Exhibit 10.12

                            DEFERRED BONUS AGREEMENT

                                 2002 AWARD YEAR

     THIS DEFERRED BONUS AGREEMENT (the "Agreement") is entered into as of March
14, 2003, by Richard T. Morgan (the  "Executive")  and Meritage  Corporation,  a
Maryland corporation (the "Company").

1.   PURPOSE.

     The purpose of this  Agreement is to reward  Executive  for his service for
the Company.

2.   COMPANY CONTRIBUTION.

     The  Company  agrees to make a  "Company  Contribution"  of  $45,455 to the
Deferred  Bonus  Account  established  pursuant  to  Section 3  effective  as of
December  31,  2002.  The  purpose of this  Company  Contribution  is to further
compensate  Executive  for his many years of service to the Company as a tool to
retain the valuable services of the Executive.

3.   DEFERRED COMPENSATION ACCOUNT.

     The Company  shall  maintain a  bookkeeping  account (the  "Deferred  Bonus
Account") to which it shall credit the Company  Contribution  in accordance with
Section  2.  Interest  shall  be  credited  to the  Deferred  Bonus  Account  in
accordance  with  Section  5,  below.  The  Deferred  Compensation  Account is a
bookkeeping  account  only  and  Executive  shall  not  have  any  claim  to any
particular assets of the Company.

4.   VESTING.

     As of the date of this  Agreement,  the  Company  Contribution  credited to
Executive's  Deferred  Bonus Account shall be unvested and subject to forfeiture
on the termination of Executive's  employment for any reason prior to January 1,
2006.  If  Executive  continues  to be  employed  by the  Company on and through
December 31, 2005,  Executive  shall be fully vested in amounts  credited to his
Deferred  Bonus  Account  and his  rights  and  interests  therein  shall not be
forfeitable.

5.   INTEREST.

     Each December 31, the Company shall credit the Deferred  Bonus Account with
interest  calculated  at an annual  rate  equal to 1.5%  plus the prime  rate as
announced  in the WALL  STREET  JOURNAL on the first  business  day of each year
compounded  annually  (or,  if no prime  rate is  announced  in the WALL  STREET
JOURNAL on such date, then on the first day of each year in which the prime rate
is reported in the WALL STREET JOURNAL),  or such other greater interest rate as
determined by the Company in its discretion.

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6.   DISTRIBUTION OF BENEFITS.

     (a)  DISTRIBUTION  OF  BENEFITS.  Payment to  Executive  shall occur within
thirty (30) days of the effective  date of  Executive's  vesting in his Deferred
Bonus  Account.  For  purposes of  determining  the  distributable  amount,  the
Deferred Bonus Account shall be valued through the day prior to the day on which
the Deferred Bonus Account is distributed,  less any claim, debt, reimbursement,
recoupment, or offset the Company may have against Executive.

     (b) IN-SERVICE DISTRIBUTIONS. Executive shall have no right to borrow money
from  his  Deferred  Bonus  Account  nor  shall  he  be  allowed  to  receive  a
distribution except as provided above.

     (c) METHOD OF  DISTRIBUTION.  Distribution of benefits shall be made in one
cash lump sum.

7.   INALIENABILITY OF BENEFITS.

     (a) GENERAL PROHIBITION.  Executive, nor creditors of Executive, shall have
any right to assign, pledge, hypothecate, anticipate or in any way create a lien
upon Executive's interest created under this Agreement.  All payments to be made
to Executive shall be made only upon his personal receipt or endorsement, and no
interest  under this  Agreement  shall be subject to  assignment  or transfer or
otherwise be alienable,  either by voluntary or involuntary  act or by operation
of  law  or  equity,   or  subject  to   attachment,   execution,   garnishment,
sequestration,  levy or  other  seizure  under  any  legal,  equitable  or other
process, or be liable in any way for the debts or defaults of Executive.

     (b) PERMITTED  ARRANGEMENTS.  This Section shall not preclude  arrangements
for the withholding of applicable  taxes from payments under this Agreement,  or
arrangements  for direct  deposit of benefit  payments  to an account in a bank,
savings and loan  association or credit union (provided that such arrangement is
not part of an arrangement constituting an assignment or alienation).

8.   BINDING NATURE OF AGREEMENT.

     This Agreement shall be binding upon the heirs, executors,  administrators,
successors and assigns of any and all interested parties, present and future.

9.   NATURE OF PAYMENTS.

     Executive shall,  for the purpose of this Agreement,  be treated as general
creditors of the Company. Nothing in this Agreement or any action taken pursuant
to  this  Agreement   shall  create  or  be  construed  to  create  a  fiduciary
relationship between the Company and Executive, or any other person.

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10.  DISPUTE RESOLUTION.

     All claims,  disputes  and other  matters in  question  between the parties
arising under this  Agreement  shall be decided in  accordance  with the dispute
resolution provisions stated below:

     (a)  MEDIATION.  Any and  all  disputes  arising  under,  pertaining  to or
touching upon this Agreement,  or the statutory  rights or obligations of either
party hereto,  shall, if not settled by  negotiation,  be subject to non-binding
mediation  before an independent  mediator  selected by the parties  pursuant to
Section 10(d).  Notwithstanding  the  foregoing,  both Executive and Company may
seek  preliminary   judicial  relief  if  such  action  is  necessary  to  avoid
irreparable  damage  during the  pendency of the  proceedings  described in this
Section  10. Any demand for  mediation  shall be made in writing and served upon
the other party to the dispute, by certified mail, return receipt requested,  at
the address  specified in the  signature  blocks of this  agreement.  The demand
shall set forth with  reasonable  specificity  the basis of the  dispute and the
relief sought.  The mediation  hearing will occur at a time and place convenient
to the parties  within 30 days of the date of  selection or  appointment  of the
mediator.

     (b)  ARBITRATION.  In the event  that the  dispute is not  settled  through
mediation,  the  parties  shall then  proceed to binding  arbitration  before an
independent  arbitrator  selected  pursuant to Section 10(d). The mediator shall
not serve as the arbitrator.  EXCEPT AS PROVIDED IN SECTION 10(a),  ALL DISPUTES
INVOLVING  ALLEGED UNLAWFUL  EMPLOYMENT  DISCRIMINATION,  TERMINATION BY ALLEGED
BREACH OF CONTRACT OR POLICY, OR ALLEGED EMPLOYMENT TORT COMMITTED BY COMPANY OR
A REPRESENTATIVE OF COMPANY,  INCLUDING CLAIMS OF VIOLATIONS OF FEDERAL OR STATE
DISCRIMINATION  STATUTES OR PUBLIC  POLICY,  SHALL BE RESOLVED  PURSUANT TO THIS
SECTION  10 AND THERE  SHALL BE NO  RECOURSE  TO COURT,  WITH OR  WITHOUT A JURY
TRIAL. The arbitration hearing shall occur at a time and place convenient to the
parties  within 90 days of selection or  appointment  of the  arbitrator,  or as
otherwise  agreed  to.  The  arbitration   shall  be  governed  by  the  Federal
Arbitration Act, 9 U.S.C.  ss.ss. 1-16 and the National Rules for the Resolution
of Employment Disputes of the American Arbitration Association ("AAA") in effect
on the date of the first notice of demand for arbitration.  Notwithstanding  any
provisions in such rules to the contrary, the arbitrator shall issue findings of
fact and  conclusions  of law,  and an award,  within 15 days of the date of the
hearing unless the parties otherwise agree.

     (c)  DAMAGES.  In case of breach of  contract or policy,  damages  shall be
limited to contract  damages.  In cases of  discrimination  claims prohibited by
statute,  the  arbitrator  may direct  payment  consistent  with the  applicable
statute.  In cases of employment tort, the arbitrator may award punitive damages
if proved by clear and convincing evidence. Issues of procedure,  arbitrability,
or  confirmation  of award shall be governed by the Federal  Arbitration  Act, 9
U.S.C.  ss.ss. 1-16, except that court review of the arbitrator's award shall be
that of an appellate court reviewing a decision of a trial judge sitting without
a jury.

     (d)  SELECTION  OF MEDIATOR OR  ARBITRATOR.  The parties  shall  select the
mediator  and  arbitrator  from a panel list made  available  by the AAA. If the
parties  are unable to agree to a mediator  or an  arbitrator  within 10 days of
receipt of a demand for  mediation or  arbitration,  the mediator or  arbitrator

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will be  chosen  by  alternatively  striking  from a list of five  mediators  or
arbitrators  obtained by Company  from the AAA.  Executive  shall have the first
strike.

     (e) FEES AND EXPENSES. The fees of the AAA and Mediation/Arbitration  shall
be borne equally by the parties,  unless  ordered  otherwise by the  Arbitrator.
Each party shall bear its own attorney's fees and other expenses, unless ordered
otherwise by the Arbitrator.

11.  VALIDITY.

     The invalidity or unenforceability of any provision of this Agreement shall
not  affect  the  validity  or  enforceability  of any other  provision  of this
Agreement, which shall remain in full force and effect.

12.  NO EMPLOYMENT OR SERVICE CONTRACT.

     Nothing in this Agreement shall confer upon Executive any right to continue
in the service of the Company (or any parent or  subsidiary  corporation  of the
Company employing or retaining Executive) for any period of time.

13.  AMENDMENT AND TERMINATION.

     Any amendment,  modification, change, or termination of this Agreement must
be done so in writing and signed by both parties.

14.  GOVERNING LAW.

     The  validity,  interpretation,   construction,  and  performance  of  this
Agreement shall be governed by the laws of the State of Arizona.

15.  COUNTERPARTS.

     This Agreement may be executed in several counterparts, each of which shall
be deemed to be an original,  but all of which together will  constitute one and
the same instrument.

16.  ENTIRE AGREEMENT.

     This Agreement sets forth the entire  agreement  between  Executive and the
Company concerning the subject matter discussed in this Agreement and supersedes
all prior agreements,  promises, covenants,  arrangements,  communications,  and
representations  or  warranties,  whether  written  or  oral,  by  any  officer,
employee,   or   representative   of  the  Company.   Any  prior  agreements  or
understandings  with respect to the subject  matter set forth in this  Agreement
are hereby terminated and canceled.

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     IN WITNESS  WHEREOF,  the parties hereto have executed this Agreement as of
the date set forth above.


                                        MERITAGE CORPORATION

                                        8501 E. Princess Drive, #290
                                        Scottsdale, AZ 85255


                                        By: /s/ Larry W. Seay
                                            ------------------------------------

                                        Its: Vice President
                                             -----------------------------------


                                        EXECUTIVE


                                        Richard T. Morgan

                                        /s/ Richard T. Morgan
                                        ----------------------------------------

                                        Address:
                                                 -------------------------------

                                        ----------------------------------------

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