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[MERITAGE CORPORATION LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
----------
DATE: MAY 21, 2003
TIME: 9:00 A.M.
LOCATION: THE DOUBLETREE PARADISE VALLEY RESORT
5401 NORTH SCOTTSDALE ROAD
SCOTTSDALE, ARIZONA 85250
To Our Stockholders:
You are invited to attend the Meritage Corporation 2003 Annual Meeting of
Stockholders for the following purposes:
1. To elect four Class II Directors, each to hold office for a two-year
term; and
2. To transact any other business that may properly come before the
meeting. We are not currently aware of any other matters that may come
before the meeting.
Only stockholders of record at the close of business on April 10, 2003 are
entitled to notice of and to vote at the annual meeting or any adjournment
thereof. A copy of our 2002 Annual Report to Stockholders, which includes
audited financial statements, is enclosed.
By Order of the Board of Directors
LARRY W. SEAY, SECRETARY
Scottsdale, Arizona
April 18, 2003
YOUR VOTE IS IMPORTANT.
WHETHER OR NOT YOU PLAN TO ATTEND THIS MEETING, PLEASE COMPLETE, SIGN
AND DATE THE ENCLOSED PROXY CARD AND RETURN IT AS SOON AS POSSIBLE IN
THE ENVELOPE PROVIDED. YOU MAY ALSO VOTE BY CALLING THE 800-NUMBER
LISTED ON YOUR PROXY CARD.
2
MERITAGE CORPORATION
8501 E. PRINCESS DRIVE
SUITE 290
SCOTTSDALE, ARIZONA 85255
-------------------------
PROXY STATEMENT
-------------------------
This Proxy Statement is furnished to you in connection with the
solicitation of proxies by the Board of Directors of Meritage Corporation to be
used in voting at our Annual Meeting of Stockholders on May 21, 2003. The
meeting will be held at 9:00 a.m. at the DoubleTree Paradise Valley Resort, 5401
North Scottsdale Road, Scottsdale, Arizona 85250. The proxy materials relating
to the annual meeting, together with our annual report (which includes audited
consolidated financial statements for our fiscal year ended December 31, 2002),
were mailed on or about April 21, 2003 to stockholders of record at the close of
business on April 10, 2003 (the "record date").
You are entitled to revoke your proxy at any time before it is exercised by
attending the annual meeting and voting in person, duly executing and delivering
a proxy bearing a later date or sending written notice of revocation to our
Secretary at the above address. Whether or not you plan to be present at the
annual meeting, we encourage you to sign and return the enclosed proxy card or
to use telephone or internet voting. Refer to your proxy card for instructions
about voting by telephone, internet and mail.
THE MERITAGE BOARD OF DIRECTORS IS SOLICITING PROXIES. We will bear the
entire cost of proxy solicitation, including charges and expenses of brokerage
firms and others for forwarding solicitation material to beneficial owners of
our outstanding common stock. We may solicit proxies through the mail, by
personal interview or telephone.
The following information should be reviewed along with the audited
consolidated financial statements, notes to consolidated financial statements,
report of independent auditors and other information included in our 2002 Annual
Report that was mailed to you along with this Proxy Statement.
VOTING SECURITIES OUTSTANDING
As of the record date, there were 12,938,634 shares of Meritage common
stock outstanding. The common stock is our only outstanding class of voting
securities. Each share is entitled to one vote on each proposal to be voted on
at the annual meeting. Only holders of record of common stock at the close of
business on the record date will be permitted to vote at the meeting, either in
person or by valid proxy. Shares represented by a proxy will be voted in the
manner directed by a stockholder. If no direction is made, proxies will be voted
(i) for the nominees for election of directors set forth in Proposal No. 1 -
Election of Directors and (ii) at the discretion of the proxy holders, on all
other matters properly brought before the annual meeting.
VOTE NECESSARY FOR ACTION
Directors will be elected by a plurality of the votes cast at the Annual
Meeting. This means that the four nominees that receive the largest number of
FOR votes cast will be elected as Class II Directors. Most other actions require
an affirmative vote of the majority of shares present at the meeting. If you
mark "withhold authority" on your proxy with respect to the election of a
nominee, your vote will not count either "for" or "against" the nominee.
Abstentions and broker non-votes have the effect of a no vote on matters other
than director elections. A broker non-vote occurs when a nominee does not have
discretionary voting power with respect to that item and has not received
instructions from the beneficial owner.
3
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
Our Board of Directors has seven members. The directors are divided into
two classes serving staggered two-year terms. This year our Class II Directors
are up for election. The Board has nominated John R. Landon, Robert G. Sarver,
Peter L. Ax and C. Timothy White who are currently serving as Class II Directors
for re-election.
All nominees have consented to serve as directors. The Board of Directors
has no reason to believe that any of the nominees will be unable to act as a
director. However, if a nominee becomes unable to serve or if a vacancy should
occur before election, the Board may either reduce its size or designate a
substitute nominee. If a substitute nominee is named, the Board will vote the
proxies held by it for the election of the substitute nominee. In the vote on
the election of four director nominees, stockholders may:
* vote FOR all nominees;
* vote to WITHHOLD votes for all nominees; or
* WITHHOLD votes as to specific nominees.
Unless you tell us by your proxy to vote differently, we will vote your
properly completed proxy FOR the Board's nominees.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE "FOR" THE ELECTION OF THE ABOVE-NAMED NOMINEES
FOR ELECTION AS DIRECTORS
4
DIRECTOR AND OFFICER INFORMATION
STEVEN J. HILTON, 41, has served as co-chairman and co-chief executive
officer (or co-managing director) since April 1998 and served as our president
and co-chief executive officer from December 31, 1996 to April 1998. In 1985,
Mr. Hilton co-founded Monterey Homes, which merged with Homeplex Mortgage
Investment Co., the Company's predecessor, and was its treasurer, secretary and
director until December 31, 1996. Mr. Hilton is a member of the National
Association of Homebuilders and the Central Arizona Homebuilders' Association.
JOHN R. LANDON, 45, has served as co-chairman and co-chief executive
officer (or co-managing director) since April 1998 and served as our chief
operating officer and co-chief executive officer from the combination of Legacy
Homes and Meritage in July 1997 to April 1998. Mr. Landon founded Legacy Homes
in 1987 and, as its president, managed all aspects of the company's business.
Mr. Landon is a member of the National Association of Homebuilders and the
Dallas Home and Apartment Builders' Association.
ROBERT G. SARVER, 41, has served as a director since December 1996, and is
currently the chairman and chief executive officer of Western Alliance
Bancorporation and a director of Skywest Airlines. He was the chairman and chief
executive officer of California Bank & Trust from 1998 to 2001. From 1995 to
1998, he served as chairman of Grossmont Bank. In 1990, Mr. Sarver co-founded
and currently serves as the executive director of Southwest Value Partners and
Affiliates, a real estate investment company. Mr. Sarver, a certified public
accountant, was the founder of the National Bank of Arizona and was its
President until its acquisition by Zions Bancorporation in 1994.
RAYMOND OPPEL, 46, has served as a director since December 1997. He was the
co-founder, chairman and chief executive officer of the Oppel Jenkins Group, a
regional homebuilder in Texas and New Mexico, which was sold to the public
homebuilder KB Home. Mr. Oppel has served as president of the Texas Panhandle
Builder's Association and is a licensed real estate broker. Mr. Oppel currently
is active as a private investor in real estate development, banking and an
automobile dealership.
PETER L. AX, 44, has served as a director since September 2000 and is the
managing partner of Phoenix Capital Management, an investment banking and
merchant-banking firm. Mr. Ax is the former chairman and chief executive officer
of SpinCycle, Inc., a publicly held consolidator and developer of coin-operated
laundromats. Previously, Mr. Ax served as head of the Private Equity Division
and senior vice president of Lehman Brothers in New York. Mr. Ax is also on the
board of directors of CashX, Inc. and Medit Marketing, Inc. Mr. Ax is a
certified public accountant and holds an M.B.A. from the Wharton School at the
University of Pennsylvania.
WILLIAM G. CAMPBELL, 44, has served as a director since May 2002. Mr.
Campbell is a co-founder and managing director of Knightsbridge Realty Capital
Inc., an advisory firm that plans and implements capitalization strategies for
commercial real estate. Prior to forming Knightsbridge, Mr. Campbell was
division manager of FINOVA Realty Capital, the commercial real estate financing
division of The FINOVA Group. From 1995 until its acquisition by FINOVA in 1997,
Mr. Campbell was chief operating officer of Belgravia Capital Corporation, a
nationwide commercial mortgage-banking firm. Mr. Campbell holds an M.B.A. from
Pepperdine University and is a certified public accountant.
C. TIMOTHY WHITE, 42, has served as a director since December 1996, and
served as a director of Monterey Homes from February 1995 until December 1996.
From 1989 to October 2002, Mr. White was an attorney with the law firm of
Tiffany & Bosco, P.A. in Phoenix, Arizona, which provided legal services to
Meritage. Effective October 2002, Mr. White joined the law firm of Greenberg
Traurig, LLP in Phoenix, Arizona, which provides legal services to Meritage.
5
LARRY W. SEAY, 47, has served as chief financial officer and vice
president-finance since December 31, 1996, has served as our secretary since
1997 and as our treasurer from 1997 to June 2002. Mr. Seay was chief financial
officer and vice president-finance of Monterey Homes from April 1996 to December
31, 1996. Prior to 1996, Mr. Seay served as vice president and treasurer of UDC
Homes, Inc. Mr. Seay is a member of the American Institute of Certified Public
Accountants and holds an M.B.A. from Arizona State University.
RICHARD T. MORGAN, 47, has served as vice president since April 1998 and
also served as chief financial officer of our Texas division since July 1997.
Mr. Morgan was appointed Legacy's chief financial officer in 1997, and was
appointed as Meritage's treasurer in June 2002.
STOCK OWNED BY MANAGEMENT AND PRINCIPAL STOCKHOLDERS
MANAGEMENT. The following table summarizes, as of March 14, 2003, the number and
percentage of outstanding shares of our common stock beneficially owned by the
following:
* all Meritage directors and nominees for director;
* all executive officers named in the compensation summary under
"Executive Compensation"; and
* all Meritage directors and executive officers as a group.
The address for our directors and executive officers is c/o Meritage
Corporation, 8501 E. Princess Drive, Suite 290, Scottsdale, Arizona 85255. The
number of shares includes shares of common stock owned of record by such
person's spouse and minor children and by other related individuals and entities
over whose shares of common stock such person has custody, voting control or the
power of disposition.
RIGHT TO TOTAL PERCENT OF
NAME OF BENEFICIAL NUMBER OF ACQUIRE BY BENEFICIAL OUTSTANDING
OWNER POSITION WITH COMPANY SHARES OWNED MAY 14, 2003 SHARES SHARES(1)
----- --------------------- ------------ ------------ ------ ---------
Steven J. Hilton Class I Director, Co-Chairman and Co-CEO 1,271,816(2) 59,640 1,331,456 10.2%
John R. Landon Class II Director, Co-Chairman and Co-CEO 1,475,268(3) 100,640 1,575,908 12.1%
Robert G. Sarver Class II Director, Audit, Compensation
Committee Member, Nominating/Governance
Committee Chairman 580,600(4) 30,000 610,600 4.7%
Raymond Oppel Class I Director, Audit, Compensation
and Nominating/Governance Committee
Member -- 5,000 5,000 *
Peter L. Ax Class II Director, Audit and
Compensation Committee Chairman, Lead
Independent Director -- 14,000 14,000 *
William G. Campbell Class I Director, Audit and Nominating/
Governance Committee Member -- -- -- --
C. Timothy White Class II Director 632 30,000 30,632 *
Larry W. Seay Chief Financial Officer, Vice
President-Finance and Secretary 16,408 43,600 60,008 *
Richard T. Morgan Vice President and Treasurer 3,152 42,800 45,952 *
All directors and executive officers as a group (9 persons) 3,347,876 325,680 3,673,556 28.2%
* Less than 1%.
(1) The percentages shown include the shares of common stock actually owned as
of March 14, 2003, and the shares which the person or group had the right
to acquire within 60 days of that date. In calculating the percentage of
ownership, all shares of common stock which the identified person had the
right to acquire within 60 days of March 14, 2003 upon exercise of options
are considered as outstanding for computing the percentage of the shares
owned by that person or group, but are not considered as outstanding for
computing the percentage of the shares of stock owned by any other person.
(2) Shares are held by family trusts.
(3) 933,334 shares are owned with Eleanor Landon, spouse, as tenants-in-common.
(4) Mr. Sarver is deemed to beneficially own 3,000 shares through his spouse
and 1,000 shares through a minor child.
6
CERTAIN OTHER BENEFICIAL OWNERS. Based on filings made under the Exchange Act,
as of March 14, 2003, the only other known beneficial owners of more than 5% of
Meritage common stock are shown in the following table:
SHARES BENEFICIALLY OWNED
AT DECEMBER 31, 2002
-----------------------
CERTAIN OTHER BENEFICIAL OWNERS ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT
------------------------------- --------------------------- --------- ---------
Capital Growth Management LP (1) One International Place, Boston, MA 02110 1,140,700 8.4%
Franklin Resources Inc. (2) One Franklin Parkway, San Mateo, CA 94403-1906 727,310 5.4%
FMR Corp. (3) 82 Devonshire Street, Boston, MA 02109 910,645 6.7%
Wellington Management Company, LLP (4) 75 State Street, Boston, MA 02109 735,900 5.4%
(1) Based solely on Schedule 13G/A, filed with the SEC on February 7, 2003.
Capital Growth Management LP ("CGM") has sole voting power with respect to
1,140,700 shares and shared dispositive power with respect to those
1,140,700 shares. The Schedule 13G/A also states that CGM disclaims any
beneficial interest in the shares.
(2) Based solely on Schedule 13G, filed with the SEC on February 12, 2003.
Franklin Resources, Inc. ("FRI") has sole voting and dispositive power with
respect to 727,310 shares. The Schedule 13G also states that FRI disclaims
any economic or beneficial interest in the shares.
(3) Based solely on Schedule 13G, filed with the SEC on February 13, 2003. FMR
Corp. has sole voting power with respect to 76,545 shares and sole
dispositive power with respect to 910,645 shares. The interest of Fidelity
Low Priced Stock Fund, an investment company registered under the
Investment Company Act of 1940, in Meritage common stock amounted to
834,100 shares or 6.15% of total outstanding shares at December 31, 2002.
The voting of these 834,100 shares is carried out under guidelines
established by the fund's Board of Trustees.
(4) Based solely on Schedule 13G, filed with the SEC on February 12, 2003.
Wellington Management Company, LLP ("WMC") has shared voting power with
respect to 496,400 shares and shared dispositive power with respect to
735,900 shares.
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
THE BOARD OF DIRECTORS met ten times in fiscal 2002. Each director attended all
of the Board and committee meetings of which he is a member.
THE EXECUTIVE COMPENSATION COMMITTEE reviews executive compensation
arrangements. In addition, the Committee reviews corporate goals and objectives
relevant to the Co-CEOs' compensation and approves compensation levels based on
this evaluation. The Committee also administers Meritage's Executive Management
Incentive Plan.
THE AUDIT COMMITTEE recommends appointment of our independent auditors, reviews
our financial statements and considers other matters in relation to the external
audit of financial affairs to promote accurate and timely reporting. The Audit
Committee members are independent as described by Sections 303.01(B)(2)(a) and
(3) of the New York Stock Exchange listing standards.
THE NOMINATING/GOVERNANCE COMMITTEE recommends nominees for election as
directors and recommends matters of corporate governance to the Board of
Directors, including plans relating to management succession.
The following summarizes the membership of the above Committees, and the
number of times each met during 2002.
7
EXECUTIVE NOMINATING/
COMPENSATION AUDIT GOVERNANCE
COMMITTEE COMMITTEE COMMITTEE
--------- --------- ---------
Robert G. Sarver * x x x
Raymond Oppel x x x
Peter L. Ax ** x x
William G. Campbell x x
Number of meetings in 2002 6 6 1
* Chairman of Nominating/Governance Committee
** Chairman of Executive Compensation and Audit Committees, Lead Independent
Director
CORPORATE GOVERNANCE
Meritage operates within a comprehensive plan of corporate governance for
the purpose of defining responsibilities and setting high standards for ethical
conduct. We regularly monitor developments in the area of corporate governance.
In July 2002, Congress passed the Sarbanes-Oxley Act of 2002 which establishes
or provides the basis for a number of new corporate governance standards and
disclosure requirements. In addition, the New York Stock Exchange ("NYSE")
recently proposed changes to its corporate governance and listing standards.
Many of the requirements of the Sarbanes-Oxley Act of 2002 and related SEC
rulemaking initiatives had not yet become effective or applicable as of the date
of this proxy statement and the NYSE's proposed rules have not yet been adopted.
Nevertheless, we have been reviewing our corporate governance policies and
practices and have initiated actions consistent with certain of the proposed
rules. We will adopt changes, as appropriate, to comply with the Sarbanes-Oxley
Act of 2002 and rule changes by the SEC and the NYSE.
INDEPENDENT DIRECTORS
The Board of Directors has determined that a majority of Meritage's Board
members are independent, based on both the NYSE's current and proposed standards
for independence. Our independent directors are Robert G. Sarver, Raymond Oppel,
Peter L. Ax and William G. Campbell. In making this determination, the Board of
Directors evaluated whether there exists any material relationships between
these individuals and Meritage. The Board of Directors determined that there
does not exist any material relationships between the Company and Peter L. Ax
and William G. Campbell. The Board identified and evaluated certain
relationships that exist between the Company and Robert G. Sarver and Raymond
Oppel, but determined these relationships are not material and do not affect
Messrs. Sarver's nor Oppel's independence.
* In the case of Mr. Sarver, he indirectly owns a 5% beneficial
interest, through a partnership, in real property subject to a
purchase contract with Meritage. Mr. Sarver's beneficial interest in
this property is estimated to be approximately $230,000. Mr. Sarver
also owns approximately 4.7% of the Company's outstanding common stock
and he owns less than 1% of the outstanding common stock of Zions
Bankcorporation, which is the parent company of California Bank &
Trust. California Bank & Trust is one of the lenders for our senior
unsecured credit facility. In addition, from time to time, we charter
an aircraft from a company owned by Mr. Sarver. The Board of Directors
determined that these items are not material and do not affect Mr.
Sarver's independence because these transactions and holdings are not
significant to Mr. Sarver's net worth or financial position. Also, the
Board of Directors considers Mr. Sarver's ownership of Meritage common
stock beneficial because it aligns his interests with the interests of
stockholders.
8
* In the case of Mr. Oppel, he owns minority limited partnership
investments in four entities that are party to four option contracts,
respectively, that sell housing lots to Meritage. In addition, Mr.
Oppel owns a minority limited partnership interest in an entity that
in 2001 entered into a contract with Hammonds Homes for the sale of
housing lots. By virtue of our acquisition of Hammonds Homes in 2002,
Meritage became a party to this contract. In 2001, Mr. Oppel
discontinued making investments in transactions involving Meritage.
The Board of Directors determined that these transactions are not
material and do not affect Mr. Oppel's independence because the
transactions are not significant to Mr. Oppel's net worth or financial
position.
AUDIT COMMITTEE
All members of the Audit Committee meet the NYSE's current and proposed
standard for independence. All members possess the required level of financial
literacy and at least one member of the Committee meets the current standard of
requisite financial management expertise required by the NYSE. The SEC recently
adopted a rule requiring disclosure concerning the presence of at least one
"audit committee financial expert" on audit committees. The Board of Directors
has made a preliminary determination that at least one of the audit committee
members would qualify as an "audit committee financial expert." The Audit
Committee operates pursuant to a charter, a copy of which is attached as Exhibit
A to this proxy.
EXECUTIVE COMPENSATION COMMITTEE
All Executive Compensation Committee members meet both the NYSE's current
and proposed standards for independence. The functions of this Committee include
administrating executive compensation for the Company's Co-CEO's and other
executive officers, and administrating management incentive compensation plans.
The Executive Compensation Committee operates under a formal charter that
governs its duties and standards of performance. A copy of the charter for the
Executive Compensation Committee is attached as Exhibit B to this proxy.
NOMINATING/GOVERNANCE COMMITTEE
The Company has established a Nominating/Governance Committee. All members
of this committee meet the NYSE's current and proposed standards for
independence. The functions of the Nominating/Governance Committee include
recommending to the Board of Directors nominees for election as directors of the
Company and making recommendations to the Board of Directors as to matters of
corporate governance. The Nominating/Governance Committee operates under a
formal charter that governs its duties and standards of performance. A copy of
the charter for the Nominating/Governance Committee is attached as Exhibit C to
this proxy.
CORPORATE GOVERNANCE PRINCIPLES AND PRACTICES
The Company has developed a set of Corporate Governance guidelines,
including specifications for director qualifications and responsibility. These
guidelines dictate that non-management directors will meet in executive session
at least quarterly outside the presence of directors that are employees or
officers of Meritage. The non-management directors met in executive session
several times during 2002 and early 2003. Peter L. Ax has been appointed the
"lead independent director" and presides over meetings of the non-management
directors. A copy of our Corporate Governance Principles and Practices is
attached as Exhibit D to this proxy.
9
CODE OF ETHICS
Meritage Corporation is committed to conducting business consistent with
the highest ethical and legal standards. The Board of Directors has adopted a
Code of Ethics which is applicable to all employees, including our Co-CEO's and
our Chief Financial Officer. The code is attached as Exhibit 14 to our Annual
Report on Form 10-K.
DIRECTOR COMPENSATION
Non-employee directors received an annual retainer of $27,000 in 2002, plus
expenses related to attending Board and Committee meetings. Beginning in 2003,
our Lead Independent Director will receive $55,000 in addition to his annual
retainer. Mr. Campbell received $18,000 for his services during the portion of
2002 that he was a Meritage director. William Cleverly, who resigned as a
director in 2002, received $13,500 during the portion of 2002 that he was a
Meritage director. Non-employee directors receive no additional cash
compensation for attending Board or Committee meetings. In 2002, each
non-employee director was granted options to acquire 2,500 shares of our common
stock as additional consideration for their services. All non-employee director
stock options vest in equal share increments on each of the first two
anniversary dates of the date of grant and have an exercise price equal to the
closing price of our common stock on the grant date.
EXECUTIVE COMPENSATION
The following table summarizes the compensation we paid in 2002, 2001 and
2000 to our co-chief executive officers and other most highly compensated
executive officers who were paid in excess of $100,000 in 2002.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------------------------------------------------- -----------
OTHER
ANNUAL SECURITIES
COMP- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ENSATION($) OPTIONS (#) COMPENSATION($)(3)
--------------------------- ---- --------- -------- ----------- ----------- ------------------
Steven J. Hilton - Co-Chairman 2002 425,000 1,935,043 -- 40,000 23,026
and Co-Chief Executive 2001 425,000 1,417,401 -- 49,000 40,964
Officer 2000 400,000 975,597 -- 11,200 35,005
John R. Landon - Co-Chairman 2002 425,000 1,935,043 -- 40,000 58,575
and Co-Chief Executive 2001 425,000 1,417,401 -- 49,000 57,277
Officer 2000 400,000 975,597 -- 11,200 63,257
Larry W. Seay - Chief 2002 220,833 600,130(1) -- 15,000 16,782
Financial Officer, Vice
President-Finance and 2001 191,308 270,000(2) -- 19,500 15,229
Secretary 2000 161,428 175,000 -- 7,500 14,654
Richard T. Morgan - Vice 2002 150,000 165,455(1) -- 10,000 5,811
President and Treasurer 2001 150,000 130,000(2) -- 13,500 4,968
2000 122,500 80,000 -- -- 5,334
(1) Includes deferred compensation of $45,455 for each Messrs. Seay and Morgan,
payable in December 2005. Mr. Morgan also received an award of 152 shares
of Meritage stock in 2002.
(2) Includes deferred compensation of $45,000 and $40,000 for Messrs. Seay and
Morgan, respectively, payable in December 2004. Mr. Seay also received an
award of 108 shares of Meritage stock in 2001.
(3) These amounts represent matching contributions by us to the officers'
accounts under the 401(k) plan, group medical, long-term disability and
life insurance plan premiums and automobile allowances paid by us as
follows:
10
SUMMARY COMPENSATION TABLE (CONTINUED)
GROUP,
LONG-TERM
401(k) DISABILITY AND VEHICLE TOTAL OTHER
NAME YEAR MATCH LIFE INSURANCE ALLOWANCE COMPENSATION
---- ---- ------- -------------- --------- ------------
Steven J. Hilton 2002 $ 3,278 $ 18,735 $ 1,013 $ 23,026
2001 3,130 15,115 22,719 40,964
2000 2,423 16,889 15,693 35,005
John R. Landon 2002 3,087 39,816 15,672 58,575
2001 2,250 38,347 16,680 57,277
2000 2,306 37,945 23,006 63,257
Larry W. Seay 2002 3,300 7,482 6,000 16,782
2001 3,150 7,429 4,650 15,229
2000 3,060 7,394 4,200 14,654
Richard T. Morgan 2002 2,475 3,336 -- 5,811
2001 2,362 2,606 -- 4,968
2000 2,460 2,874 -- 5,334
OPTION GRANTS IN 2002
The following table lists stock options granted in 2002 to the officers
named in the Summary Compensation Table above. The amounts shown as potential
realizable values rely on arbitrarily assumed share price appreciation rates
prescribed by the SEC over the five or seven-year term of the options. In
assessing these values, please note that the ultimate value of the options
depends on actual future share values and do not necessarily reflect
management's assessment of our future stock price performance and are not
intended to indicate our assessment of the value of the options.
INDIVIDUAL GRANTS
PERCENT OF
NUMBER OF TOTAL POTENTIAL REALIZABLE VALUE AT
SHARES OPTIONS ASSUMED ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO EXERCISE OF PRICE APPRECIATION FOR OPTION TERM
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------------------
NAME GRANTED (#) 2002 ($/SH) DATE 5%($) 10%($)
---- ----------- ---- ------ ---- ----- ------
Steven J. Hilton 37,645 11.8% $38.59 6/11/09 591,403 1,378,221
Steven J. Hilton 2,355 0.7% $42.45 6/11/07 16,018 46,393
John R. Landon 37,645 11.8% $38.59 6/11/09 591,403 1,378,221
John R. Landon 2,355 0.7% $42.45 6/11/07 16,018 46,393
Larry W. Seay 15,000 4.7% $38.59 6/11/09 235,650 549,165
Richard T. Morgan 10,000 3.1% $38.59 6/11/09 157,100 366,110
No options were granted at a below market price in 2002 and we do not have
a stock appreciation rights ("SAR") program.
AGGREGATED OPTION EXERCISES IN 2002
AND 2002 YEAR-END OPTION VALUES
The following table lists the number of shares acquired and the value
realized as a result of options exercised during 2002 for the listed officers.
The table contains values for "in the money" options, which are those with a
positive spread between the exercise price and the December 31, 2002 share price
of $33.65. The values are the difference between the year-end price per share
and the exercise price per share, multiplied by the number of applicable shares
in the money. These values may never be realized. The options may never be
exercised, and the value, if any, will depend on the share price on the exercise
date.
11
NUMBER OF SECURITIES UNDERLYING
UNEXERCISED OPTIONS VALUE OF UNEXERCISED IN-THE-MONEY
SHARES AT DECEMBER 31, 2002 (#) OPTIONS AT DECEMBER 31, 2002 ($)
ACQUIRED ON VALUE --------------------------- --------------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
Steven J. Hilton 206,734 5,497,931 23,560 115,840 459,864 2,391,384
John R. Landon -- -- 64,560 115,840 1,529,846 2,391,384
Larry W. Seay 16,000 406,560 24,800 56,200 627,226 1,281,914
Richard T. Morgan 8,000 259,025 31,400 33,600 816,438 733,452
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
THE FOLLOWING REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE DOES NOT
CONSTITUTE SOLICITING MATERIAL AND SHOULD NOT BE DEEMED FILED OR INCORPORATED BY
REFERENCE INTO ANY COMPANY FILING UNDER THE SECURITIES ACT OF 1933 OR THE
SECURITIES EXCHANGE ACT OF 1934, EXCEPT TO THE EXTENT THE COMPANY SPECIFICALLY
INCORPORATES THIS REPORT.
It is the duty of the Executive Compensation Committee to review and
determine the salaries and bonuses of the Co-CEO's, and to establish the general
compensation policies for executive officers. The Committee believes that the
compensation programs for each Co-CEO and the Company's other executive officers
should reflect Meritage's performance and the value created for Meritage
stockholders, and that compensation programs should support the goals and values
of the Company. In addition, the Executive Compensation Committee administers
Meritage's Executive Management Incentive Plan.
GENERAL COMPENSATION POLICY AND PHILOSOPHY. The Company's philosophy is to
provide its executive officers with compensation that is based on their
individual performance and the financial performance of Meritage. Compensation
is generally comprised of:
* a base salary;
* performance bonuses designed to reward performance based on financial
results; and
* stock-based incentives designed to tie the executive's overall
compensation to the interests of Meritage's stockholders by providing
rewards to executives if stockholders benefit from stock price
appreciation.
The Executive Compensation Committee attempts to set executive compensation
at levels that are competitive within the industry. The Company's philosophy is
to set salaries at the industry medium and provide for the opportunity to earn
bonuses at the 75th percentile if the financial hurdles set by the Board of
Directors are met. Each year we review executive compensation against publicly
available information for other homebuilders. Periodically, we engage outside
consultants to evaluate our compensation programs.
In 2001, the Board of Directors and stockholders approved the Meritage
Corporation Incentive Plan (the "Annual Incentive Plan"). The Annual Incentive
Plan provides for annual incentive awards to certain of our key executives. In
determining awards to be made under the Annual Incentive Plan, the Executive
Compensation Committee may approve a formula that is based on one or more
objective criteria, including performance criteria and performance goals.
Performance criteria must include one or more of the following: pre- or
after-tax earnings, revenue growth, operating income, operating cash flow,
return on net assets, return on stockholders' equity, return on assets, return
on capital, share price growth, stockholder returns, gross or net profit margin,
earnings per share, price per share and market share, any of which may be
measured either in absolute terms or as compared to any incremental increase, or
12
as compared to results of a peer group. It is our intent that awards made
pursuant to the Annual Incentive Plan constitutes "qualified performance-based
compensation" satisfying the requirement of Section 162(m) of the Internal
Revenue Code (the "Code").
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M). Section 162(m) of the
Code limits the deductibility of executive compensation paid by publicly held
corporations to $1 million for each executive officer named in this proxy
statement. The $1 million limitation generally does not apply to compensation
that is pursuant to a performance-based plan approved by stockholders. Our
policy is to comply with the requirements of Section 162(m) and maintain
deductibility for all executive compensation, except in circumstances where the
Executive Compensation Committee concludes on an informed basis that it is in
the best interest of Meritage and our stockholders to take actions with regard
to the payment of executive compensation which do not qualify for tax
deductibility.
CEO COMPENSATION. Meritage's two co-chief executive officers, John R.
Landon and Steven J. Hilton, were compensated during 2001 pursuant to employment
agreements they have with the Company. Mr. Landon's and Mr. Hilton's employment
agreements provided for a base salary, stock options and bonuses based on
company performance. Both agreements provided for an annual salary and annual
performance bonus based on a percentage of consolidated net income, as
determined by the Board of Directors. These Agreements expired in 2001.
During 2002, the Executive Compensation Committee continued to compensate
Messrs. Landon and Hilton under the parameters of their employment agreements
after such agreements expired. A substantial portion of each Co-CEO's
compensation is in the form of a bonus program, which is tied to an annual
budget. The Executive Compensation Committee believes that tying compensation to
financial performance aligns the interests of executives with those of our
stockholders. The performance bonus criteria for each Mr. Landon and Mr. Hilton
was based on consolidated pre-tax net income and in meeting certain return on
asset and equity levels. Based on the 2002 financial results and return on asset
and equity goals, Messrs. Landon and Hilton each exceeded the minimum thresholds
to qualify for a performance bonus. As a result, the Executive Compensation
Committee approved the following compensation for Messrs. Landon and Hilton:
* an annualized salary of $425,000;
* a performance bonus of $1,935,043; and
* a grant of 40,000 stock options vesting over five years.
The Co-CEO's also participate in various other benefit plans generally
available to all Meritage employees, including medical 401(k) and life insurance
plans.
During 2002, the Executive Compensation Committee commissioned a global
consulting firm to conduct a study of the Company's executive compensation. As a
result of this study, a new employment agreement with Steven J. Hilton,
Meritage's Co-CEO, was approved. This employment agreement is described in the
following section.
Peter L. Ax - Chairman
Robert G. Sarver
Raymond Oppel
13
EMPLOYMENT AGREEMENTS
The Executive Compensation Committee recently approved a new employment
agreement with Steven J. Hilton, the Company's Co-CEO.
GENERAL PROVISIONS. The new employment agreement was entered into in 2003,
and expires in July 2005. The agreement provides for an annual base salary of
$500,000 and an annual performance bonus, which is comprised of two components,
the "budget based" component and the "return on assets/equity" component.
BUDGET BASED COMPONENT. The budget based component is based on the
achievement of certain budget targets as determined by the Executive
Compensation Committee. The bonus that Mr. Hilton can potentially earn is based
on a percentage of pre-tax net income. The percentage of pre-tax net income that
he will receive ranges from zero, when he does not achieve at least 90% of the
budget target, to 1.2%, when he achieves 100% or more of the budget target.
RETURN ON ASSETS/EQUITY COMPONENT. The return on assets/equity component
provides Mr. Hilton with the opportunity to earn a bonus if Meritage's 2003
return on assets and return on equity meets or exceeds the top one-third of a
group of 11 peer homebuilder companies. If Meritage's return on assets and
equity meets or exceeds the top one-third of this peer group, Mr. Hilton is
entitled to receive an additional bonus of 0.45% of pre-tax net income.
OTHER BENEFITS. The agreement also entitle Mr. Hilton to participate in
fringe and other benefits as are regularly provided by Meritage to its senior
management, such as health and long-term disability insurance and paid vacation.
In addition, the agreement provides Mr. Hilton with:
* payments, including a tax gross up, to purchase life insurance in a
coverage amount equal to $5 million;
* payments, including a tax gross up, to purchase disability insurance
providing coverage benefits of approximately $20,000 per month;
* a supplemental savings plan enabling deferred compensation in excess
of current 401(k) limitations; and
* supplemental retirement benefits to provide him with payments equal to
60% of his final five years base salary beginning at age 65 and
continuing through his death.
NON-COMPETE AND SEVERANCE PROVISIONS. The new employment agreement contains
non-compete provisions restricting Mr. Hilton from engaging in the homebuilding
and home sales business (subject to certain defined exceptions), hiring
Meritage's employees, and soliciting its customers and suppliers for a competing
business or otherwise attempting to induce any customer or supplier to
discontinue or materially modify its relationship with Meritage. The
applicability and length of the non-compete provision is interrelated with the
Company's severance obligations under the employment agreement, which contains
the following provisions:
1. If the Company discharges Mr. Hilton for cause, no severance payment
is required and the non-compete provisions are applicable for two
years.
2. If the Company discharges Mr. Hilton without cause or he resigns for
good reason, the Company will be obligated to pay:
* his base salary for two years;
* two times his annual performance bonus based on the average bonus
for the preceding two years; and
* COBRA premiums for two years or the period required by law,
whichever is shorter.
14
The Company's severance obligations listed in this item 2 are
contingent upon Mr. Hilton agreeing to a two year non-compete period.
In addition, all stock options granted to Mr. Hilton during the term
of the agreement would accelerate and become vested and he would have
one year to exercise those options. Mr. Hilton also has stock options
that were granted prior to July 1, 2002 that include certain
acceleration provisions. If the Company discharges Mr. Hilton without
cause, or he resigns for good reason, he may exercise any stock
options granted prior to the new employment agreement to the extent
already vested or to the extent they vest within three months of
termination.
3. If Mr. Hilton voluntarily resigns his employment (other than for good
reason), at its election, the Company will make severance payments,
and Mr. Hilton will be subject to a non-compete as follows:
* If the Company elects a two year non-compete period, it will pay
Mr. Hilton (i) his base salary for two years, (ii) two times his
annual performance bonus based on the average bonus for the
preceding two years, and (iii) COBRA premiums for two years or
the period required by law, whichever is shorter.
* If the Company elects a one year non-compete period, it will pay
Mr. Hilton (i) his base salary for one year, (ii) one times his
annual performance bonus based on the average bonus for the
preceding two years, and (iii) COBRA premiums for two years or
the period required by law, whichever is shorter.
The Company also has an employment agreement with Larry W. Seay, the chief
financial officer, which provides for an initial term through December 31, 2003.
Mr. Seay's agreement is designed to provide for a base salary and an annual
bonus based on the achievement of specific performance objectives. Compensation
is subject to continuing employment and standard employment policies. If Mr.
Seay is terminated without cause or he terminates his employment due to a
demotion in position, he will be entitled to receive:
* an amount equal to 75% of his base salary;
* 75% of his average bonus for the previous three fiscal years; and
* acceleration of vesting of his stock options as if he held them
through the end of the following fiscal year.
CHANGE OF CONTROL ARRANGEMENTS
We have senior executive severance agreements with Messrs. Hilton, Landon,
Seay and Morgan. Under these severance agreements, the executive officer is
entitled to a severance payment if his employment is terminated by us without
cause within two years following a change of control event (or, in the case of
Messrs. Hilton, 90 days prior thereto). In addition, the executive officer is
entitled to the severance payment if he terminates his employment for good
reason within two years following a change in control event. The severance
payment equals the sum of:
15
* for Mr. Hilton, three times his base salary (as defined) for Mr.
Landon, two times his base salary (as defined), and for Messrs. Seay
and Morgan, one times their base salary (as defined);
* for Mr. Hilton, three times his annual incentive compensation (as
defined), for Mr. Landon, two times his annual incentive compensation
(as defined), and for Messrs. Seay and Morgan, one times their annual
incentive compensation (as defined); and
* immediate vesting of all their stock options.
16
REPORT OF THE AUDIT COMMITTEE
THE FOLLOWING REPORT OF THE AUDIT COMMITTEE DOES NOT CONSTITUTE SOLICITING
MATERIAL AND SHOULD NOT BE DEEMED FILED OR INCORPORATED BY REFERENCE INTO ANY
COMPANY FILING UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT
OF 1934, EXCEPT TO THE EXTENT MERITAGE SPECIFICALLY INCORPORATES THIS REPORT.
It is the duty of the Audit Committee to provide independent, objective
oversight of Meritage's accounting functions and internal controls. The Audit
Committee is composed of independent directors and acts under a written charter
that sets forth the audit related functions the committee is to perform. The
Board of Directors has adopted a written charter for the Audit Committee. The
audit functions of the Audit Committee are to:
* serve as an independent and objective party to monitor Meritage's
financial reporting process and internal controls;
* review and appraise the audit efforts of Meritage's independent
accountants; and
* provide an open avenue of communication among the independent
accountants, financial and senior management, and the Board of
Directors.
The Audit Committee meets with management periodically to consider the
adequacy of Meritage's internal controls and the objectivity of its financial
reporting. We discuss these matters with our independent auditors and with
appropriate company financial personnel. We regularly meet privately with the
independent auditors, who have unrestricted access to the Committee. We also
recommend to the Board the appointment of the independent auditors and review
periodically their performance and independence from management. We have
considered the provision of additional services by our independent auditors and
believe that the provision of such additional services does not adversely impact
their independence.
Although the Committee reviews Meritage's financing plans and reports
recommendations to the full Board for approval, management has primary
responsibility for our financial statements and the overall reporting process,
including the Company's internal controls. The independent auditors audit the
annual consolidated financial statements prepared by management, express an
opinion as to whether those consolidated financial statements fairly present the
financial position, results of operations and cash flows of Meritage in
conformity with accounting principles generally accepted in the United States of
America and discuss with us any issues they believe should be raised with us.
This year, we reviewed Meritage's audited consolidated financial statements
and met with both management and KPMG LLP, our independent auditors, to discuss
those consolidated financial statements. Management has represented to us that
the consolidated financial statements were prepared in accordance with
accounting principles generally accepted in the United States of America. We
have received from and discussed with KPMG LLP the written disclosure and the
letter required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees). These items relate to that firm's
independence from Meritage. We also discussed with KPMG LLP those matters
required to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees). Based on these reviews and discussions,
we recommended to the Board that Meritage's audited financial statements be
included in its Annual Report on Form 10-K for the fiscal year ended December
31, 2002.
Peter L. Ax - Chairman
Robert G. Sarver
Raymond Oppel
17
PERFORMANCE GRAPH
The chart below graphs our performance in the form of cumulative total
return to stockholders for the past five years. Our total return is compared to
that of the Standard and Poor's 500 Index, the Peer Group and the peer group
reported in our last proxy statement (the "Old Peer Group"). We expanded our
peer group in 2002 to maintain consistency with the group our Board of Directors
uses for purposes of calculating certain components of our Co-CEO's annual
performance bonus.
The comparison assumes $100 was invested on December 31, 1997 in Meritage
common stock and in each of the other indices and assumes reinvestment of
dividends.
AS OF DECEMBER 31,
--------------------------------------------
1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ----
Meritage Corporation 100 101 90 307 423 555
S&P 500 Index 100 127 151 136 118 91
Peer Group (1) 100 104 90 160 223 260
Old Peer Group (2) 100 112 87 162 212 263
[GRAPH]
(1) The Peer Group consists of the following companies: Beazer Homes USA, Inc.,
Dominion Homes, Inc. Hovnanian Enterprises, Inc., MDC Holdings, Inc.,
Ryland Group, Inc., Toll Brothers, Inc., Standard-Pacific Corporation,
Technical Olympic USA, Inc., M/I Schottenstein Homes, Inc., WCI
Communities, Inc. and William Lyon Homes.
(2) The Old Peer Group consists of the same companies with the exclusion of
Dominion Homes, Technical Olympics, WCI and William Lyon Homes. The line
graph itself does not include the Old Peer Group because the returns for
that group cumulatively and during each of the five years represented are
substantially the same as the returns for the new Peer Group.
18
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Executive officers, directors and "beneficial owners" of more than ten
percent of our common stock must file initial reports of ownership and reports
of changes in ownership with the Securities and Exchange Commission under
Section 16(a). Based solely on review of the copies of such forms furnished to
us, or representations that no forms were required, we believe that during our
preceding fiscal year all Section 16(a) filing requirements applicable to our
officers, directors and greater than ten percent beneficial owners were complied
with, with the exception of John R. Landon, our Co-CEO, who filed a report in
April 2002, related to the sale of 200 shares in March 2002; Richard T. Morgan,
a corporate officer, who filed a report in February 2003 related to the receipt
of a stock award of 152 shares of Meritage common stock in December 2002; and
Vicki L. Biggs, a corporate officer, who filed a report in February 2003 related
to the receipt of a stock award of 76 shares of Meritage common stock in
December 2002. In all cases, forms were filed within two months of the
transaction date.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since 1997, we have leased office space in Plano, Texas from Home Financial
Services, a Texas partnership owned by John and Eleanor Landon. The lease
expires May 15, 2005. Rents paid to the partnership were $225,182 in 2002 and
$193,771 in 2001. Scheduled rent payments in 2003 are approximately $235,000.
We paid legal fees to Tiffany & Bosco, P.A. of approximately $329,900 in
2002 and $420,000 in 2001. We paid legal fees to Greenberg Traurig, LLP of
approximately $102,500 in 2002. C. Timothy White is a partner of Greenberg
Traurig, LLP and was a partner of Tiffany Bosco, P.A. prior to October 2002.
William Cleverly resigned as a managing director effective March 18, 1999
and as a director in 2002. Mr. Cleverly also serves as a consultant to us. In
connection with Mr. Cleverly's resignation as a managing director in 1999,
Meritage and Mr. Cleverly entered into a separation and consulting agreement.
The separation was deemed a termination without cause under Mr. Cleverly's
employment agreement. For three years from the effective date of the separation
agreement, Mr. Cleverly agreed to consult on our new product development and
other areas agreed upon by the parties. The separation agreement contained a
non-compete provision that prohibited Mr. Cleverly from competing with us for
three years following the effective date, subject to various exceptions. In
consideration for Mr. Cleverly's agreement not to compete, he was paid a total
of $285,000 in quarterly installments of $23,750 through March 31, 2002. In
connection with the separation agreement, both Mr. Cleverly and Meritage
released the other party from any liabilities or obligations either party had or
may have against such party in the future, subject to certain exceptions. In
2002 we purchased 163 lots for development in Arizona from a business controlled
by Cleverly. The total amount paid for the lots was approximately $7.4 million.
We purchased 77 lots at a cost of approximately $3.5 million from this same
business in 2001.
During 2002, we chartered an aircraft from a company in which Steven J.
Hilton has an ownership interest. The total amount paid for the charter service
in 2002 was approximately $128,000.
In 2002 we entered into a contract with a limited partnership to acquire a
parcel of land in Tucson, Arizona. The purchase price of the land is
approximately $4.6 million. One of our directors, Robert G. Sarver, has an
indirect 5% beneficial interest in this parcel of land through his investment in
a partnership. The company anticipates it will acquire this parcel of land in
2003. In addition, during 2002 and 2001, we chartered an aircraft from a company
owned by Mr. Sarver. The total amount paid for the charter service during 2002
was $27,604. We paid $101,000 for this charter service in 2001.
One of our directors, Ray Oppel, has minority limited partner investments
in four limited partnerships that have entered into landbanking transactions
with us. Mr. Oppel's partnership ownership percentage in these entities ranges
19
from 21.5% to 34.2%. Mr. Oppel also has a 7.5% limited partnership interest in a
joint venture that sells lots to Hammonds Homes, which agreement was made prior
to our acquisition of Hammonds. By the end of 2001, Mr. Oppel discontinued
making new investments in landbanking transactions that involved sales to
Meritage. During 2002, we acquired 175 lots at a cost of approximately $14.1
million from these partnerships. We anticipate that in 2003 we will acquire
additional lots from these partnerships pursuant to the existing option
contracts and agreements. However, as the amount and timing of acquisitions is
subject to a number of factors, including factors within and outside the control
of Meritage, the exact amount of purchases in a given period that will be made
by the partnerships Mr. Oppel has invested in, cannot be reasonably estimated.
Management believes that the terms and fees negotiated for all transactions
listed above are no less favorable than those that could be negotiated in arm's
length transactions.
INDEPENDENT AUDITORS
KPMG LLP served as our principal independent auditors for the fiscal year
ended December 31, 2002 and the firm has been appointed as our independent
auditors for the fiscal year ending December 31, 2003. We expect representatives
of KPMG LLP to be present at our Annual Meeting to respond to appropriate
questions, and they will be given an opportunity to make a statement if they
wish to.
The following table presents fees for professional audit services rendered
by KPMG LLP for the audit of our annual financial statements for 2002 and 2001,
and fees billed for other services rendered by KPMG LLP.
2002 2001
-------- --------
Audit Fees $238,245 $150,000
Audit Related Fees (1) 134,074 110,808
-------- --------
Audit and Audit Related Fees 372,319 260,808
Tax Fees (2) 119,893 240,845
All Other Fees (3) -- 24,186
-------- --------
Total fees $492,212 $525,839
======== ========
(1) Audit related fees consisted principally of fees for services related to
SEC filings and related research, the 2002 acquisitions of Hammonds Homes
and Perma-Bilt Homes, our 2002 equity offering and the audit of our 401(k)
Plan.
(2) Tax fees consisted of fees for income tax consulting and tax compliance,
including preparation of our state and federal income tax returns.
(3) All other fees consisted of fees for management advisory services.
STOCKHOLDER PROPOSALS
The Board of Directors or Nominating/Governance Committee will consider
nominations from stockholders for the class of directors whose terms expire at
the year 2004 Annual Meeting. Nominations must be made in writing to our
Secretary, received at least 90 days prior to the 2004 Annual Meeting, and
contain sufficient background information concerning the nominee's
qualifications. Our Secretary must receive any other stockholder proposals for
the 2004 Annual Meeting by December 18, 2003 to be considered for inclusion in
our 2004 Proxy Statement. Proposals to be presented at the 2004 Annual Meeting
that are not intended for inclusion in the Proxy Statement must be submitted in
accordance with our Bylaws. A nomination or other proposal will be disregarded
if it does not comply with the above procedures.
20
OTHER MATTERS
The Board of Directors is not aware of any other matters to be presented at
the meeting. If any other business should properly come before the meeting, the
proxy holders will vote according to their best judgment.
ELECTRONIC DELIVERY OF FUTURE ANNUAL MEETING MATERIALS
We are offering our stockholders the opportunity to consent to receiving
our future proxy materials and annual reports electronically by providing the
appropriate information when voting via the Internet. Electronic delivery could
save us a significant portion of the costs associated with printing and mailing
annual meeting materials, and we hope that our stockholders find this service
convenient and useful. If you consent and Meritage elects to deliver future
proxy materials and/or annual reports to you electronically, then we will send
you a notice (either by electronic mail or regular mail) explaining how to
access these materials but will not send you paper copies of these materials
unless you request them. We may also choose to send one or more items to you in
paper form despite your consent to receive them electronically. Your consent
will be effective until you revoke it by terminating your registration at the
website WWW.INVESTORDELIVERY.COM if you hold shares at a brokerage firm or bank
participating in the ADP program, or by contacting Mellon Investor Services if
you hold shares in your own name.
By consenting to electronic delivery, you are stating to Meritage that you
currently have access to the Internet and expect to have access in the future.
If you do not have access to the Internet, or do not expect to have access in
the future, please do not consent to electronic delivery because we may rely on
your consent and not deliver paper copies of future annual meeting materials. In
addition, if you consent to electronic delivery, you will be responsible for
your usual Internet charges (e.g., online fees) in connection with the
electronic delivery of the proxy materials and annual report.
Meritage Corporation
LARRY W. SEAY
Chief Financial Officer, Vice
President-Finance and Secretary
April 18, 2003
21
EXHIBIT A
MERITAGE CORPORATION
AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS CHARTER
I. PURPOSE AND AUTHORITY
The primary function of the Audit Committee is to assist the Board of Directors
in fulfilling its oversight responsibilities by reviewing: the financial reports
and other financial information provided by the Corporation to any governmental
body or the public; the Corporation's systems of internal controls regarding
finance, accounting, legal compliance and ethics that management and the Board
have established; the Corporation's internal audit function and the
Corporation's auditing, accounting and financial reporting processes generally.
Consistent with this function, the Audit Committee should encourage continuous
improvement of, and should foster adherence to the Corporation's policies,
procedures and practices at all levels. The Audit Committee shall have the sole
authority to appoint or replace the independent accountants and shall approve
all audit engagement fees and terms and all significant non-audit engagements
with the independent accountants. The Audit Committee shall consult with
management but shall not delegate these responsibilities.
The Audit Committee's primary duties and responsibilities are to:
* Serve as an independent and objective party to monitor the
Corporation's financial reporting process, internal control system and
internal audit function.
* Engage the external auditors and the outsourced internal auditors as
well as the tax compliance work.
* Review and appraise the audit efforts of the Corporation's independent
accountants and internal audit function.
* Provide an open avenue of communication among the independent
accountants, financial and senior management, the internal auditing
department, and the Board of Directors.
* Review the independent auditor's qualifications and independence.
* Review the compliance by the Corporation with legal and regulatory
requirements.
* Prepare the report required by the rules of the Securities and
Exchange Commission to be included in the Corporation's annual proxy
statement.
* Make regular reports to the Board.
The Audit Committee will primarily fulfill these responsibilities by carrying
out the activities enumerated in Section IV of this Charter.
The Audit Committee shall have the authority, to the extent it deems necessary
or appropriate, to retain special legal, accounting or other consultants to
advise the Audit Committee. The Audit Committee may request any officer or
employee of the Corporation's or the Corporation's outside counsel or
independent auditor to attend a meeting of the Audit Committee or to meet with
any members of, or consultants to, the Audit Committee.
1
II. COMPOSITION
The Audit Committee shall be comprised of three or more directors. The members
of the Audit Committee shall meet the independence and experience requirements
of the NYSE.
The following Independence criteria (which is consistent with SEC and NYSE
rules) shall apply to each Audit Committee member:
* Employees. A director who is an employee (including non-employee
executive officers) of the company or any of its affiliates may not
serve on the Audit Committee until five years following the
termination of his or her employment. In the event the employment
relationship is with a former parent or predecessor of the
Corporation, the director could serve on the audit committee after
five years following the termination of the relationship between the
Corporation and the former parent or predecessor.
* Business Relationship. A director who has a material relationship with
the Corporation may not serve on the Audit Committee. In making a
determination regarding the independence of a director pursuant to
this paragraph, the Nominating/Governance Committee should consider,
among other things, the materiality of the relationship to the
Corporation, to the director, and if applicable, to the organization
with which the director is affiliated. "Business relationships" can
include commercial, industrial, banking, consulting, legal, accounting
and other relationships. A director can have this relationship
directly with the company, or the director can be a partner, officer
or employee or an organization that has such a relationship.
* Cross Compensation Committee Link. A director who is employed as an
executive of another Corporation where any of the Corporation's
executives serves on that company's compensation committee may not
serve on the Audit Committee.
* Immediate Family. A director who is an immediate family member of an
individual who falls within any of the above categories cannot serve
on the Audit Committee until after five years following the
termination of such employment relationship.
* Large Stockholders. A director who holds 20% or more of the
Corporation's stock (or who is a general partner, controlling
shareholder or other of any such holder) cannot chair or be a voting
member of the Audit Committee.
All members of the Committee shall have a working familiarity with basic finance
and accounting practices, and the Chair shall be a "financial expert." Audit
Committee members may enhance their familiarity with finance and accounting by
participating in educational programs conducted by the Corporation or an outside
consultant.
Unless a Chair is elected by the full Board, the members of the Committee may
designate a Chair by majority vote of the full Committee membership.
III. MEETINGS
The Committee shall meet at least four times annually, or more frequently as
circumstances dictate. As part of its job to foster open communication, the
Committee should meet at least annually with management and the independent
accountants in separate executive sessions to discuss any matters that the
Committee or each of these groups believe should be discussed privately. In
addition, the Committee or at least its Chair should meet with the independent
accountants and management quarterly to review the Company's financial
statements consistent with IV.3. below.
2
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
DOCUMENTS/REPORTS REVIEW
1. Review and update this Charter periodically, at least annually, as
conditions dictate. The Audit Committee shall annually review the
Committee's own performance.
2. Review the organization's annual financial statements and any reports
or other financial information submitted to any governmental body, or
the public, including any certification, report, opinion or review
rendered by the independent accountants, and recommend whether the
audited financial statements shall be included in the Corporation's
Form 10-K.
3. Review the 10-Q with financial management and the independent
accountants, if necessary, prior to its filing or prior to the release
of earnings. The Chair of the Committee may represent the entire
Committee for purposes of this review.
INDEPENDENT ACCOUNTANTS
4. Select the independent accountants, considering independence and
effectiveness and approve the fees and other compensation to be paid
to the independent accountants.
5. Review the performance of the independent accountants and approve any
proposed discharge of the independent accountants when circumstances
warrant.
6. Periodically consult with the independent accountants out of the
presence of management about internal controls and the fullness and
accuracy of the organization's financial statements.
7. Review the experience and qualifications of the senior members of the
independent accountant team.
8. Obtain and review a report from the independent auditor at least
annually regarding (a) the accountant's internal quality-control
procedures, (b) any material issues raised by the most recent
quality-control review, or peer review, of the firm, or by any inquiry
or investigation by governmental or professional authorities within
the preceding five years respecting one or more independent audits
carried out by the firm, (c) any steps taken to deal with any such
issues, and (d) all relationships between the independent accountant
and the Corporation. Evaluate the qualifications, performance and
independence of the independent accountant, including considering
whether the accountant's quality controls are adequate and the
provision of non-audit services is compatible with maintaining the
accountant's independence, and taking into account the opinions of
management and the internal auditor. The Audit Committee shall present
its conclusions to the Board and, as necessary, recommend that the
Board take additional action to satisfy itself of the qualifications,
performance and independence of the accountants.
9. Consider whether, in order to assure continuing auditor independence,
it is appropriate to adopt a policy of rotating the lead audit partner
or even the independent accounting firm itself on a regular basis.
10. Recommend to the Board policies for the Corporation's hiring of
employees or former employees of the independent accountant who were
engaged on the Corporation's account.
3
11. Discuss with the national office of the independent accountant issues
on which they were consulted by the Corporation's audit team and
matters of audit quality and consistency.
12. Meet with the independent accountant prior to the audit to discuss the
planning and staffing of the audit.
FINANCIAL REPORTING PROCESSES
13. Discuss with management and the independent accountants significant
financial reporting issues and judgments made in connection with the
preparation of the Corporation's financial statements, including any
significant changes in the Corporation's selection or application of
accounting principles, any major issues as to the adequacy of the
Corporation's internal controls, the development, selection and
disclosure of critical accounting estimates, and analyses of the
effect of alternative assumptions, estimates or GAAP methods on the
Corporation's financial statements.
14. Discuss with management the Corporation's earnings press releases,
including the use of "pro forma" or "adjusted" non-GAAP information,
as well as financial information and earnings guidance provided to
analysts and rating agencies.
15. Discuss with management and the independent accountants the effect of
regulatory and accounting initiatives as well as off-balance sheet
structures on the Corporation's financial statements.
16. Discuss with management the Corporation's major financial risk
exposures and the steps management has taken to monitor and control
such exposures, including the Corporation's risk assessment and risk
management policies.
PROCESS IMPROVEMENT
17. Establish regular and separate systems of reporting to the Audit
Committee by each of management and the independent accountants any
significant judgments made in management's preparation of the
financial statements and the view of each as to appropriateness of
such judgments.
18. Following completion of the annual audit, review separately with each
of management and the independent accountants any significant
difficulties encountered during the course of the audit, including any
restrictions on the scope of work or access to required information.
19. Review any significant disagreements among management and the
independent accountants in connection with the preparation of the
financial statements.
20. Review with the independent accountants and management the extent to
which changes or improvements in financial or accounting practices, as
approved by the Audit Committee, have been implemented. (This review
should be conducted at an appropriate time subsequent to
implementation of changes or improvements, as decided by the Audit
Committee.)
ETHICAL AND LEGAL COMPLIANCE
21. Review and update periodically the Corporation's employee handbook and
Code of Ethics and ensure that management has established a system to
enforce these policies.
4
22. Review management's monitoring of the Corporation's compliance with
the organization's conduct policies, and ensure that management has
the proper review system in place to ensure that Corporation's
financial statements, reports and other financial information
disseminated to governmental organizations, and the public, satisfy
legal requirements.
23. Review, with the organization's counsel, legal compliance matters
including corporate securities trading policies.
24. Review, with the organization's counsel, any legal matter that could
have a significant impact on the Corporation's financial statements.
25. Perform any other activities consistent with this Charter, the
Corporation's Bylaws and governing law, as the Audit Committee or the
Board deems necessary or appropriate
5
EXHIBIT B
MERITAGE CORPORATION
EXECUTIVE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS CHARTER
I. PURPOSE AND AUTHORITY
The Executive Compensation Committee (the "Committee") is responsible to the
Board of Directors and reports regularly to the Board on the activities of the
Committee which includes approving all executive compensation arrangements. The
Committee has sole authority to retain and terminate any consulting firm used to
advise the Committee, when appropriate, including sole authority to approve the
consulting firm's fees and other retention terms. The Committee may when
appropriate form and delegate authority to subcommittees comprised of
independent directors.
II. COMPOSITION
The Committee shall be comprised of three or more Directors, all of whom are
independent within the meaning of applicable New York Stock Exchange rules.
Members of the Committee are selected by the full Board of Directors upon
recommendation of the Nominating/Governance Committee and may be removed and
replaced by the full Board at any time.
III. RESPONSIBILITIES AND DUTIES
1. Establish a compensation philosophy for the Corporation with regard to
salaries and other compensation of executive officers which considers
business and financial objectives, compensation provided by comparable
companies and/or such other information as may be deemed appropriate.
2. Approve all base salaries and other compensation of executive officers
who are in a position to exercise discretionary judgment which can
substantially influence the affairs of the Corporation.
3. Review and make recommendations on changes in major fringe benefit
programs.
4. Approve awards under all stock option plans of the Corporation.
5. Annually review and approve corporate goals and objectives relevant to
the Chief Executive Officer's compensation, evaluate the Chief
Executive Officer's performance in light of those goals and
objectives, and recommend to the Board, the Chief Executive Officer's
compensation levels based on this evaluation. In determining any
long-term incentive component of the Chief Executive Officer's
compensation, the Committee shall consider the Corporation's
performance and relative stockholder return, the value of similar
incentive awards to chief executive officers and comparable companies,
and the awards given to the Chief Executive Officer in past years. In
addition, the Committee shall comply with the requirements of Section
162(m) of the Internal Revenue Code and maintain deductibility of all
executive compensation, except in circumstances where the Committee
determines on an informed basis that it is in the best interest of the
Corporation and the stockholders to take actions with regard to
executive compensation that do not qualify for tax deductibility.
6. Act on behalf of the Board in administering compensation plans
approved by the Board and/or stockholders, in a manner consistent with
the terms of such plans, including, as applicable, review of
performance target goals established before start of the relevant plan
year and determination of when performance goals have been achieved at
the end of the plan year.
1
7. Review and recommend for approval new incentive plans to the Board.
8. Annually review the outside Directors compensation program for
competitiveness and plan design. Recommend changes as appropriate to
the Board.
9. Consult with and advise management on major policies affecting
employee relations.
10. Ensure that a management succession program for the Chief Executive
Officer(s) and selected senior executives is developed and presented
annually to the Board.
11. Annually issue a summary report suitable for submission to the
stockholders in the Corporation's annual proxy statement.
12. Perform such other duties and functions as from time to time may be
prescribed by the Board.
13. Review and update the Committee's Charter on at least an annual basis.
14. Regularly report to the Board.
15. Conduct a Committee self-evaluation on at least an annual basis,
consistent with the self-assessment process reflected in the
Corporation's Corporate Governance Principles and Guidelines.
2
EXHIBIT C
MERITAGE CORPORATION
NOMINATING/GOVERNANCE COMMITTEE
OF THE BOARD OF DIRECTORS CHARTER
I. PURPOSE AND AUTHORITY
The Committee is responsible to the Board of Directors and reports regularly to
the Board on activities of the Committee, which include (1) assisting the Board
by identifying individuals qualified to become Board members, and recommending
to the Board director nominees for the next annual meeting of stockholders, (2)
recommending to the Board Corporate Governance Principles and Practices
applicable to the Corporation, (3) leading the Board in its annual review of the
Board's performance, and (4) recommending to the Board director nominees for the
Executive Compensation Committee and the Audit Committee. The Committee has sole
authority to retain and terminate any search firm used to identity director
candidates, including sole authority to approve the search firm's fees and other
retention terms. The Committee may when appropriate form and delegate authority
to subcommittees comprised of Independent Directors.
II. COMPOSITION
The Committee shall be comprised of Directors who are independent within the
meaning of applicable New York Stock Exchange rules ("Independent Directors").
Non-management Directors who are not Independent Directors will be entitled to
notice of, and may attend, all meetings of the Committee. Committee Members are
selected by the full Board and may be removed and replaced by the full Board at
any time. The Chair of the Committee is selected by the Independent Directors
and may be removed at any time by a majority of the Independent Directors.
III. RESPONSIBILITIES
The Committee shall have the following specific responsibilities and such other
responsibilities as from time to time may be prescribed by the Board of
Directors:
BOARD ORGANIZATION, MEMBERSHIP AND FUNCTIONS
1. Develop criteria for director nominees.
2. Review and recommend director candidates for the Board.
3. Recommend a class of directors for election at the Annual Meeting of
Stockholders.
4. Make recommendations to the Board regarding director retirement age,
tenure and removal for cause.
5. Assess and monitor, with Board involvement, the performance of the
Board.
6. Review continued appropriateness of Board membership of members who
retire or change their position held at the time of election.
7. Develop and recommend to the full Board a set of corporate governance
principles and practices applicable to the Corporation (the "Corporate
Governance Principles and Practices"), addressing, at a minimum, the
following matters:
1
* Director qualification standards, including policies regarding
director tenure, retirement, and succession;
* Director responsibilities, including basic duties and
responsibilities with respect to attendance at Board and
committee meetings and advance review of meeting materials;
* Director access to management and, as necessary or appropriate,
independent advisors;
* Director orientation and continuing education;
* Management succession, including policies and principles for
Chief Executive Officer selection and performance review, as well
as policies regarding succession in the event of an emergency or
retirement of the Chief Executive Officer(s); and
* Board and committee self-assessments on at least an annual basis
to determine whether the Board and its committees are functioning
effectively.
8. Monitor compliance with the Corporation's Corporate Governance
Principles and Practices.
9. Conduct a Committee self-evaluation on at least an annual basis,
consistent with the self-assessment process reflected in the
Corporation's Corporate Governance Principles and Practices.
10. Review and update the Committee's Charter on at least an annual basis.
COMMITTEE STRUCTURE AND MEMBERSHIP
Review the Charters of the Executive Compensation Committee and the Audit
Committee and make recommendations regarding the number, structure,
membership and function of such committees.
2
EXHIBIT D
MERITAGE CORPORATION
CORPORATE GOVERNANCE PRINCIPLES AND PRACTICES
DIRECTOR QUALIFICATIONS
The Board of Directors (the "Board") will have a majority of directors who
meet the criteria for independence required by the New York Stock Exchange. The
Nominating/Governance Committee is responsible for reviewing with the Board, on
an annual basis, the requisite skills and characteristics of new Board members
as well as the composition of the Board as a whole. This assessment will include
members' qualification as independent, as well as consideration of age, skills,
and experience in the context of the needs of the Board. Nominees for
directorship will be selected by the Nominating/Governance Committee in
accordance with the policies and principles in its charter. The invitation to
join the Board should be extended by the Board itself, by the Chairman of the
Nominating/Governance Committee and the Chairman of the Board.
The Board presently has seven members. The Board believes that a size of
six to ten is an appropriate size.
The Board does not believe it should establish term limits. While term
limits could help insure that there are fresh ideas and viewpoints available to
the Board, they hold the disadvantage of losing the contribution of directors
who have been able to develop over time increasing insight into the Corporation
and its operations and, therefore, provide an increasing contribution to the
Board as a whole through this "institutional knowledge." As an alternative to
term limits, the Nominating/Governance Committee will review from time to time
each director's continuation on the Board.
DIRECTOR RESPONSIBILITIES
The basic responsibility of the directors is to exercise their business
judgment to act in what they reasonably believe to be in the best interests of
the Corporation and its Stockholders. In discharging that obligation, directors
should be entitled to rely on the honesty and integrity of the Corporation's
senior executives and its outside advisors and auditors. The directors shall
also be entitled to have the Corporation purchase directors' and officers'
liability insurance on their behalf, to the benefits of indemnification to the
fullest extent permitted by law and the Corporation's charter, bylaws and any
indemnification agreements, and to exculpation as provided by Maryland law and
the Corporation's charter.
Directors are expected to attend Board meetings and meetings of committees
on which they serve, and to spend the time needed and meet as frequently as
necessary to properly discharge their responsibilities. Information and data
that are important to the Board's understanding of the business to be conducted
at a Board or committee meeting should generally be distributed to the directors
before the meeting, and directors should review these materials in advance of
the meeting.
The Chairman will establish the agenda for each Board meeting. Each Board
member is free to suggest the inclusion of items on the agenda. Each Board
member is free to raise at any Board meeting subjects that are not on the agenda
for that meeting. The Board shall advise and participate in the Corporation's
long range strategic plans and such issues should be addressed at least one
Board meeting each year.
The non-management directors will meet in executive session at least
quarterly. The director who presides at these meetings will be chosen by the
independent directors, and his/her name will be disclosed in the Corporation's
annual proxy statement.
1
BOARD COMMITTEES
The Board will have at all times an Audit Committee, an Executive
Compensation Committee and a Nominating/Governance Committee. All of the members
of these committees will be independent directors under the criteria established
by the New York Stock Exchange.
Committee members will be appointed by the Board upon recommendation of the
Nominating/Governance Committee. The Board will not mandate rotation of the
Committee members, but will consider from time to time the membership of the
Committees.
Each committee will have its own written charter. The charters will set
forth the authority and responsibilities of the committees as well as
qualifications for committee membership, procedures for committee member
appointment and removal, committee structure and operations and committee
reporting to the Board. The charters will also provide that each committee will
annually evaluate its performance.
DIRECTOR ACCESS TO OFFICERS AND EMPLOYEES
Directors have full and free access to officers and employees of the
Corporation. Any meetings or contacts that a director wishes to initiate may be
arranged through the Chief Executive Officer or directly by the director. The
directors will use their judgment to ensure that any such contact is not
disruptive to the business operations of the Corporation and will, unless
inappropriate, copy the Chief Executive Officer on any written communications
between a director and an officer or employee of the Corporation.
DIRECTOR COMPENSATION
The form and amount of director compensation will be determined by the
Executive Compensation Committee in accordance with the policies and principles
set forth in its charter, and the Executive Compensation Committee will conduct
an annual review of director compensation. The Executive Compensation Committee
will consider that directors' independence may be jeopardized if director
compensation and perquisites exceed customary levels, if the Corporation makes
substantial charitable contributions to organizations with which a director is
affiliated, or if the Corporation enters into consulting contracts with, or
provides other indirect forms of compensation to, a director or an organization
with which the director is affiliated.
DIRECTOR ORIENTATION AND CONTINUING EDUCATION
All new directors should participate in an orientation program sponsored by
the Corporation. This orientation will be designed to familiarize new directors
with the Corporation's strategic plans, its significant financial, accounting
and risk management issues, its compliance programs, its Code of Ethics, its
principal officers, its internal audit function, and its independent auditors.
CHIEF EXECUTIVE OFFICER EVALUATION AND MANAGEMENT SUCCESSION
The Executive Compensation Committee will conduct an annual review of the
Chief Executive Officers' performance, as set forth in its charter. The Board
will review the Executive Compensation Committee's report in order to ensure
that each Chief Executive Officer is providing the best leadership for the
Corporation in the long- and short-term.
The Board of Directors shall be responsible to approve a succession plan
for the Chief Executive Officer(s) and the Senior Officers of the Corporation.
The entire Board will work with the Nominating/Governance Committee to nominate
and evaluate potential successors to the Chief Executive Officer.
2
ANNUAL PERFORMANCE EVALUATION
The Board will conduct an annual self-evaluation to determine whether it
and its committees are functioning effectively. The Nominating/Governance
Committee will receive comments from all directors and report annually to the
Board with an assessment of the Board's performance. This will be discussed with
the full Board following the end of each fiscal year. The assessment will focus
on the Board's contribution to the Corporation and specifically focus on areas
in which the Board or management believes that the Board could improve.
3
Mark Here for [ ]
Address Change
or Comments
PLEASE SEE REVERSE SIDE
FOR WITHHELD THIS PROXY, WHEN PROPERLY EXECUTED WILL
FOR ALL BE VOTED AS YOU SPECIFY ABOVE. IF NO
ELECTION OF CLASS II DIRECTORS: [ ] [ ] SPECIFIC VOTING DIRECTIONS ARE GIVEN BY
VOTE FOR nominees listed below YOU, THIS PROXY WILL BE VOTED FOR THE
DIRECTOR NOMINEES LISTED AND, WITH
01 John R. Landon RESPECT TO SUCH OTHER BUSINESS AS MAY
02 Robert G. Sarver PROPERLY COME BEFORE THE MEETING, IN
03 Peter L. Ax ACCORDANCE WITH THE DISCRETION OF THE
04 C. Timothy White APPOINTED PROXY. PLEASE SIGN, DATE AND
RETURN THIS PROXY PROMPTLY.
WITHHELD FOR:
(Write that nominee's name
in the space provided below.)
_________________________________________ Please disregard if you have previously [ ]
provided your consent decision.
_________________________________________
By checking the box to the right, I
_________________________________________ consent to future delivery of annual
reports, proxy statements, prospectuses
and other materials and shareholder
communications electronically via the
Internet at a webpage which will be
disclosed to me. I understand that the
Company may no longer distribute printed
materials to me from any future
shareholder meeting until such consent
is revoked. I understand that I may
revoke my consent at any time by
contacting the Company's transfer agent,
Mellon Investor Services LLC, Ridgefield
Park, NJ and that costs normally
associated with electronic delivery,
such as usage and telephone charges as
well as any costs I may incur in
printing documents, will be my
responsibility.
SIGNATURE __________________________ SIGNATURE __________________________ DATE ______________
PLEASE SIGN EXACTLY AS NAME(S) APPEAR HEREIN. IF ACTING AS AN EXECUTOR, ADMINISTRATOR, TRUSTEE,
CUSTODIAN, GUARDIAN, ETC., YOU SHOULD SO INDICATE IN SIGNING. IF THE STOCKHOLDER IS A
CORPORATION, PLEASE SIGN THE FULL CORPORATE NAME, BY A DULY AUTHORIZED OFFICER. IF SHARES ARE
HELD JOINTLY, EACH STOCKHOLDER NAMED SHOULD SIGN.
--------------------------------------------------------------------------------
- DETACH HERE FROM PROXY VOTING CARD. -
VOTE BY INTERNET OR TELEPHONE OR MAIL
24 HOURS A DAY, 7 DAYS A WEEK
INTERNET AND TELEPHONE VOTING IS AVAILABLE THROUGH 11PM
EASTERN TIME THE DAY PRIOR TO ANNUAL MEETING DAY.
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES
IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
INTERNET TELEPHONE MAIL
http://www.eproxy.com/mth 1-800-435-6710
Use the Internet to vote your Use any touch-tone telephone to Mark, sign and date
proxy. Have your proxy card in vote your proxy. Have your proxy your proxy card
hand when you access the web OR card in hand when you call. You OR and
site. You will be prompted to will be prompted to enter your return it in the
enter your control number, control number, located in the enclosed postage-paid
located in the box below, to box below, and then follow the envelope.
create and submit an electronic directions given.
ballot.
IF YOU VOTE YOUR PROXY BY INTERNET OR BY TELEPHONE,
YOU DO NOT NEED TO MAIL BACK YOUR PROXY CARD.
YOU CAN VIEW THE ANNUAL REPORT AND PROXY STATEMENT
ON THE INTERNET AT: HTTP://WWW.MERITAGEHOMES.COM
PROXY PROXY
MERITAGE CORPORATION
ANNUAL MEETING OF STOCKHOLDERS - May 21, 2003
The undersigned hereby appoints each of Steven J. Hilton or John R. Landon
proxies with full power of substitution acting unanimously and voting or if only
one is present and voting then that one, to vote the shares of stock of Meritage
Corporation, which the undersigned is entitled to vote, at the Annual Meeting of
Stockholders to be held at the DoubleTree Paradise Valley Resort, 5401 N.
Scottsdale Road, Scottsdale, Arizona 85250 on Wednesday, May 21, 2003 at 9:00
a.m. local time, and at any adjournment or adjournments thereof, with all the
powers the undersigned would possess if present.
IF YOU RETURN YOUR PROPERLY EXECUTED PROXY, WE WILL VOTE YOUR SHARES AS YOU
DIRECT. IF YOU DO NOT SPECIFY ON YOUR PROXY CARD HOW YOU WANT TO VOTE YOUR
SHARES, WE WILL VOTE THEM FOR THE ELECTION OF THE DIRECTOR NOMINEES LISTED IN
PROPOSAL 1 AND IN THE DISCRETION OF THE PROXIES ON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS THEREOF.
PLEASE MARK, SIGN AND DATE THE REVERSE SIDE AND
RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
--------------------------------------------------------------------------------
ADDRESS CHANGE/COMMENTS (MARK THE CORRESPONDING BOX ON THE REVERSE SIDE)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
- DETACH HERE FROM PROXY VOTING CARD. -
YOU CAN NOW ACCESS YOUR MERITAGE ACCOUNT ONLINE.
ACCESS YOUR MERITAGE STOCKHOLDER ACCOUNT ONLINE VIA INVESTOR SERVICEDIRECT (R)
(ISD).
Mellon Investor Services LLC, agent for Meritage Corporation, now makes it easy
and convenient to get current information on your shareholder account. After a
simple and secure process of establishing a Personal Identification Number
(PIN), you are ready to log in and access your account to:
* View account status * View payment history for dividends
* View certificate history * Make address changes
* View book-entry information * Obtain a duplicate 1099 tax form
* Establish/change your PIN
VISIT US ON THE WEB AT HTTP://WWW.MELLONINVESTOR.COM
AND FOLLOW THE INSTRUCTIONS SHOWN ON THIS PAGE.
STEP 1: FIRST TIME USERS - ESTABLISH A PIN
You must first establish a Personal Identification Number (PIN) online by
following the directions provided in the upper right portion of the web screen
as follows. You will also need your Social Security Number (SSN) or Investor ID
available to establish a PIN.
THE CONFIDENTIALITY OF YOUR PERSONAL INFORMATION IS PROTECTED USING SECURE
SOCKET LAYER (SSL) TECHNOLOGY.
* SSN or Investor ID
* PIN
* Then click on the ESTABLISH PIN button
PLEASE BE SURE TO REMEMBER YOUR PIN, OR MAINTAIN IT IN A SECURE PLACE FOR FUTURE
REFERENCE.
STEP 2: LOG IN FOR ACCOUNT ACCESS
You are now ready to log in. To access your account please enter your:
* SSN or Investor ID
* PIN
* Then click on the SUBMIT button
IF YOU HAVE MORE THAN ONE ACCOUNT, YOU WILL NOW BE ASKED TO SELECT THE
APPROPRIATE ACCOUNT.
STEP 3: ACCOUNT STATUS SCREEN
You are now ready to access your account information. Click on the appropriate
button to view or initiate transactions.
* Certificate History
* Book-Entry Information
* Issue Certificate
* Payment History
* Address Change
* Duplicate 1099
FOR TECHNICAL ASSISTANCE CALL 1-877-978-7778 BETWEEN
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