<SUBMISSION>
<ACCESSION-NUMBER>0000950153-02-000989
<TYPE>424B3
<PUBLIC-DOCUMENT-COUNT>1
<FILING-DATE>20020516
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>MERITAGE CORP
<CIK>0000833079
<ASSIGNED-SIC>1531
<IRS-NUMBER>860611231
<STATE-OF-INCORPORATION>MD
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>424B3
<ACT>33
<FILE-NUMBER>333-87398
<FILM-NUMBER>02655066
</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>EMERALD MORTGAGE INVESTMENTS CORP
<DATE-CHANGED>19900502
</FORMER-COMPANY>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>HOMEPLEX MORTGAGE INVESTMENTS CORP
<DATE-CHANGED>19920703
</FORMER-COMPANY>
</FILER>
<DOCUMENT>
<TYPE>424B3
<SEQUENCE>1
<FILENAME>p66504b3e424b3.htm
<DESCRIPTION>424B3
<TEXT>
<HTML>
<HEAD>
<TITLE>e424b3</TITLE>
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<BODY bgcolor="#FFFFFF">
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<DIV align="right">
<FONT size="2">Filed pursuant to Rule 424(b)(3)
</FONT>
</DIV>

<DIV align="right">
<FONT size="2">Registration Statement No.&nbsp;333-87398
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">PROSPECTUS</FONT></B>

<P align="center">
<B><FONT size="6">Meritage Corporation</FONT></B>

<P align="center">
<B><FONT size="2">$300,000,000</FONT></B>

<P align="center">
<B><FONT size="4">Debt Securities</FONT></B>

<P align="center">
<B><FONT size="4">Common Stock</FONT></B>

<P align="center">
<B><FONT size="4">Preferred Stock</FONT></B>

<P align="center">
<B><FONT size="4">Warrants</FONT></B>

<P align="center">
<B><FONT size="4">Guarantees</FONT></B>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under this prospectus, we may sell a variety of
securities. We will provide specific terms of these securities
in supplements to this prospectus. You should read this
prospectus and any supplement to this prospectus carefully
before you invest.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our common stock is listed on the New York Stock
Exchange under the symbol &#147;MTH.&#148; We will list any
common stock issued pursuant to a prospectus supplement, subject
to notice of issuance, on the New York Stock Exchange.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>See &#147;Risk Factors,&#148; which begin on page&nbsp;2, for
a discussion of certain factors that should be considered in
evaluating an investment in our securities.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Neither the Securities and Exchange Commission
nor any state securities commission has 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.</FONT></B>

<P align="center">
<FONT size="2">The date of this prospectus is May&nbsp;14, 2002.
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">We have not authorized anyone to provide you
with any information other than the information incorporated by
reference or provided in this prospectus or any prospectus
supplement. We are not making an offer of these securities in
any state or other jurisdiction where the offer is not
permitted. You should not assume that the information in this
prospectus, any prospectus supplement or any document
incorporated or deemed to be incorporated by reference in this
prospectus is accurate as of any date other than the date of
that document.</FONT></B>

<P align="center">
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<P align="center">
<B><FONT size="2">TABLE OF CONTENTS</FONT></B>

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<TR>
    <TD width="90%"><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>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Page</FONT></B></TD>
</TR>

<TR>
    <TD></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">Forward-Looking 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">1</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">About this Prospectus
    </FONT></DIV>
    </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 align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Meritage Corporation
    </FONT></DIV>
    </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 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">2</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">Ratio of Earnings to Fixed Charges and Ratio of
    Earnings to Combined Fixed Charges and Preferred Stock Dividends
    </FONT></DIV>
    </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>
</TR>

<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">6</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">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">6</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">Description of Debt Securities
    </FONT></DIV>
    </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 align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Description of Capital 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">15</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">Description of 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>
</TR>

<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">20</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">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">20</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">Where You Can Find More 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">20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

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<P align="center">
<B><FONT size="2">FORWARD-LOOKING STATEMENTS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Certain of the matters discussed or incorporated
in this prospectus may constitute forward-looking statements
within the meaning of Section&nbsp;27A of the Securities Act of
1933 and Section&nbsp;21E of the Securities Exchange Act of
1934. 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. Our forward-looking statements may
address such matters as, but are not limited to, projections of
revenue, income or loss, anticipated benefits of acquisitions,
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 business and
real property acquisitions and new or planned development
projects, as well as assumptions related to these matters. Under
the caption &#147;Risk Factors&#148; and elsewhere in this
prospectus and in the documents we incorporate by reference, we
have described several important factors currently known to
management that could cause actual results to differ materially
from those in the forward-looking statements.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 that 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 may not be 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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">See our Annual Report on Form&nbsp;10-K for the
year ended December&nbsp;31, 2001 and our other filings with the
Securities and Exchange Commission, or SEC, for a further
discussion of risks and uncertainties applicable to our business.
</FONT>

<!-- link1 "ABOUT THIS PROSPECTUS" -->

<P align="center">
<B><FONT size="2">ABOUT THIS PROSPECTUS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">This prospectus is part of a registration
statement that we filed with the SEC utilizing a
&#147;shelf&#148; registration process. Under this shelf
process, we may sell any combination of the securities described
in this prospectus in one or more offerings up to an aggregate
initial offering price of $300,000,000. This prospectus provides
you with a general description of the securities we may offer.
Each time we sell securities, we will provide a prospectus
supplement that will contain specific information about the
terms of that offering and the securities being sold in that
offering. The prospectus supplement may also add, update or
change information contained in this prospectus. You should read
both this prospectus and any prospectus supplement together with
additional information described under the heading &#147;Where
You Can Find More Information.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Any statements in this prospectus or in any
accompanying prospectus supplement concerning the provisions of
any document are not complete. In each instance, reference is
made to the copy of that document filed or incorporated or
deemed to be incorporated by reference as an exhibit to the
registration statement of which this prospectus is a part or
otherwise filed with the SEC. Each statement concerning the
provisions of any document is qualified in its entirety by
reference to the document so filed.
</FONT>

<!-- link1 "MERITAGE CORPORATION" -->

<P align="center">
<B><FONT size="2">MERITAGE CORPORATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 first-time, 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, in 2001 we acquired
Hancock Communities, another well-established homebuilder that
serves the first-time and move-up markets in the Phoenix area.
We operate in Texas under the Legacy Homes name, in Arizona as
</FONT>

<P align="center"><FONT size="2">1
</FONT>
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<DIV align="left">
<FONT size="2">Monterey Homes, Meritage Homes and Hancock
Communities, and in Northern California as Meritage Homes. At
December&nbsp;31, 2001, we were actively selling homes in 74
communities, with base prices ranging from $90,000 to $820,000.
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.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our principal executive office in Arizona is
located at 6613 North Scottsdale Road, Suite 200, Scottsdale,
Arizona 85250, and our telephone number there is (877) 400-7888.
Our principal executive office in Texas is located at 4050 West
Park Boulevard, Plano, Texas 75093, and our telephone number
there is (800) 210-6004.
</FONT>

<!-- link1 "RISK FACTORS" -->

<P align="center">
<B><FONT size="2">RISK FACTORS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our future operating results and financial
condition depend on our ability to successfully design, develop,
construct and sell homes that satisfy dynamic customer demand
patterns. Inherent in this process are factors that we must
successfully manage to achieve favorable future operating
results and financial condition. These operating and financial
factors, along with many other factors, could affect the price
of our securities. You should carefully consider the following
potential risks and uncertainties before investing in our
securities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Homebuilding Industry Factors.
</FONT></I><FONT size="2">The homebuilding industry is cyclical
and is significantly affected by changes in economic and other
conditions, such as employment levels, availability of
financing, interest rates, and consumer confidence. These
factors can negatively affect the demand for and pricing of our
homes. 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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The homebuilding industry is also subject to the
potential for significant variability and fluctuations in real
estate availability and values. Write-downs of our land
inventories could occur if market conditions deteriorate and
these write-downs could be material in amount. Write-downs may
also occur if we purchase land at higher prices during stronger
economic cycles and the value of that land subsequently declines
during slower economic cycles.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Fluctuations in Operating Results.
</FONT></I><FONT size="2">We historically have experienced, and
expect to continue to experience, variability in home sales and
net earnings on a quarterly basis. As a result of such
variability, our historical performance may not be a meaningful
indicator of future results. Factors that contribute to this
variability include:
</FONT>
<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><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">timing of home deliveries and land sales;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our ability to acquire additional land or options
    for additional land on acceptable terms;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">conditions of the real estate market in areas
    where we operate and of the general economy;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the cyclical nature of the homebuilding industry,
    changes in prevailing interest rates and the availability of
    mortgage financing;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">costs and availability of materials and labor; and
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">delays in construction schedules due to strikes,
    adverse weather, acts of God, reduced subcontractor availability
    and governmental restrictions.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Interest Rates and Mortgage Financing.
</FONT></I><FONT size="2">In general, housing demand is
adversely affected by increases in interest rates and housing
costs and the unavailability of mortgage financing. Most of our
buyers finance their home purchases through third-party lenders
providing mortgage financing. If mortgage interest rates
increase and, consequently, the ability of prospective buyers to
finance home purchases is
</FONT>

<P align="center"><FONT size="2">2
</FONT>

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<DIV align="left">
<FONT size="2">adversely affected, home sales, gross margins and
cash flow may also be adversely affected and the impact may be
material. Our homebuilding activities also depend upon the
availability and costs of mortgage financing for buyers of homes
owned by potential customers, as those customers (move-up
buyers) often need to sell their existing residences before they
purchase our homes. Any reduction of financing availability
could adversely affect home sales.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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. No meaningful
prediction can be made whether any such proposals will be
enacted and, if enacted, the particular form such laws would
take.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Competition. </FONT></I><FONT size="2">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 rental housing. If we are unable
to successfully compete, our financial results and growth could
suffer. 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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Lack of Geographic Diversification.
</FONT></I><FONT size="2">We have operations in Texas, Arizona
and Northern California. Our lack of geographic diversification
could adversely affect us if the homebuilding business in our
current markets should decline, since there may not be a
balancing opportunity in stronger markets in other geographic
regions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Additional Financing; Limitations.
</FONT></I><FONT size="2">The homebuilding industry is capital
intensive and requires significant up-front expenditures to
acquire land and begin development. Accordingly, we incur
substantial indebtedness to finance our homebuilding activities.
We may be required to seek additional capital in the form of
equity or debt financing from a variety of potential sources,
including bank financing and securities offerings. Also, lenders
are increasingly requiring developers and homebuilders to invest
significant amounts of equity in a project both in connection
with origination of new loans as well as the extension of
existing loans. The high level of our indebtedness could have
important consequences to our securityholders, including the
following:
</FONT>
<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><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our ability to obtain additional financing for
    working capital, capital expenditures, acquisitions or general
    corporate purposes may be impaired;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">we must use a substantial portion of our cash
    flow from operations to pay interest and principal on our
    indebtedness, which will reduce the funds available for other
    purposes, such as capital expenditures;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">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
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">we are more vulnerable to economic downturns and
    adverse developments in our business.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We expect to obtain the money to pay our expenses
and to pay the principal and interest on our indebtedness from
cash flow from 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, 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, 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 may restrict us from pursuing any of these
alternatives.
</FONT>

<P align="center"><FONT size="2">3
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Operating and Financial Limitations.
</FONT></I><FONT size="2">The covenants under our existing
senior notes indenture and credit facilities impose significant
operating and financial restrictions on us. These restrictions
will limit our ability, among other things, to:
</FONT>
<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><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">incur additional indebtedness;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">pay dividends or make other distributions;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">repurchase our stock;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">make investments;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">sell assets;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">enter into agreements restricting our
    subsidiaries&#146; ability to pay dividends;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">enter into transactions with affiliates; and
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">consolidate, merge or sell all or substantially
    all of our assets.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, the indenture for our existing
senior notes requires us to maintain a minimum consolidated
tangible net worth and our existing credit facilities require us
to maintain other specified financial ratios. These covenants
may adversely affect our ability to finance our future
operations or capital needs or to pursue available business
opportunities. A breach of these covenants or our inability to
maintain the required financial ratios could result in a default
on our indebtedness. If a default occurs, the relevant lenders
could declare the indebtedness, together with accrued interest
and other fees, to be immediately due and payable and proceed
against any collateral securing that indebtedness.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Government Regulations; Environmental
Conditions.</FONT></I><FONT size="2"> 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
developmental matters, as well as building and site design. We
are subject to various fees and charges of governmental
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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Recent Acquisition.</FONT></I><FONT size="2">
During 2001, we acquired Hancock Communities. We cannot
guarantee that:
</FONT>
<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><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the Hancock business will be integrated
    successfully with our existing business;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the market and financial synergies we anticipate
    will be achieved in our expected time frame, or at all;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the combined companies will not lose key
    employees, management, suppliers or subcontractors; and
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">we can successfully manage new housing lines that
    were previously managed by Hancock or new lines planned for the
    future.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Future Expansion.</FONT></I><FONT size="2"> We
may continue to consider growth or expansion of our operations
in our current markets or in other areas of the country. Our
expansion into new or existing markets could have a material
adverse effect on our cash flows or profitability. The
magnitude, timing and nature of any future
</FONT>

<P align="center"><FONT size="2">4
</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">expansion will depend on a number of factors,
including suitable acquisition candidates, the negotiation of
acceptable terms, our financial capabilities, and general
economic and 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.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Dependence on Key
Personnel.</FONT></I><FONT size="2"> Our success largely depends
on the continuing services of certain key employees, including
Steve Hilton and John Landon, and our continued favorable
development depends on our ability to attract and retain
qualified personnel. We do not have employment agreements with
certain key officers and the loss of their services could harm
our business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Dependence on
Subcontractors.</FONT></I><FONT size="2"> 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
depend on the continued availability of and satisfactory
performance by these subcontractors for the design and
construction of our homes. We cannot assure you 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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Inflation.</FONT></I><FONT size="2"> 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. 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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Natural Disasters.</FONT></I><FONT size="2">
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 experienced a significant
number of earthquakes, flooding, landslides and other natural
disasters in recent years. We do not insure against some of
these risks. These occurrences could damage or destroy our homes
under construction or our building lots, which may result in
losses that exceed our insurance coverage. We could also suffer
significant constructions delays or substantial fluctuations in
the pricing or availability of building materials. Any of these
events could cause a decrease in our revenue, cash flow and
earnings.
</FONT>

<!-- link1 "RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS" -->

<P align="center">
<B><FONT size="2">RATIO OF EARNINGS TO FIXED CHARGES</FONT></B>

<DIV align="center">
<B><FONT size="2">AND</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">RATIO OF EARNINGS TO COMBINED FIXED
CHARGES</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">AND PREFERRED STOCK DIVIDENDS</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth Meritage&#146;s
ratio of earnings to fixed charges and ratio of earnings to
combined fixed charges and preferred stock dividends for each of
the periods indicated:
</FONT>

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

<TR>
    <TD width="60%"><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="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>
</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="1">Years Ended December 31,</FONT></B></TD>
</TR>

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

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1999</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1998</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1997</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 valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Ratio of Earnings to Fixed Charges
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.66x</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">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>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Ratio of Earnings to Combined Fixed Charges and
    Preferred Stock Dividends
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.66x</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">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>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The ratio of earnings to fixed charges and ratio
of earnings to combined fixed charges and preferred stock
dividends are identical because Meritage had no outstanding
preferred stock during such periods. For the purposes of these
calculations, &#147;earnings&#148; consist of earnings before
income taxes and extraordinary items plus fixed charges less
capitalized interest. &#147;Fixed charges&#148; consist of
interest expense including
</FONT>

<P align="center"><FONT size="2">5
</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">amortization of deferred debt costs, one-half of
rent expense, which is deemed to be representative of an
interest factor, and capitalized interest. See Exhibit&nbsp;12.1
to the registration statement containing this prospectus for a
calculation of ratio of earnings to fixed charges and ratio of
earnings to combined fixed charges and preferred stock dividends
for the periods presented.
</FONT>
</DIV>

<!-- link1 "USE OF PROCEEDS" -->

<P align="center">
<B><FONT size="2">USE OF PROCEEDS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Unless we otherwise specify in the applicable
prospectus supplement, the net proceeds we receive from the sale
of the securities offered by this prospectus and the
accompanying prospectus supplement will be used for general
corporate purposes. General corporate purposes may include the
development of new residential properties, the repayment of
debt, land acquisitions and possible acquisitions of other
homebuilders. The net proceeds may be invested temporarily or
applied to repay short-term debt until they are used for their
stated purpose.
</FONT>

<!-- link1 "PLAN OF DISTRIBUTION" -->

<P align="center">
<B><FONT size="2">PLAN OF DISTRIBUTION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We may sell the securities:
</FONT>
<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><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">through underwriters or dealers;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">through agents; or
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">directly to purchasers.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The securities may be sold in one or more
transactions at a fixed price or prices, which may be changed,
or at market prices prevailing at the time of sale, at prices
relating to prevailing market prices or at negotiated prices. We
will describe in a prospectus supplement the particular terms of
the offering of the securities, including the following:
</FONT>
<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><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the names of any underwriters or agents;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the purchase price and the proceeds we will
    receive from the sale;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any discounts and other items constituting
    underwriters&#146; or agents&#146; compensation;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any initial public offering price and any
    discounts or concessions allowed or re-allowed or paid to
    dealers;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any securities exchanges on which the applicable
    securities may be listed; and
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any other information we think is important.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If we use underwriters in the sale, the
underwriters will acquire the securities for their own account.
The underwriters may resell the securities in one or more
transactions, at a fixed price or prices, which may be changed,
or at market prices prevailing at the time of sale, at prices
relating to prevailing market prices or at negotiated prices.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The securities may be offered to the public
through underwriting syndicates represented by managing
underwriters or by underwriters without a syndicate. The
obligations of the underwriters to purchase the securities will
be subject to certain conditions. The underwriters will be
obligated to purchase all the securities of the class or series
offered if any of the securities are purchased. The underwriters
may change from time to time any initial public offering price
and any discounts or concessions allowed or re-allowed or paid
to dealers.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We may sell securities through agents or dealers
designated by us. Any agent or dealer involved in the offer or
sale of the securities for which this prospectus is delivered
will be named, and any commissions payable by us to that agent
or dealer will be set forth, in the prospectus supplement.
Unless indicated in the prospectus supplement, the agents will
agree to use their reasonable efforts to solicit purchases for
the period of their appointment and any dealer will purchase
securities from us as principal and may resell
</FONT>

<P align="center"><FONT size="2">6
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">those securities at varying prices to be
determined by the dealer. We also may sell securities directly
to investors. In this case, no underwriters or agents would be
involved.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Underwriters, dealers and agents that participate
in the distribution of the securities may be underwriters as
defined in the Securities Act, and any discounts or commissions
received by them from us and any profit on the resale of the
securities by them may be treated as underwriting discounts and
commissions under the Securities Act.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We may have agreements with the underwriters,
dealers and agents to indemnify them against certain civil
liabilities, including liabilities under the Securities Act, or
to contribute with respect to payments which the underwriters,
dealers or agents may be required to make.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Underwriters, dealers and agents may engage in
transactions with, or perform services for, us or our
subsidiaries in the ordinary course of their businesses.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In order to facilitate the offering of the
securities, any underwriters or agents involved in the offering
of those securities may engage in transactions that stabilize,
maintain or otherwise affect the price of the securities.
Specifically, the underwriters or agents may overallot in
connection with the offering, creating a short position in the
offered securities for their own account. In addition, to cover
over allotments or to stabilize the price of the securities, the
underwriters or agents may bid for, and purchase, the securities
in the open market. Finally, in any offering of the securities
through a syndicate of underwriters, the underwriting syndicate
may reclaim selling concessions allotted to an underwriter or a
dealer for distributing the securities in the offering if the
syndicate repurchases previously distributed securities in
transactions to cover syndicate short positions, in
stabilization transaction or otherwise. Any of these activities
may stabilize or maintain the market price of the securities
above independent market levels. The underwriters or agents are
not required to engage in these activities, and may end any of
these activities at any time.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Some or all of the securities may be new issues
of securities with no established trading market. Any
underwriter to which securities are sold by us for public
offering and sale may make a market in those securities, but
will not be obligated to do so, and may discontinue any market
making at any time without notice. We cannot and will not give
any assurances as to the liquidity of the trading market for any
of our securities.
</FONT>

<!-- link1 "DESCRIPTION OF DEBT SECURITIES" -->

<P align="center">
<B><FONT size="2">DESCRIPTION OF DEBT SECURITIES</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">This prospectus describes certain general terms
and provisions of our debt securities. When we offer to sell a
particular series of debt securities, we will describe the
specific terms of the series in a supplement to this prospectus.
We will also indicate in the applicable prospectus supplement
whether the general terms and provisions described in this
prospectus apply to a particular series of debt securities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Unless otherwise specified in a supplement to
this prospectus, the debt securities will be the direct,
unsecured obligations of Meritage Corporation and will rank
equally with all of its other unsecured and unsubordinated
indebtedness. Meritage Corporation&#146;s payment obligations
under any series of debt securities may be guaranteed by one or
more co-registrants.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The debt securities will be issued under an
indenture between us and a bank or trust company, as trustee. We
have summarized select portions of the indenture below. The
summary is not complete. The form of the indenture has been
filed as an exhibit to the registration statement and you should
read the indenture for provisions that may be important to you.
Capitalized terms used in the summary have the meaning specified
in the indenture.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">When we refer to &#147;we,&#148; &#147;our&#148;
and &#147;us&#148; in this section, we mean Meritage Corporation
unless the context otherwise requires or as otherwise expressly
stated.
</FONT>

<P align="center"><FONT size="2">7
</FONT>
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<P align="left">
<B><FONT size="2">General</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The terms of each series of debt securities will
be established by or pursuant to a resolution of our board of
directors and set forth or determined in the manner provided in
an officers&#146; certificate or by a supplemental indenture.
The particular terms of each series of debt securities will be
described in a prospectus supplement relating to that series,
including any pricing supplement.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We may issue an unlimited amount of debt
securities under the indenture that may be in one or more series
with the same or various maturities, at par, at a premium, or at
a discount. We will set forth in a prospectus supplement,
including any pricing supplement, relating to any series of debt
securities being offered, the aggregate principal amount and the
following terms of the debt securities:
</FONT>
<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><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the title of the debt securities;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the price or prices (expressed as a percentage of
    the principal amount) at which we will sell the debt securities;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any limit on the aggregate principal amount of
    the debt securities;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the date or dates on which we will pay the
    principal on the debt securities;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the rate or rates (which may be fixed or
    variable) per annum or the method used to determine the rate or
    rates (including any commodity, commodity index, stock exchange
    index or financial index) at which the debt securities will bear
    interest, the date or dates from which interest will accrue, the
    date or dates on which interest will commence and be payable and
    any regular record date for the interest payable on any interest
    payment date;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the trustee for the series of debt securities;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">whether the debt securities rank as senior debt
    securities, senior subordinated debt securities or subordinated
    debt securities, or any combination thereof;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the form and terms of any guarantee of any debt
    securities;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any depositories, interest rate calculation
    agents or other agents with respect to the debt securities;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">whether, the ratio at which and the terms and
    conditions upon which, if any, the debt securities will be
    convertible into or exchangeable for our common stock or our
    other securities or securities of another person;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the place or places where principal of, premium,
    if any, and interest, if any, on the debt securities will be
    payable or the method of payment, if by wire transfer, mail or
    by other means;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the terms and conditions upon which we may redeem
    the debt securities;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any obligation we have to redeem or purchase the
    debt securities pursuant to any sinking fund or analogous
    provisions or at the option of a holder of debt securities;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the dates, if any, on which, and the price or
    prices at which, we will repurchase debt securities at the
    option of the holders of debt securities and other detailed
    terms and provisions of these repurchase obligations;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the denominations in which the debt securities
    will be issued, if other than denominations of $1,000 and any
    integral multiple thereof;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">whether the debt securities will be issued in
    bearer or fully registered form (and if in fully registered
    form, whether the debt securities will be issuable, in whole or
    in part, as global debt securities);
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the portion of principal amount of the debt
    securities payable upon declaration of acceleration of the
    maturity date, if other than the principal amount;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the currency of denomination of the debt
    securities;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">8
</FONT>

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<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><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the designation of the currency, currencies or
    currency units in which payment of principal of, premium and
    interest on the debt securities will be made;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">if payments of principal of, premium or interest
    on the debt securities will be made in one or more currencies or
    currency units other than that or those in which the debt
    securities are denominated, the manner in which the exchange
    rate with respect to these payments will be determined;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the manner in which the amounts of payment of
    principal of, or premium or interest on the debt securities will
    be determined, if these amounts may be determined by reference
    to an index based on a currency or currencies other than that in
    which the debt securities are denominated or designated to be
    payable or by reference to a commodity, commodity index, stock
    exchange index or financial index;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any provisions relating to any security provided
    for the debt securities;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any addition to or change in the events of
    default described in this prospectus or in the indenture with
    respect to the debt securities and any change in the
    acceleration provisions described in this prospectus or in the
    indenture with respect to the debt securities;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any addition to, change in or deletion from, the
    covenants described in this prospectus or in the indenture with
    respect to the debt securities; and
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any other terms of the debt securities, which may
    modify, supplement or delete any provision of the indenture as
    it applies to that series.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, the indenture does not limit our
ability to issue subordinated debt securities. Any subordination
provisions of a particular series of debt securities will be set
forth in the officers&#146; certificate or supplemental
indenture related to that series of debt securities and will be
described in the relevant prospectus supplement.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We may issue debt securities that provide for an
amount less than their stated principal amount to be due and
payable upon declaration of acceleration of their maturity
pursuant to the terms of the indenture. We will provide you with
information on the federal income tax considerations and other
special considerations applicable to any of these debt
securities in the applicable prospectus supplement.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If we denominate the purchase price of any of the
debt securities in a foreign currency or currencies or a foreign
currency unit or units, or if the principal of and any premium
and interest on any series of debt securities is payable in a
foreign currency or currencies or a foreign currency unit or
units, we will provide you with information on the restrictions,
elections, general tax considerations, specific terms and other
information with respect to that issue of debt securities and
such foreign currency or currencies or foreign currency unit or
units in the applicable prospectus supplement.
</FONT>

<P align="left">
<B><FONT size="2">Transfer and Exchange</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Each debt security will be represented by either
one or more global securities registered in the name of The
Depository Trust Company, as depositary, or a nominee (we will
refer to any debt security represented by a global debt security
as a &#147;book-entry debt security&#148;), or a certificate
issued in definitive registered form (we will refer to any debt
security represented by a certificated security as a
&#147;certificated debt security&#148;) as set forth in the
applicable prospectus supplement. Except as set forth under the
heading &#147;Global Debt Securities and Book-Entry System&#148;
below, book-entry debt securities will not be issuable in
certificated form.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Certificated Debt
Securities.</FONT></I><FONT size="2"> You may transfer or
exchange certificated debt securities at any office we maintain
for this purpose in accordance with the terms of the indenture.
No service charge will be made for any transfer or exchange of
certificated debt securities, but we may require payment of a
sum sufficient to cover any tax or other governmental charge
payable in connection with a transfer or exchange.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">You may effect the transfer of certificated debt
securities and the right to receive the principal of, premium
and interest on certificated debt securities only by
surrendering the certificate representing those
</FONT>

<P align="center"><FONT size="2">9
</FONT>

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<DIV align="left">
<FONT size="2">certificated debt securities and either
reissuance by us or the trustee of the certificate to the new
holder or the issuance by us or the trustee of a new certificate
to the new holder.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Global Debt Securities and Book-Entry
System.</FONT></I><FONT size="2"> Each global debt security
representing book-entry debt securities will be deposited with,
or on behalf of, the depositary, and registered in the name of
the depositary or a nominee of the depositary.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The depositary has indicated it intends to follow
the following procedures with respect to book-entry debt
securities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Ownership of beneficial interests in book-entry
debt securities will be limited to persons that have accounts
with the depositary for the related global debt security, which
we refer to as participants, or persons that may hold interests
through participants. Upon the issuance of a global debt
security, the depositary will credit, on its book-entry
registration and transfer system, the participants&#146;
accounts with the respective principal amounts of the book-entry
debt securities represented by the global debt security
beneficially owned by such participants. The accounts to be
credited will be designated by any dealers, underwriters or
agents participating in the distribution of the book-entry debt
securities. Ownership of book-entry debt securities will be
shown on, and the transfer of those ownership interests will be
effected only through, records maintained by the depositary for
the related global debt security (with respect to interests of
participants) and on the records of participants (with respect
to interests of persons holding through participants). The laws
of some states may require that certain purchasers of securities
take physical delivery of the securities in definitive form.
These laws may impair the ability to own, transfer or pledge
beneficial interests in book-entry debt securities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">So long as the depositary for a global debt
security, or its nominee, is the registered owner of that global
debt security, the depositary or its nominee, as the case may
be, will be considered the sole owner or holder of the
book-entry debt securities represented by the global debt
security for all purposes under the indenture. Except as
described below, beneficial owners of book-entry debt securities
will not be entitled to have securities registered in their
names, will not receive or be entitled to receive physical
delivery of a certificate in definitive form representing
securities and will not be considered the owners or holders of
those securities under the indenture. Accordingly, each person
beneficially owning book-entry debt securities must rely on the
procedures of the depositary for the related global debt
security and, if that person is not a participant, on the
procedures of the participant through which that person owns its
interest, to exercise any rights of a holder under the indenture.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We understand, however, that under existing
industry practice, the depositary will authorize the persons on
whose behalf it holds a global debt security to exercise certain
rights of holders of debt securities, and the indenture provides
that we, the trustee and our respective agents will treat as the
holder of a debt security the persons specified in a written
statement of the depositary with respect to that global debt
security for purposes of obtaining any consents or directions
required to be given by holders of the debt securities pursuant
to the indenture.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We will make payments of principal of, and
premium and interest on, book-entry debt securities to the
depositary or its nominee, as the case may be, as the registered
holder of the related global debt security. We, the trustee and
any other agent of ours or agent of the trustee will not have
any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership
interests in a global debt security or for maintaining,
supervising or reviewing any records relating to beneficial
ownership interests.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We expect that the depositary, upon receipt of
any payment of principal of, premium or interest on a global
debt security, will immediately credit participants&#146;
accounts with payments in amounts proportionate to the
respective amounts of book-entry debt securities held by each
participant as shown on the records of the depositary. We also
expect that payments by participants to owners of beneficial
interests in book-entry debt securities held through those
participants will be governed by standing customer instructions
and customary practices, as is now the case with the securities
held for the accounts of customers in bearer form or registered
in &#147;street name,&#148; and will be the responsibility of
those participants.
</FONT>

<P align="center"><FONT size="2">10
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We will issue certificated debt securities in
exchange for each global debt security if the depositary is at
any time unwilling or unable to continue as depositary or ceases
to be a clearing agency registered under the Securities Exchange
Act of 1934, as amended, or Exchange Act, and a successor
depositary registered as a clearing agency under the Exchange
Act is not appointed by us within 90&nbsp;days. In addition, we
may at any time and in our sole discretion determine not to have
the book-entry debt securities of any series represented by one
or more global debt securities and, in that event, will issue
certificated debt securities in exchange for the global debt
securities of that series. Global debt securities will also be
exchangeable by the holders for certificated debt securities if
an event of default with respect to the book-entry debt
securities represented by those global debt securities has
occurred and is continuing. Any certificated debt securities
issued in exchange for a global debt security will be registered
in such name or names as the depositary shall instruct the
trustee. We expect that such instructions will be based upon
directions received by the depositary from participants with
respect to ownership of book-entry debt securities relating to
such global debt security.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have obtained the foregoing information
concerning the depositary and the depositary&#146;s book-entry
system from sources we believe to be reliable, but we take no
responsibility for the accuracy of this information.
</FONT>

<P align="left">
<B><FONT size="2">Change of Control</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Unless we state otherwise in the applicable
prospectus supplement, the debt securities will not contain any
provisions that may afford holders of the debt securities
protection in the event we undergo a change in control or in the
event of a highly leveraged transaction (whether or not the
transaction results in a change in control) that could adversely
affect holders of debt securities.
</FONT>

<P align="left">
<B><FONT size="2">Covenants</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We will set forth in the applicable prospectus
supplement any restrictive covenants applicable to any issue of
debt securities.
</FONT>

<P align="left">
<B><FONT size="2">Consolidation, Merger and Sale of
Assets</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We may not consolidate with or merge with or
into, or convey, transfer or lease all or substantially all of
our properties and assets to, any person, which we refer to as a
successor person, unless:
</FONT>
<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><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">we are the surviving corporation or the successor
    person (if other than Meritage Corporation) is a corporation
    organized and validly existing under the laws of any U.S.
    domestic jurisdiction and expressly assumes our obligations on
    the debt securities and under the indenture;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">immediately after giving effect to the
    transaction, no event of default, and no event which, after
    notice or lapse of time, or both, would become an event of
    default, shall have occurred and be continuing under the
    indenture; and
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">certain other conditions that may be set forth in
    the applicable prospectus supplement are met.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Events of Default</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Unless otherwise stated in the applicable
prospectus supplement, event of default means, with respect to
any series of debt securities, any of the following:
</FONT>
<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><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">default in the payment of any interest upon any
    debt security of that series when it becomes due and payable,
    and continuance of that default for a period of 30&nbsp;days
    (unless the entire amount of the payment is deposited by us with
    the trustee or with a paying agent prior to the expiration of
    the 30-day period);
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">default in the payment of principal of or premium
    on any debt security of that series when due and payable at
    maturity, upon redemption or otherwise;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">11
</FONT>
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<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><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">an event of default as defined in the debt
    securities of that series or our failure to comply with any of
    our other agreements in the debt securities of that series or
    the indenture with respect to that series, which default
    continues uncured for a period of 60&nbsp;days after we receive
    written notice from the trustee or we and the trustee receive
    written notice from the holders of not less than a majority in
    principal amount of the outstanding debt securities of that
    series as provided in the indenture;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">certain events of bankruptcy, insolvency or
    reorganization; and
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any other event of default provided with respect
    to debt securities of that series which is described in the
    applicable prospectus supplement accompanying this prospectus.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">No event of default with respect to a particular
series of debt securities (except as to certain events of
bankruptcy, insolvency or reorganization) necessarily
constitutes an event of default with respect to any other series
of debt securities. The occurrence of an event of default may
constitute an event of default under our bank credit agreements
in existence from time to time. In addition, the occurrence of
certain events of default or an acceleration under the indenture
may constitute an event of default under certain of our other
indebtedness outstanding from time to time.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If an event of default with respect to debt
securities of any series at the time outstanding occurs and is
continuing, then the trustee or the holders of not less than a
majority in principal amount of the outstanding debt securities
of that series may, by a notice in writing to us (and to the
trustee if given by the holders), declare to be due and payable
immediately the principal (or, if the debt securities of that
series are discount securities, that portion of the principal
amount as may be specified in the terms of that series) of and
accrued and unpaid interest, if any, on all debt securities of
that series. In the case of an event of default resulting from
certain events of bankruptcy, insolvency or reorganization, the
principal (or such specified amount) of and accrued and unpaid
interest, if any, on all outstanding debt securities will become
and be immediately due and payable without any declaration or
other act on the part of the trustee or any holder of
outstanding debt securities. At any time after a declaration of
acceleration with respect to debt securities of any series has
been made, but before a judgment or decree for payment of the
money due has been obtained by the trustee, the holders of a
majority in principal amount of the outstanding debt securities
of that series may rescind and annul the acceleration if all
events of default, other than the non-payment of accelerated
principal and interest, if any, with respect to debt securities
of that series, have been cured or waived as provided in the
indenture. We refer you to the prospectus supplement relating to
any series of debt securities that are discount securities for
the particular provisions relating to acceleration of a portion
of the principal amount of such discount securities upon the
occurrence of an event of default.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The indenture provides that the trustee will be
under no obligation to exercise any of its rights or powers
under the indenture at the request of any holder of outstanding
debt securities, unless the trustee receives indemnity
satisfactory to it against any loss, liability or expense.
Subject to certain rights of the trustee, the holders of a
majority in principal amount of the outstanding debt securities
of any series will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to
the trustee or exercising any trust or power conferred on the
trustee with respect to the debt securities of that series.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Unless stated otherwise in the applicable
prospectus supplement, no holder of any debt security of any
series will have any right to institute any proceeding, judicial
or otherwise, with respect to the indenture or for the
appointment of a receiver or trustee, or for any remedy under
the indenture, unless:
</FONT>
<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><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">that holder has previously given to the trustee
    written notice of a continuing event of default with respect to
    debt securities of that series; and
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the holders of at least 25% in principal amount
    of the outstanding debt securities of that series have made
    written request, and offered reasonable indemnity, to the
    trustee to institute the proceeding as trustee, and the trustee
    has not received from the holders of a majority in principal
    amount of the outstanding debt securities of that series a
    direction inconsistent with that request and has failed to
    institute the proceeding within 60&nbsp;days.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">12
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Notwithstanding the foregoing, the holder of any
debt security will have an absolute and unconditional right to
receive payment of the principal of, premium and any interest on
that debt security on or after the due dates expressed in that
debt security and to institute suit for the enforcement of
payment.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The indenture requires us, within 90&nbsp;days
after the end of our fiscal year, to furnish to the trustee a
statement as to compliance with the indenture. The indenture
provides that the trustee may withhold notice to the holders of
debt securities of any series of any default or event of default
(except in payment on any debt securities of that series) with
respect to debt securities of that series if it in good faith
determines that withholding notice is in the interest of the
holders of those debt securities.
</FONT>

<P align="left">
<B><FONT size="2">Modification and Waiver</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We may modify and amend the indenture without
notice to or the consent of the holders:
</FONT>
<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><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">to establish additional series of securities
    permitted under the indenture;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">to cure any ambiguity, defect or inconsistency;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">to evidence the assumption of a successor
    corporation of our obligations under the indenture;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">to comply with any requirements of the SEC or the
    Trust Indenture Act;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">to provide for uncertificated securities in
    addition to or in place of certificated securities;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">to add, change or eliminate any other provisions
    of the indenture so long as that change does not apply to any
    then existing series of debt securities or modify the rights of
    the holder of any such security with respect to that provision;
    or
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">make any change that does not adversely affect in
    any material respect the interests of the securityholders of any
    series.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We may modify and amend the indenture with the
consent of the holders of at least a majority in principal
amount of the outstanding debt securities of each series
affected by the modifications or amendments. We may not make any
modification or amendment without the consent of the holders of
each affected debt security then outstanding if that amendment
will:
</FONT>
<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><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">reduce the amount of debt securities whose
    holders must consent to an amendment or waiver;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">reduce the rate of or extend the time for payment
    of interest (including default interest) on any debt security;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">reduce the principal of or premium on or change
    the fixed maturity of any debt security or reduce the amount of,
    or postpone the date fixed for, the payment of any sinking fund
    or analogous obligation with respect to any series of debt
    securities;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">reduce the principal amount of discount
    securities payable upon acceleration of maturity;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">waive a default in the payment of the principal
    of, premium or interest on any debt security (except a
    rescission of acceleration of the debt securities of any series
    by the holders of at least a majority in aggregate principal
    amount of the then outstanding debt securities of that series
    and a waiver of the payment default that resulted from such
    acceleration);
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">make the principal of or premium or interest on
    any debt security payable in currency other than that stated in
    the debt security;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">make any change to certain provisions of the
    indenture relating to, among other things, the right of holders
    of debt securities to receive payment of the principal of,
    premium and interest on those debt securities and to institute
    suit for the enforcement of any such payment and to waivers or
    amendments; or
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">waive a redemption payment with respect to any
    debt security.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">13
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Except for certain specified provisions, the
holders of at least a majority in principal amount of the
outstanding debt securities of any series may on behalf of the
holders of all debt securities of that series waive our
compliance with provisions of the indenture. The holders of a
majority in principal amount of the outstanding debt securities
of any series may on behalf of the holders of all the debt
securities of such series waive any past default under the
indenture with respect to that series and its consequences,
except a default in the payment of the principal of, premium or
any interest on any debt security of that series or in respect
of a covenant or provision which cannot be modified or amended
without the consent of the holder of each outstanding debt
security of the series affected; provided, however, that the
holders of a majority in principal amount of the outstanding
debt securities of any series may rescind an acceleration and
its consequences, including any related payment default that
resulted from the acceleration.
</FONT>

<P align="left">
<B><FONT size="2">Defeasance of Debt Securities and Certain
Covenants in Certain Circumstances</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Legal Defeasance.</FONT></I><FONT size="2">
The indenture provides that, unless otherwise provided by the
terms of the applicable series of debt securities, we may be
discharged from any and all obligations in respect of the debt
securities of any series (except for certain obligations to
register the transfer or exchange of debt securities of such
series, to replace stolen, lost or mutilated debt securities of
such series, and to maintain paying agencies and certain
provisions relating to the treatment of funds held by paying
agents). We will be so discharged upon the deposit with the
trustee, in trust, of money and/or U.S.&nbsp;government
obligations or, in the case of debt securities denominated in a
single currency other than U.S.&nbsp;dollars, foreign government
obligations, that, through the payment of interest and principal
in accordance with their terms, will provide money in an amount
sufficient in the opinion of a nationally recognized firm of
independent public accountants to pay and discharge each
installment of principal, premium and interest on and any
mandatory sinking fund payments in respect of the debt
securities of that series on the stated maturity of those
payments in accordance with the terms of the indenture and those
debt securities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">This discharge may occur only if, among other
things, we have delivered to the trustee an opinion of counsel
stating that we have received from, or there has been published
by, the United States Internal Revenue Service a ruling or,
since the date of execution of the indenture, there has been a
change in the applicable United States federal income tax law,
in either case to the effect that, and based thereon such
opinion shall confirm that, the holders of the debt securities
of that series will not recognize income, gain or loss for
United States federal income tax purposes as a result of the
deposit, defeasance and discharge and will be subject to United
States federal income tax on the same amounts and in the same
manner and at the same times as would have been the case if the
deposit, defeasance and discharge had not occurred.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Defeasance Of Certain
Covenants.</FONT></I><FONT size="2"> The indenture provides
that, unless otherwise provided by the terms of the applicable
series of debt securities, upon compliance with certain
conditions:
</FONT>
<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><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">we may omit to comply with the covenant described
    under the heading &#147;Consolidation, Merger and Sale of
    Assets&#148; and certain other covenants set forth in the
    indenture, as well as any additional covenants which may be set
    forth in the applicable prospectus supplement; and
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any omission to comply with those covenants will
    not constitute a default or an event of default with respect to
    the debt securities of that series, or covenant defeasance.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The conditions include:
</FONT>
<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><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">depositing with the trustee money and/or U.S.
    government obligations or, in the case of debt securities
    denominated in a single currency other than U.S. dollars,
    foreign government obligations, that, through the payment of
    interest and principal in accordance with their terms, will
    provide money in an amount sufficient in the opinion of a
    nationally recognized firm of independent public accountants to
    pay and discharge each installment of principal of, premium and
    interest on and any mandatory sinking fund payments in respect
    of the debt securities of that series on the stated maturity of
    those payments in accordance with the terms of the indenture and
    those debt securities; and
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">14
</FONT>

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<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><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">delivering to the trustee an opinion of counsel
    to the effect that the holders of the debt securities of that
    series will not recognize income, gain or loss for United States
    federal income tax purposes as a result of the deposit and
    related covenant defeasance and will be subject to United States
    federal income tax on the same amounts and in the same manner
    and at the same times as would have been the case if the deposit
    and related covenant defeasance had not occurred.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Covenant Defeasance And Events Of
Default.</FONT></I><FONT size="2"> In the event we exercise our
option to effect covenant defeasance with respect to any series
of debt securities and the debt securities of that series are
declared due and payable because of the occurrence of any event
of default, the amount of money and/or U.S.&nbsp;government
obligations or foreign government obligations on deposit with
the trustee will be sufficient to pay amounts due on the debt
securities of that series at the time of their stated maturity
but may not be sufficient to pay amounts due on the debt
securities of that series at the time of the acceleration
resulting from the event of default. However, we will remain
liable for those payments.
</FONT>

<P align="left">
<B><FONT size="2">Guarantees</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our payment obligations under any series of debt
securities may be guaranteed by one or more of the
co-registrants. The terms of any guarantee will be set forth in
the applicable prospectus supplement.
</FONT>

<!-- link1 "DESCRIPTION OF CAPITAL STOCK" -->

<P align="center">
<B><FONT size="2">DESCRIPTION OF CAPITAL STOCK</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following summary describes the material
terms of our capital stock. However, you should refer to the
actual terms of our articles of incorporation and bylaws and to
the applicable provisions of the Maryland General Corporation
Law.
</FONT>

<P align="left">
<B><FONT size="2">Common Stock</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are authorized to issue up to 50,000,000
shares of common stock, $0.01 par value per share, of which
11,411,480&nbsp;shares were outstanding as of April&nbsp;26,
2002. These amounts reflect a 2-for-1 stock split in the form of
a stock dividend which Meritage effected on April&nbsp;26, 2002
to stockholders of record at the close of business on
April&nbsp;12, 2002. The outstanding shares of our common stock
are, when issued and paid for, fully-paid and non-assessable.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Voting
Rights.</FONT></I></B><FONT size="2"> The holders of our common
stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have
cumulative voting rights. As a result, the holders of a majority
of the shares of our common stock entitled to vote in any
election of directors may elect all of the directors standing
for election. Our directors are divided into two classes serving
staggered two-year terms.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our articles of incorporation contain a provision
allowing action to be authorized by the affirmative vote of the
holders of a majority of the total number of shares of common
stock outstanding and entitled to vote thereon notwithstanding
any provision of law that would otherwise require the
authorization of the action by a greater proportion than a
majority. This provision may allow authorization of certain
extraordinary transactions and amendment of our articles of
incorporation, including an amendment changing the terms or
rights of our outstanding common stock. But for this provision,
under Maryland law, these extraordinary transactions and
amendment of our articles of incorporation, with certain limited
exceptions, would require the affirmative vote of the holders of
two-thirds of the outstanding common stock entitled to vote
thereon.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Dividends.</FONT></I></B><FONT size="2">
The holders of our common stock are entitled to receive ratably
such dividends that may be declared by the board of directors
out of legally available funds. We do not intend to declare cash
dividends in the foreseeable future. We expect to retain
earnings to finance the continuing development of our business.
Future dividends, if any, will depend upon our financial
condition, results of operations, capital requirements,
compliance with debt covenants of existing indebtedness, as well
as other factors considered relevant by our board of directors.
</FONT>

<P align="center"><FONT size="2">15
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Liquidation
Rights.</FONT></I></B><FONT size="2"> Upon our liquidation,
dissolution or winding-up, the holders of our common stock are
entitled to share ratably in all assets available for
distribution after payment in full to creditors and holders of
preferred stock, if any.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Other
Provisions.</FONT></I></B><FONT size="2"> The holders of our
common stock have no preemptive, subscription, redemption
conversion or other similar rights. The rights, preferences, and
privileges of holders of common stock are subject to, and may be
adversely affected by, the rights of the holders of shares of
any series of preferred stock which we may issue in the future.
However, we are not currently authorized to issue preferred
stock under our articles of incorporation.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Transfer
Agent.</FONT></I></B><FONT size="2"> The transfer agent and
registrar for our common stock is Mellon Investor Services, LLC.
</FONT>

<P align="left">
<B><FONT size="2">Preferred Stock</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are not currently authorized to issue
preferred stock. We will need to obtain stockholder approval to
authorize the issuance of preferred stock. We anticipate that
the board of directors will have the authority to determine the
terms of our preferred stock without further stockholder
approval. The preferred stock, if authorized by our
stockholders, will be issued in one or more series with the
designations, rights, preferences and limitations determined by
our board of directors, including the consideration to be
received for the preferred stock, the number of shares
comprising each series, dividend rates, redemption provisions,
liquidation preferences, mandatory retirement provisions,
conversion rights and voting rights.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If we issue preferred stock with voting rights,
it could make it more difficult for a third party to acquire
control of Meritage and could adversely affect the rights of
holders of common stock. Preferred stockholders typically are
entitled to satisfaction in full of specified dividend and
liquidation rights before any payment of dividends or
distribution of assets on liquidation can be made to holders of
common stock. Also, any voting rights granted to our preferred
stock may dilute the voting rights of our common stock. Under
some circumstances, control of Meritage would shift from the
holders of common stock to the holders of preferred stock with
voting rights. Certain fundamental matters requiring stockholder
approval (such as mergers, sale of assets and certain amendments
to our articles of incorporation) may require approval by the
separate vote of the holders of preferred stock in addition to
any required vote of the common stock.
</FONT>

<P align="left">
<B><FONT size="2">Certain Provisions of Maryland Law</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are incorporated in Maryland and are subject
to the provisions of the Maryland General Corporation Law,
certain of which provisions are discussed below.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Business
Combinations.</FONT></I><FONT size="2"> Under the Maryland
Business Combinations Act, &#147;business combinations&#148;
between a Maryland corporation and an interested stockholder or
an affiliate of an interested stockholder are prohibited for
five years after the most recent date on which the interested
stockholder becomes an interested stockholder. These business
combinations include certain mergers, asset transfers, loans and
other transactions or issuances, transfers or reclassifications
of equity securities. An interested stockholder is defined as:
</FONT>
<P>

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<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
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<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any person who beneficially owns ten percent or
    more of the voting power of the corporation&#146;s shares; or
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">an affiliate or associate of the corporation who,
    at any time within the two-year period prior to the date in
    question, was the beneficial owner of 10% or more of the voting
    power of the then outstanding voting stock of the corporation.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A person is not an interested stockholder under
the statute if the board of directors approved in advance the
transaction by which the stockholder otherwise would have become
an interested stockholder.
</FONT>

<P align="center"><FONT size="2">16
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">After the five-year prohibition, any business
combination between the Maryland corporation and an interested
stockholder generally must be recommended by the board of
directors of the corporation and approved by the affirmative
vote of at least:
</FONT>
<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><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">80% of the votes entitled to be cast by the
    outstanding shares of voting stock of the corporation voting
    together as a single voting group; and
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">two-thirds of the votes entitled to be cast by
    the holders of voting stock of the corporation other than shares
    held by the interested stockholder with whom or with whose
    affiliate the business combination is to be effected or held by
    an affiliate or associate of the interested stockholder voting
    together as a single voting group.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">These super-majority vote requirements do not
apply to certain business combinations if the corporation&#146;s
stockholders receive a minimum price, as defined under Maryland
law, for their shares in the form of cash or other consideration
in the same form as previously paid by the interested
stockholder for its shares and the corporation and interested
stockholder meet certain other requirements.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The statute provides for various exemptions from
its provisions, including business combinations that are
exempted by the board of directors prior to the time that the
interested stockholder becomes an interested stockholder.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The business combination statute could have the
effect of delaying, deferring or preventing a transaction or a
change in control that might involve a premium price for holders
of our common stock or otherwise be in their best interest.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A Maryland corporation may adopt an amendment to
its charter electing not to be subject to the Maryland Business
Combinations Act. No such amendment to our charter has been
adopted.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Control Share
Acquisitions.</FONT></I><FONT size="2"> Maryland&#146;s Control
Share Acquisition Act provides that control shares of a Maryland
corporation acquired in a control share acquisition have no
voting rights, except to the extent approved by a vote of
two-thirds of the votes entitled to be cast on the matter.
Shares owned by the acquiror, by officers or by directors who
are employees of the corporation are excluded from shares
entitled to vote on the matter. Control shares are voting shares
of stock, which, if aggregated with all other shares of stock
owned by the acquiror or in respect of which the acquiror is
able to exercise or direct the exercise of voting power (except
solely by virtue of a revocable proxy), would entitle the
acquiror to exercise voting power equal to:
</FONT>
<P>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">one-tenth or more but less than one-third;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">one-third or more but less than a majority; or
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">a majority or more of all voting power.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Control shares do not include shares the
acquiring person is then entitled to vote as a result of having
previously obtained stockholder approval. A control share
acquisition means the acquisition of control shares, subject to
certain exceptions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A person who has made or proposes to make a
control share acquisition may compel the board of directors of
the corporation to call a special meeting of stockholders to be
held within 50&nbsp;days of demand to consider the voting rights
of the shares. The right to require the calling of a special
meeting is subject to the satisfaction of certain conditions,
including an undertaking to pay the expenses of the meeting. If
no request for a meeting is made, the corporation may itself
present the question at any stockholders meeting.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If voting rights are not approved at the meeting
or if the acquiring person does not deliver an acquiring person
statement as required by the statute, then the corporation may
redeem for fair value any or all of the control shares, except
those for which voting rights have previously been approved. The
right of the corporation to redeem control shares is subject to
certain conditions and limitations. Fair value is determined,
without regard to the absence of voting rights for the control
shares, as of the date of the last control share acquisition by
the acquiror or, if a meeting of stockholders is held, at which
the voting rights
</FONT>

<P align="center"><FONT size="2">17
</FONT>
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<DIV align="left">
<FONT size="2">of the shares are considered and not approved, as
of the date of that meeting. If voting rights for control shares
are approved at a stockholders meeting and the acquiror becomes
entitled to vote a majority of the shares entitled to vote, all
other stockholders may exercise appraisal rights. The fair value
of the shares as determined for purposes of appraisal rights may
not be less than the highest price per share paid by the
acquiror in the control share acquisition.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The control share acquisition statute does not
apply (a)&nbsp;to shares acquired in a merger, consolidation or
share exchange if the corporation is a party to the transaction,
or certain other transactions or (b)&nbsp;to acquisitions
approved or exempted by the charter or bylaws of the
corporation. Neither our articles of incorporation or bylaws
have any provisions exempting any control share acquisitions.
</FONT>

<P align="left">
<B><FONT size="2">Certain Provisions of our Articles of
Incorporation and Bylaws</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our articles of incorporation and bylaws include
provisions that could have an anti-takeover effect. These
provisions are intended to preserve the continuity and stability
of our board of directors and the policies formulated by our
board of directors. The following is a summary of the provisions
or our articles of incorporation and bylaws that we consider
material, but does not purport to be complete and is subject to,
and qualified in its entirety by reference to, the provisions of
our articles of incorporation and bylaws.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Indemnification.</FONT></I><FONT size="2">
Under Maryland 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
of its stockholders for money damages. However, no provision may
restrict or limit the liability of a corporation&#146;s
directors or officers to the corporation or its stockholders to
the extent that (1)&nbsp;it is proved that the person actually
received an improper benefit or (2)&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). Our charter contains a
provision limiting the personal liability of officers and
directors to Meritage and its stockholders for money damages to
the fullest extent permitted under Maryland law.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, with certain exceptions, Maryland
law permits a corporation to indemnify its present and former
directors and officers, among others, against liability
incurred, unless it is established that:
</FONT>
<P>

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    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">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;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the director or officer actually received an
    improper personal benefit in money, property, or services; or
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">in the case of any criminal proceeding, the
    director or officer had reasonable cause to believe that the act
    or omission was unlawful.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">Our charter provides that Meritage will indemnify
(1)&nbsp;its directors and officers to the full extent allowed
under Maryland law and (2)&nbsp;its officers who are not
directors to such further extent as shall be authorized by the
board of directors and be consistent with law.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Advance Notice
Procedures.</FONT></I><FONT size="2"> Our bylaws establish an
advance notice procedure for stockholders to make nominations of
candidates for election as directors or to bring other business
before an annual meeting. These stockholder notice procedures
provide that only persons that are nominated by board of
directors, or by a stockholder who was a stockholder at the time
of giving notice and has given timely written notice to our
secretary before the meeting at which directors are to be
elected, will be eligible for election as directors. These
stockholder notice procedures also provide that at an annual
meeting only the business as has been brought before the meeting
by our board of directors, or by a stockholder who has given
timely written notice to our secretary of the stockholder&#146;s
intention to bring the business before the meeting, may be
conducted. To be timely, a stockholder&#146;s nomination or
notice must be received by our secretary not less than
20&nbsp;days nor more than 30&nbsp;days prior to the meeting.
The stockholder notice procedures described above will be
shortened, as described in our bylaws, in the event we give less
than 30&nbsp;days&#146; notice or prior public disclosure of the
date of the meeting.
</FONT>

<P align="center"><FONT size="2">18
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, under these stockholder notice
procedures, a stockholder&#146;s notice to us proposing to
nominate a person for election as a director or relating to the
conduct of business other than the nomination of directors will
be required to contain specified information. If the chairman of
a meeting determines that an individual was not nominated, or
other business was not brought before the meeting, in accordance
with our stockholder notice procedure, the individual will not
be eligible for election as a director, or the business will not
be conducted at the meeting, as the case may be.
</FONT>

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<P align="center">
<B><FONT size="2">DESCRIPTION OF WARRANTS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We may issue warrants for the purchase of common
stock, preferred stock or debt securities. Warrants may be
issued independently or together with our common stock,
preferred stock or debt securities and may be attached to or
separate from any offered securities. Each series of warrants
will be issued under a separate warrant agreement to be entered
into between us and a bank or trust company, as warrant agent.
The warrant agent will act solely as our agent in connection
with the warrants and will not have any obligation or
relationship of agency or trust for or with any holders or
beneficial owners of warrants. A copy of the warrant agreement
will be filed with the SEC in connection with any offering of
warrants.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The prospectus supplement relating to a
particular issue of warrants to purchase common stock, preferred
stock or debt securities will describe the terms of those
warrants, including the following:
</FONT>
<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><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the title of the warrants;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the offering price for the warrants, if any;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the aggregate number of the warrants;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the designation and terms of the common stock,
    preferred stock or debt securities that may be purchased upon
    exercise of the warrants;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">if applicable, the designation and terms of the
    securities that the warrants are issued with and the number of
    warrants issued with each security;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">if applicable, the date from and after which the
    warrants and any securities issued with them will be separately
    transferable;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">if applicable, the principal amount of debt
    securities that may be purchased upon exercise of a warrant and
    the price at which the debt securities may be purchased upon
    exercise;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">if applicable, the number of shares of common
    stock or preferred stock that may be purchased upon exercise of
    a warrant and the price at which the shares may be purchased
    upon exercise;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the dates on which the right to exercise the
    warrants will commence and expire;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">if applicable, the minimum or maximum amount of
    the warrants that may be exercised at any one time;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">whether the warrants represented by the warrant
    certificates or debt securities that may be issued upon exercise
    of the warrants will be issued in registered or bearer form;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">information relating to book-entry procedures, if
    any;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the currency or currency units in which the
    offering price, if any, and the exercise price are payable;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">if applicable, a discussion of material United
    States federal income tax considerations;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">anti-dilution provisions of the warrants, if any;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">redemption or call provisions applicable to the
    warrants, if any;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">19
</FONT>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any additional terms of the warrants, including
    terms, procedures and limitations relating to the exchange and
    exercise of the warrants; and
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any other information we think is important about
    the warrants.
    </FONT></TD>
</TR>

</TABLE>

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<P align="center">
<B><FONT size="2">LEGAL MATTERS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Snell &#38; Wilmer L.L.P., our outside counsel,
will issue an opinion regarding the validity of the offered
securities. If counsel for any underwriters passes on legal
matters in connection with an offering made by this prospectus,
we will name that counsel in the accompanying prospectus
supplement.
</FONT>

<!-- link1 "EXPERTS" -->

<P align="center">
<B><FONT size="2">EXPERTS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The consolidated financial statements of Meritage
as of December&nbsp;31, 2001 and 2000, and for each of the years
in the three-year period ended December&nbsp;31, 2001, have been
incorporated by reference herein in reliance upon the report of
KPMG LLP, independent accountants, incorporated by reference
herein, and upon the authority of said firm as experts in
accounting and auditing.
</FONT>

<!-- link1 "WHERE YOU CAN FIND MORE INFORMATION" -->

<P align="center">
<B><FONT size="2">WHERE YOU CAN FIND MORE INFORMATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We file annual, quarterly and special reports,
proxy statements and other information with the SEC. Our SEC
filings are available to the public over the Internet at the
SEC&#146;s web site at http://www.sec.gov. You may also read and
copy any document we file at the SEC&#146;s public reference
room at 450&nbsp;Fifth Street, N.W., Washington,
D.C.&nbsp;20549. Please call the SEC at 1-800-SEC-0330 for
further information on the operations of the public reference
rooms. Our common stock is listed on the New York Stock
Exchange. Our reports, proxy statements and other information
can also be inspected at the offices of the New York Stock
Exchange, 20&nbsp;Broad Street, New York, New York&nbsp;10005.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The SEC allows us to &#147;incorporate by
reference&#148; the information contained in the documents we
file with the SEC, which means that we can disclose important
information to you by referring you to those documents. The
information incorporated by reference is an important part of
this prospectus, and information that we file later with the SEC
will automatically update and supersede this information. We
incorporate by reference any future filings we make with the SEC
under Sections&nbsp;13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934 after the date of this prospectus and until
we sell all the securities covered by this prospectus, other
than portions of these documents that are either
(i)&nbsp;described in paragraphs&nbsp;(i), (k)&nbsp;and
(l)&nbsp;of Item&nbsp;402 of Regulation&nbsp;S-K promulgated by
the SEC or (ii)&nbsp;furnished under Item&nbsp;9 of a Current
Report on Form&nbsp;8-K. We also specifically incorporate by
reference the following documents, which we have already filed
with the SEC:
</FONT>
<P>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;our Annual
    Report on Form&nbsp;10-K for the year ended December&nbsp;31,
    2001;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;our definitive
    Proxy Statement dated April&nbsp;2, 2002;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;our Quarterly
    Report on Form&nbsp;10-Q for the quarter ended March&nbsp;31,
    2002; and
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the description
    of Meritage Corporation&#146;s capital stock contained in the
    Form&nbsp;8-A of Emerald Mortgage Investments Corporation (a
    predecessor at Meritage Corporation) filed on July&nbsp;7, 1988,
    including any amendment or report filed to update such
    description.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Any information contained in this prospectus or
in any document incorporated or deemed to be incorporated by
reference in this prospectus will be deemed to have been
modified or superseded to the extent that a statement contained
in this prospectus, in any other document we subsequently file
with the SEC that also is incorporated or deemed to be
incorporated by reference in this prospectus or in the
</FONT>

<P align="center"><FONT size="2">20
</FONT>

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<DIV align="left">
<FONT size="2">applicable prospectus supplement modifies or
supersedes the original statement. Any statement so modified or
superseded will not be deemed, except as so modified or
superseded, to be a part of this prospectus.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We encourage you to read our periodic and current
reports. We think these reports provide additional information
about our company that prudent investors will find important.
You may request a copy of these filings as well as any future
filings incorporated by reference, at no cost, by calling us or
by writing to us at our principal executive offices in Arizona
at the following address: Meritage Corporation, 6613&nbsp;North
Scottsdale Road, Suite&nbsp;200, Scottsdale, Arizona 85250,
Attention: Investor Relations. Our telephone number is
(877)&nbsp;400-7888.
</FONT>

<P align="center"><FONT size="2">21
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<B><FONT size="2"> PROSPECTUS</FONT></B>

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

<P align="center">
<B><FONT size="4">Debt Securities</FONT></B>

<DIV align="center">
<B><FONT size="4">Common Stock</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="4">Preferred Stock</FONT></B>
</DIV>

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

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

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