed as
promptly as practicable by oral or written notice to the Exchange Agent and the
Company will mail to the registered holders an announcement thereof, each prior
to 9:00 a.m., New York City time, on the next business day after the previously
scheduled Expiration Date. Except as otherwise provided in the Prospectus,
withdrawal rights with respect to Outstanding Notes tendered pursuant to the
Exchange Offer will not be extended or reinstated as a result of an extension or
amendment of the Exchange Offer.

          8. Consummation of the Exchange Offer may have adverse consequences to
non-tendering Outstanding Note holders, including that the reduced amount of
Outstanding Notes as a result of the Exchange Offer may adversely affect the
trading market, liquidity and market price of the Outstanding Notes.

     If you wish to have us tender any or all of the Outstanding Notes held by
us for your account, please so instruct us by completing, executing and
returning to us the instruction form that follows.


                                       18
<PAGE>   19
                              MERITAGE CORPORATION

                    INSTRUCTIONS REGARDING THE EXCHANGE OFFER
                               WITH RESPECT TO THE
                               9 3/4% SENIOR NOTES DUE 2011

     THE UNDERSIGNED ACKNOWLEDGE(S) RECEIPT OF YOUR LETTER AND THE ENCLOSED
DOCUMENTS REFERRED TO THEREIN RELATING TO THE EXCHANGE OFFER OF THE COMPANY.

     THIS WILL INSTRUCT YOU WHETHER TO TENDER THE PRINCIPAL AMOUNT OF
OUTSTANDING NOTES INDICATED BELOW HELD BY YOU FOR THE ACCOUNT OF THE UNDERSIGNED
PURSUANT TO THE TERMS OF AND CONDITIONS SET FORTH IN THE PROSPECTUS AND THE
LETTER OF TRANSMITTAL.

Box 1 [ ] Please tender the Outstanding Notes held by you for my account, as
indicated below.

Box 2 [ ] Please do not tender any Outstanding Notes held by you for my account.

Date: _________, 2001

Principal Amount of Outstanding Notes to be Tendered:

$ _______________________________   * ___________________________________


(must be in the principal amount of $1,000 or an integral multiple thereof) -

________________________________________________________________
Signature(s)

________________________________________________________________

________________________________________________________________
Please print name(s) here

________________________________________________________________
Please type or print address

________________________________________________________________
Area Code and Telephone Number

________________________________________________________________
Taxpayer Identification or Social Security Number

________________________________________________________________
My Account Number with You

* UNLESS OTHERWISE INDICATED, SIGNATURE(S) HEREON BY BENEFICIAL OWNER(S) SHALL
CONSTITUTE AN INSTRUCTION TO THE NOMINEE TO TENDER ALL OUTSTANDING NOTES OF SUCH
BENEFICIAL OWNER(S).


                                       19
<PAGE>   20
                              MERITAGE CORPORATION

                                OFFER TO EXCHANGE

                          9 3/4% SENIOR NOTES DUE 2011
                           FOR ANY AND ALL OUTSTANDING
                          9 3/4% SENIOR NOTES DUE 2011

       THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON
        AUGUST __, 2001, UNLESS EXTENDED. TENDERS OF 9 3/4% SENIOR NOTES
             DUE 2011 MAY ONLY BE WITHDRAWN UNDER THE CIRCUMSTANCES
                  DESCRIBED IN THE PROSPECTUS AND THE LETTER OF
                                  TRANSMITTAL.

To Brokers, Dealers, Commercial Banks, Trust Companies and other Nominees:

     We have been appointed by Meritage Corporation, a Maryland corporation (the
"Company"), to act as the Exchange Agent in connection with the offer (the
"Exchange Offer") of the Company to exchange $1,000 principal amount of its
9 3/4% Senior Notes due 2011 (the "Exchange Notes") for each $1,000 principal
amount of its 9 3/4% Senior Notes due 2011 (the "Outstanding Notes"), upon the
terms and subject to the conditions set forth in the Prospectus dated July __,
2001 (the "Prospectus") and in the related Letter of Transmittal and the
instructions thereto (the "Letter of Transmittal").

     Enclosed herewith are copies of the following documents:

         1. The Prospectus;

         2. The Letter of Transmittal for your use and for the information of
clients, together with guidelines of the Internal Revenue Service for
Certification of Taxpayer Identification Number on Substitute Form W-9 providing
information relating to backup federal income tax withholding;

         3. Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if the Notes and all other required documents cannot be delivered to the
Exchange Agent on or prior to the Expiration Date (as defined);

         4. A form of letter which may be sent to your clients for whose account
you hold the Notes in your name or in the name of a nominee, with space provided
for obtaining such clients' instructions with regard to the Exchange Offer; and

         5. A return envelope addressed to the Exchange Agent.

     PLEASE NOTE THAT THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME ON AUGUST __, 2001 (THE "EXPIRATION DATE"), UNLESS EXTENDED. WE URGE
YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE.

     The Company will not pay any fees or commission to any broker or dealer or
other person (other than to the Exchange Agent) for soliciting tenders of the
Notes pursuant to the Exchange Offer. You will be reimbursed for customary
mailing and handling expenses incurred by you in forwarding the enclosed
materials to your clients.

     Additional copies of the enclosed materials may be obtained by contacting
the Exchange Agent as provided in the enclosed Letter of Transmittal.

                                          Very truly yours,


                                          Wells Fargo Bank, National Association


NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON THE AGENT OF THE COMPANY OR THE EXCHANGE AGENT OR AUTHORIZE YOU
OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF
OF ANY OF THEM WITH RESPECT TO THE EXCHANGE OFFER NOT CONTAINED IN THE
PROSPECTUS OR THE LETTER OF TRANSMITTAL.


                                       20
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>35
<FILENAME>p65173pi5-110.gif
<DESCRIPTION>GRAPHIC
<TEXT>

begin 644 p65173pi5-110.gif
M1TE&.#EA#``,`/?^``````$!`0("`@,#`P0$!`4%!08&!@<'!P@("`D)"0H*
M"@L+"PP,#`T-#0X.#@\/#Q`0$!$1$1(2$A,3$Q04%!45%186%A<7%Q@8&!D9
M&1H:&AL;&QP<'!T='1X>'A\?'R`@("$A(2(B(B,C(R0D)"4E)28F)B<G)R@H
M*"DI*2HJ*BLK*RPL+"TM+2XN+B\O+S`P,#$Q,3(R,C,S,S0T-#4U-38V-C<W
M-S@X.#DY.3HZ.CL[.SP\/#T]/3X^/C\_/T!`0$%!04)"0D-#0T1$1$5%149&
M1D='1TA(2$E)24I*2DM+2TQ,3$U-34Y.3D]/3U!04%%145)24E-34U145%55
M55965E=75UA86%E965I:6EM;6UQ<7%U=75Y>7E]?7V!@8&%A86)B8F-C8V1D
M9&5E969F9F=G9VAH:&EI:6IJ:FMK:VQL;&UM;6YN;F]O;W!P<'%Q<7)R<G-S
M<W1T='5U=79V=G=W=WAX>'EY>7IZ>GM[>WQ\?'U]?7Y^?G]_?X"`@(&!@8*"
M@H.#@X2$A(6%A8:&AH>'AXB(B(F)B8J*BHN+BXR,C(V-C8Z.CH^/CY"0D)&1
MD9*2DI.3DY24E)65E9:6EI>7EYB8F)F9F9J:FIN;FYR<G)V=G9Z>GI^?GZ"@
MH*&AH:*BHJ.CHZ2DI*6EI::FIJ>GIZBHJ*FIJ:JJJJNKJZRLK*VMK:ZNKJ^O
MK["PL+&QL;*RLK.SL[2TM+6UM;:VMK>WM[BXN+FYN;JZNKN[N[R\O+V]O;Z^
MOK^_O\#`P,'!P<+"PL/#P\3$Q,7%Q<;&QL?'Q\C(R,G)R<K*RLO+R\S,S,W-
MS<[.SL_/S]#0T-'1T=+2TM/3T]34U-75U=;6UM?7U]C8V-G9V=K:VMO;V]S<
MW-W=W=[>WM_?W^#@X.'AX>+BXN/CX^3DY.7EY>;FYN?GY^CHZ.GIZ>KJZNOK
MZ^SL[.WM[>[N[N_O[_#P\/'Q\?+R\O/S\_3T]/7U]?;V]O?W]_CX^/GY^?KZ
M^OO[^_S\_/W]_?[^_O___R'Y!`$``/X`+``````,``P`!P@Z`/\)'$APX)L?
M"!,J_/<#F;B'$!\:8"BNX,`#%"T*Q/BCHD:.'BV"U/AOY,>,)SN2Y&C@@,N7
&+@$$!``[
`
end
</TEXT>
</DOCUMENT>
</SUBMISSION>
