AMERICAN HOMESTAR CORP, DEF 14A, 1997-08-28

AMERICAN HOMESTAR CORP
DEF 14A, 1997-08-28
PREFABRICATED WOOD BLDGS & COMPONENTS

Previous: AMERICAN HOMESTAR CORP, 10-K, 1997-08-28

Next: AMERICAN HOMESTAR CORP, S-3, 1997-08-28

<PAGE> 1

SCHEDULE 14A
(RULE 14A-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12

- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)

American Homestar Corporation
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.

(1) Title of each class of securities to which transaction applies:

- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:

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

- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:

- --------------------------------------------------------------------------------
(5) Total fee paid:

[ ] Fee paid previously with preliminary materials.

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

(1) Amount Previously Paid:

- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:

- --------------------------------------------------------------------------------
(3) Filing Party:

- --------------------------------------------------------------------------------
(4) Date Filed:

- --------------------------------------------------------------------------------
<PAGE> 2

AMERICAN HOMESTAR CORPORATION
2450 SOUTH SHORE BOULEVARD, SUITE 300
LEAGUE CITY, TEXAS 77573

August 28, 1997

Dear Shareholder:

You are cordially invited to attend the Annual Meeting of Shareholders of
American Homestar Corporation (the "Company") to be held at South Shore Harbour
Hotel, 2500 South Shore Boulevard, League City, Texas 77573, on Thursday,
October 2, 1997, at 10:00 a.m. local time. The attached Notice of Annual Meeting
and Proxy Statement fully describe the formal business to be transacted at the
Meeting, which includes the election of eight directors of the Company, approval
of the Non-Qualified Stock Option Agreements with the Company's Co-Chief
Executive Officers (the "Option Agreements") and ratification of the selection
of independent certified public accountants. We have also enclosed a copy of the
Company's Annual Report for the fiscal year ended May 31, 1997.

The Company's Board of Directors believes that a favorable vote for each
person nominated to serve as a director of the Company, for the approval of the
Option Agreements and for ratification of the selection of KPMG Peat Marwick LLP
as the Company's independent certified public accountants are in the best
interests of the Company and its shareholders and unanimously recommends a vote
"FOR" each nominee, "FOR" the Option Agreements and "FOR" such ratification.
Accordingly, we urge you to review the accompanying material carefully and to
return the enclosed Proxy promptly.

Please sign, date and return the enclosed Proxy without delay. If you
attend the Meeting, you may vote in person even if you have previously mailed a
Proxy.

Sincerely,

/s/ FINIS F. TEETER
-----------------------------------
Finis F. Teeter
Chairman of the Board
<PAGE> 3

AMERICAN HOMESTAR CORPORATION
2450 SOUTH SHORE BOULEVARD, SUITE 300
LEAGUE CITY, TEXAS 77573

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 2, 1997

NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Meeting") of American Homestar Corporation, a Texas corporation (the
"Company"), will be held at South Shore Harbour Hotel, 2500 South Shore
Boulevard, League City, Texas 77573, on Thursday October 2, 1997, 10:00 a.m.
local time. A Proxy and a Proxy Statement for the Meeting are enclosed.

The Meeting is for the following purposes:

(1) To elect eight members of the Board of Directors for terms
expiring in 1998.

(2) To approve Non-Qualified Stock Option Agreements with the
Company's Co-Chief Executive Officers.

(3) To consider and ratify the selection of the Company's independent
certified public accountants.

(4) To transact any other business that may properly come before the
Meeting or any adjournments thereof.

The close of business on August 18, 1997, has been fixed as the record date
for determining shareholders entitled to notice of and to vote at the Meeting or
any adjournments thereof. For a period of at least ten days prior to the
Meeting, a complete list of shareholders entitled to vote at the Meeting will be
open to the examination of any shareholder during ordinary business hours at the
principal executive offices of the Company at 2450 South Shore Boulevard, Suite
300, League City, Texas 77573.

Information concerning the matters to be acted upon at the Meeting is set
forth in the accompanying Proxy Statement.

SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING IN PERSON ARE
URGED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.

By Order of the Board of Directors

/s/ CRAIG A. REYNOLDS
------------------------------------
Craig A. Reynolds
Secretary

Houston, Texas
August 28, 1997
<PAGE> 4

AMERICAN HOMESTAR CORPORATION
2450 SOUTH SHORE BOULEVARD, SUITE 300
LEAGUE CITY, TEXAS 77573

PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 2, 1997

This Proxy Statement is being first mailed on or about August 28, 1997, to
shareholders of American Homestar Corporation, a Texas corporation (the
"Company"), by the Board of Directors to solicit proxies (the "Proxies") for use
at the Annual Meeting of Shareholders (the "Meeting") to be held at South Shore
Harbour Hotel, 2500 South Shore Boulevard, League City, Texas 77573, on
Thursday, October 2, 1997, at 10:00 a.m., local time, or at such other time and
place to which the Meeting may be adjourned.

The purpose of the Meeting is to consider and act upon: (i) the election of
eight directors for terms expiring in 1998; (ii) approval of Non-Qualified
Option Agreements with the Company's Co-Chief Executive Officers (the "Option
Agreements"); (iii) the ratification of the selection of KPMG Peat Marwick LLP
as the Company's independent certified public accountants; and (iv) such other
matters as may properly come before the Meeting or any adjournments thereof.

All shares represented by valid Proxies, unless the shareholder otherwise
specifies, will be voted: (i) FOR the election of the eight persons named under
"Election of Directors" as nominees for election as directors of the Company for
terms expiring in 1998; (ii) FOR the approval of Option Agreements; (iii) FOR
the ratification of the selection of KPMG Peat Marwick LLP as the Company's
independent certified public accountants; and (iv) at the discretion of the
Proxy holders with regard to any other matter that may properly come before the
Meeting or any adjournment thereof.

Where a shareholder has appropriately specified how a Proxy is to be voted,
it will be voted accordingly. Any shareholder executing a Proxy retains the
right to revoke it at any time prior to exercise at the Meeting. A Proxy may be
revoked by delivery of written notice to the Secretary of the Company, by
execution and delivery of a later Proxy or by voting in person at the Meeting.

RECORD DATE AND VOTING SECURITIES

The record date for determining the shareholders entitled to vote at the
Meeting was the close of business on August 18, 1997 (the "Record Date"), at
which time the Company had issued and outstanding approximately 11,438,420
shares of Common Stock, par value $.05 per share (the "Common Stock"). The
shares of Common Stock constitute the only outstanding voting securities of the
Company entitled to be voted at the Meeting.

QUORUM AND VOTING

The presence at the Meeting, in person or by Proxy, of the holders of a
majority of the issued and outstanding shares of Common Stock is necessary to
constitute a quorum. Each share of Common Stock represented at the Meeting in
person or by proxy will be counted toward a quorum. In deciding all questions
and other matters, a holder of Common Stock on the Record Date will be entitled
to cast one vote for each share of Common Stock registered in such holder's
name.

Approval of Proposal No. 1 to elect the eight nominees to serve as members
of the Board of Directors for terms expiring at the Company's Annual Meeting of
Shareholders in 1998 requires the affirmative vote of a plurality of the shares
of Common Stock present or represented at the Meeting and entitled to vote
thereon. Votes may be cast in favor or withheld with respect to such proposal.
Votes that are withheld will be counted
<PAGE> 5

toward a quorum, but will be excluded entirely from the tabulation for such
proposal and, therefore, will not affect the outcome of the vote on such
proposal.

In order to comply with certain rules promulgated under the Internal
Revenue Code and of the Nasdaq National Market, approval of Proposal No. 2 to
approve the Option Agreements requires the affirmative vote of a majority of the
shares of Common Stock present or represented at the Meeting and entitled to
vote thereon. Abstentions on the proposal may be specified and will have the
same effect as a vote against such proposal.

Approval of Proposal No. 3 to ratify the selection of KPMG Peat Marwick LLP
as the Company's independent certified public accountants requires the
affirmative vote of a majority of the shares of Common Stock present or
represented at the Meeting and entitled to vote thereon. Abstentions on such
proposal may be specified and will have the same effect as a vote against such
proposal.

The election inspectors will treat shares referred to as "broker non-votes"
(i.e., shares held by brokers or nominees as to which they have no discretionary
power to vote on a particular matter and have received no instructions from the
beneficial owners or persons entitled to vote thereon), if any, as shares that
are present and entitled to vote for purposes of determining the presence of a
quorum. However, for purposes of determining the outcome of any matter requiring
discretionary voting, broker non-votes will be treated as not present and not
entitled to vote with respect to that matter (even though those shares are
considered entitled to vote for quorum purposes and may be entitled to vote on
other matters). Brokers or nominees have discretionary power to vote on
Proposals No. 1 and 3, but have no discretionary power to vote with respect to
Proposal No. 2. Accordingly, broker non-votes will not be counted with respect
to Proposal No. 2.

2
<PAGE> 6

PRINCIPAL SHAREHOLDERS AND MANAGEMENT OWNERSHIP

The following table sets forth information as of August 6, 1997, regarding
the beneficial ownership of Common Stock of the Company by (i) each person as a
group known by the Company to beneficially own 5% or more of the outstanding
shares of Common Stock, (ii) each director and nominee for director of the
Company, (iii) the Company's Named Executive Officers (as herein defined) and
(iv) the directors and executive officers of the Company as a group. The persons
named in the table have sole voting and investment power with respect to all
shares of capital stock owned by them, unless otherwise noted.

<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME OF BENEFICIAL OF BENEFICIAL PERCENT
OWNER OR GROUP OWNERSHIP OF CLASS
------------------ ----------------- --------
<S> <C> <C>
Finis F. Teeter(1)(2)..................................... 1,734,507 15.15%
Laurence A. Dawson, Jr.(1)(3)............................. 1,507,300 13.16%
Craig A. Reynolds(4)...................................... 88,674 *
Charles N. Carney, Jr.(4)................................. 166,119 1.45%
Jackie H. Holland(5)...................................... 40,362 *
James J. Fallon(5)........................................ 78,159 *
William O. Hunt(6)........................................ 26,564 *
Jack L. McDonald(7)....................................... 17,189 *
Seligman Group of Investment Companies(8)................. 638,500 5.59%
Directors and executive officers as a group (8 persons)... 3,658,874 31.68%
</TABLE>

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

* Less than 1%.

(1) The address of Finis F. Teeter is 2450 South Shore Boulevard, Suite 300,
League City, Texas 77573. The address of Laurence A. Dawson, Jr. is 2221
East Lamar Boulevard, Suite 790, Arlington, Texas 76006.

(2) Mr. Teeter's shares include 1,038,478 shares that are owned by Teeter
Investments, Ltd., a limited partnership in which Mr. Teeter is the managing
general partner, and 130,204 shares that are owned by the Teeter 1992 Trust,
of which Mr. Teeter is trustee. Includes 21,878 shares that are purchasable
pursuant to an immediately exercisable stock option. Does not include
options granted pursuant to the Option Agreements that are subject to
shareholder approval under Proposal No. 2 in this Proxy Statement.

(3) Mr. Dawson's shares include 953,125 shares that are owned by Dawson
Adventures, Ltd. ("DAL"), a limited partnership in which Mr. Dawson is the
managing general partner. Mr. Dawson has the sole power to dispose of all of
such shares but, pursuant to the terms of the DAL partnership agreement, Mr.
Dawson currently has the power to vote only 184,430 of such shares. In
addition, the beneficial ownership figure for Mr. Dawson includes 381,118
shares that are owned jointly with Mrs. Dawson. Mrs. Dawson is deemed to
beneficially own 184,430 shares that are owned by DAL by virtue of the fact
that she has the right to vote such shares pursuant to the partnership
agreement; however, she does not currently have the power to dispose of such
shares. Includes 21,878 shares that are purchasable pursuant to an
immediately exercisable stock option. Does not include options granted
pursuant to the Option Agreements that are subject to shareholder approval
under Proposal No. 2 in this Proxy Statement.

(4) Includes 9,376 shares that are purchasable pursuant to an immediately
exercisable stock option.

(5) Includes 10,314 shares that are purchasable pursuant to an immediately
exercisable stock option.

(6) Includes 17,189 shares that are purchasable pursuant to an immediately
exercisable stock option.

(7) All such shares are purchasable pursuant to an immediately exercisable stock
option.

(8) Pursuant to Schedule 13G, Seligman Group of Investment Companies ("Seligman
Group") was the beneficial owner of 638,500 shares at December 31, 1996, of
which it has the sole power to vote or direct the vote. Such shares have
been adjusted to reflect the Company's 5 for 4 stock split on February 7,
1997. The address of the Seligman Group is 100 Park Avenue, New York, New
York 10017.

3
<PAGE> 7

PROPOSAL NO. 1

ELECTION OF DIRECTORS

There are eight directors to be elected for terms expiring at the Company's
Annual Meeting of Shareholders in 1998 or until their successors have been
elected and qualified. It is intended that the names of the persons indicated in
the following table will be placed in nomination and that the persons named in
the Proxy will vote for their election. Each of the nominees has indicated his
willingness to serve as a member of the Board of Directors, if elected; however,
if any nominee becomes unavailable for election to the Board of Directors for
any reason not presently known or contemplated, the Proxy holders will have
discretionary authority to vote the Proxy for a substitute. Proxies cannot be
voted for more than eight nominees.

The nominees are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Finis F. Teeter(1)........... 53 Chairman of the Board and Co-Chief Executive Officer
Laurence A. Dawson, Jr.(1)... 53 President, Co-Chief Executive Officer and Director
Craig A. Reynolds............ 48 Executive Vice President, Chief Financial Officer,
Secretary and Director
Jackie H. Holland............ 50 Vice President, Treasurer and Director
Charles N. Carney, Jr........ 42 Vice President and Director
James J. Fallon.............. 57 Vice President and Director
William O. Hunt(2)(3)........ 63 Director
Jack L. McDonald(2)(3)....... 64 Director
</TABLE>

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

(1) Member of the Executive Committee

(2) Member of the Compensation Committee

(3) Member of the Audit Committee

Finis F. Teeter is a founder of the Company and served as its Chairman of
the Board and Chief Executive Officer from 1971 until August 1993. Since August
1993, Mr. Teeter has served as its Chairman of the Board and Co-Chief Executive
Officer. Prior to forming the Company, Mr. Teeter served in various sales and
sales management capacities with Teeter Mobile Homes from 1962 to 1969 and with
Mobile Home Industries from 1969 to late 1970.

Laurence A. Dawson, Jr. has served as President, Co-Chief Executive Officer
and as a Director of the Company since August 1993. Mr. Dawson served as Chief
Executive Officer and Chairman of the Board of Oak Creek Homes, Inc. ("Oak
Creek") from its founding in 1983 until August 31, 1993. Mr. Dawson served as
Executive Vice President -- Chief Operating Officer and in other executive
positions with Kaufman & Broad Home Systems, Inc. from 1972 to 1983. Mr. Dawson
is a director of the Manufactured Housing Institute and the Texas Manufactured
Housing Association. Mr. Dawson holds a Master of Business Administration degree
from Harvard University.

Craig A. Reynolds has served as Executive Vice President, Chief Financial
Officer and Secretary of the Company since joining the Company in 1982, and has
been a Director of the Company since 1985. Mr. Reynolds is a Certified Public
Accountant and holds a Master of Business Administration degree from Florida
Institute of Technology.

Jackie H. Holland has served as Vice President, Treasurer and as a Director
of the Company since August 1993. Mr. Holland has served as Vice President and
Chief Financial Officer of Oak Creek since 1989. Before joining Oak Creek, Mr.
Holland held various financial and general management positions with Palm Harbor
Homes, Inc. from 1978 to 1989 and Redman Homes, Inc. from 1970 to 1978. Mr.
Holland holds a Bachelor of Science in Accounting degree from the University of
North Alabama.

4
<PAGE> 8

Charles N. Carney, Jr. has served as Vice President of the Company since
June 1993 and as President of the Retail Division of the Company since 1987. He
has served as a Director of the Company since August 1993. Mr. Carney has served
in various sales, sales management and senior sales management capacities with
the Company since joining its predecessor in 1977. Mr. Carney holds a Bachelor
of Business Administration degree from Eastern Kentucky University.

James J. Fallon has served as Vice President and as a Director of the
Company since August 1993 and as President of Oak Creek since December 1993.
Prior to that time, Mr. Fallon served in various general management capacities
with Oak Creek, Kaufman & Broad Home Systems, Inc., and Fleetwood Homes, Inc.
Mr. Fallon holds a Bachelor of Science in Electrical Engineering from Purdue
University.

William O. Hunt has served as a Director of the Company since July 1994.
Mr. Hunt has also served as Chairman of the Board and Chief Executive Officer of
Intellicall, Inc., a diversified telecommunications company providing products
and services to pay telephone networks on a worldwide basis, since December
1992. From July 1989 through July 1992 (when it was sold to The Allen Group,
Inc. ("Allen")), Mr. Hunt was Chairman of the Board, Chief Executive Officer and
President of Alliance Telecommunications Corporation ("Alliance"), a
privately-held corporation engaged in the manufacture and service of wireless
communications systems worldwide. From August 1990 to August 1993, Mr. Hunt
served as Chairman of the Board of Hogan Systems, Inc. ("Hogan"), a leading
supplier of application software for the financial and banking industry. Since
August 1993, Mr. Hunt has served as Vice Chairman of Hogan. He is also a
director of Dr. Pepper Bottling Company of Texas, DSC Corporation, a
telecommunications company, and Allen, a firm active in the automotive and
mobile communications industry.

Jack L. McDonald has served as a Director of the Company since September
1994. From 1978 until his retirement in 1985, Mr. McDonald served as President
and Chief Operating Officer of Centex Corporation, a corporation involved in the
home-building, cement, oil and gas and general construction industries. Since
his retirement, he has been self-employed as a business consultant. Mr. McDonald
is also a director of Triangle Pacific Corp., Bally's Grand, Inc. and U.S. Homes
Corp.

BOARD OF DIRECTORS AND COMMITTEES

The business of the Company is managed under the direction of the Board of
Directors. The Board of Directors meets on a regularly scheduled basis to review
significant developments affecting the Company and to act on matters requiring
approval of the Board of Directors. It also holds special meetings when an
important matter requires action by the Board of Directors between scheduled
meetings. The Board of Directors met four times and acted by unanimous written
consent three times during fiscal 1997. During fiscal 1997, each member of the
Board of Directors participated in at least 75% of all Board of Directors and
applicable committee meetings held during the period for which he was a
director.

The Board of Directors has established audit, executive and compensation
committees to devote attention to specific subjects and to assist it in the
discharge of its responsibilities. The functions of those committees, their
current members and the number of meetings held during fiscal 1997 are described
below.

Audit Committee. The Audit Committee recommends to the Board of Directors
the appointment of the firm selected to be independent certified public
accountants for the Company and monitors the performance of such firm; reviews
and approves the scope of the annual audit and quarterly reviews and evaluates
with the independent certified public accountants the Company's annual audit and
annual consolidated financial statements and the results of quarterly reviews;
reviews with management the status of internal accounting controls; evaluates
problem areas having a potential financial impact on the Company that may be
brought to its attention by management, the independent certified public
accountants or the Board of Directors; and evaluates all public financial
reporting documents of the Company. Messrs. Hunt and McDonald currently are
members of the Audit Committee. The Audit Committee met five times during fiscal
1997.

Compensation Committee. The Compensation Committee approves the
compensation of executive officers of the Company, establishes and monitors the
compensation policies of the Company, and administers the Company's 1994 Amended
and Restated Stock Compensation Plan (the "Stock Compensation Plan").

5
<PAGE> 9

The Compensation Committee has the power to determine from time to time the
individuals to whom options will be granted, the number of shares to be covered
by each option and the times at which options will be granted. Messrs. Hunt and
McDonald currently are members of the Compensation Committee. The Compensation
Committee met four times and acted upon unanimous written consent once during
fiscal 1997.

Executive Committee. The Executive Committee is empowered to act in lieu of
the Board of Directors on any matter except where action of the Board of
Directors as a whole is expressly required by law or by the Articles of
Incorporation or Bylaws of the Company. Messrs. Teeter and Dawson currently are
members of the Executive Committee. The Executive Committee met 26 times during
fiscal 1997.

The Company does not have a nominating committee. The functions customarily
attributable to a nominating committee are performed by the Board of Directors
as a whole.

PROPOSAL NO. 2

APPROVAL OF NON-QUALIFIED OPTION AGREEMENTS

The Board of Directors has unanimously approved the grant of non-qualified
options to Messrs. Teeter and Dawson, the Company's Co-Chief Executive Officers,
pursuant to Non-Qualified Stock Option Agreements, dated November 15, 1996 (the
"Option Agreements"), whereby each Co-Chief Executive Officer received a
non-qualified stock option to purchase 93,750 shares of the Company's common
stock at $13.60 per share (adjusted to reflect the 5-for-4 stock split on
February 7, 1997). Each option is exercisable after November 15, 2005 and
terminates on November 15, 2006; provided, however, that the options may be
exercised earlier according to the following schedule:

31,250 shares If the Company's market capitalization equals or exceeds
$300 million at any time prior to November 15, 2000.

31,250 shares If the Company's market capitalization equals or exceeds
$400 million at any time prior to November 15, 2000.

31,250 shares If the Company's market capitalization equals or exceeds
$500 million at any time prior to November 15, 2000.

The options granted pursuant to the Option Agreements must be administered
by a committee of the Board of Directors consisting of two or more non-employee
directors within the meaning of Rule 16b-3. The options are currently
administered by the Compensation Committee.

The options may be exercised by written notice to the Company of the number
of shares of Common Stock being purchased and the exercise price may be paid (i)
in cash, (ii) by certified or cashier's check, (iii) in shares of Common Stock
then owned by the optionee or (iv) any other form of valid consideration as
permitted by the Board of Directors.

No taxable income generally is realized by the participant upon the grant
of a non-qualified option, and no deduction generally is then available to the
Company. Upon exercise of a non-qualified option, the excess of the fair market
value of the shares on the date of exercise over the exercise price will be
taxable to the participant as ordinary income. Such amount will also be
deductible by the Company unless such amount exceeds the annual one million
dollar limitation on the deduction that an employer may claim for compensation
of certain executives pursuant to Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Deduction Limitation"), and does not satisfy an exception
to the Deduction Limitation. The tax basis of the shares acquired by the
participant will be the fair market value on the date of exercise. When a
participant disposes of shares acquired upon exercise of a non-qualified stock
option, any amount realized in excess of the fair market value of the shares on
the date of exercise generally will be treated as a capital gain and will be
long-term or short-term, depending on the holding period of the shares. The
holding period commences upon the exercise of the non-qualified stock option. If
the amount received is less than such fair market value, the loss will be
treated as a long-term or short-term capital loss, depending on the holding
period

6
<PAGE> 10

of the shares. The exercise of a non-qualified stock option will not trigger the
alternative minimum tax consequences applicable to incentive stock options.

VOTE REQUIRED

The approval of the Option Agreements requires the affirmative vote of a
majority of the shares of Common Stock present or represented at the Meeting and
entitled to vote thereon. If approved by the shareholders, such Option
Agreements will be effective as of November 15, 1996. Unless otherwise
instructed, it is the intent of the persons named in the Proxy to vote all
Proxies "FOR" the adoption of this proposal.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
APPROVAL OF THE OPTION AGREEMENTS.

REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION

The Company is engaged in a competitive and specialized industry and
believes that it must be able to attract and retain experienced, qualified
executives and key employees. The Company's executive compensation program for
fiscal 1997 was established by the Compensation Committee, comprised of the
Independent Directors.

Executive Compensation Policy

The Company's compensation policy is designed to support the overall
objective of enhancing value for the Company's shareholders by:

- Attracting, developing, rewarding and retaining highly qualified and
productive individuals.
- Directly relating compensation to both Company and individual
performance.
- Ensuring compensation levels that are externally competitive and
internally equitable.
- Encouraging executive stock ownership to enhance a mutuality of interest
with other shareholders.

The following is a description of the specific elements of the Company's
executive compensation and how each relates to the objectives and policy
outlined above. See also "Employment Contracts and Termination of Employment and
Change-in-Control Arrangements."

Base Salary. The Compensation Committee reviewed each executive officer's
salary. In determining appropriate salary levels, the Compensation Committee
considered individual performance, internal equity, as well as pay practices of
other companies relating to executives of similar responsibility.

Short-term Incentives. In fiscal 1997, the Co-Chief Executive Officers and
the Chief Financial Officer qualified for annual bonuses based on the
performance and profitability of the entire Company. In fiscal 1997, the other
executive officers were eligible for quarterly incentive and/or annual bonuses
based on performance and profitability of the operating division or unit over
which that executive officer exercised the most direct operating control.

Long-Term Incentives. The Company's long-term incentive compensation
philosophy is that long-term incentives should be related to improvement in
long-term shareholder value, thereby creating a mutuality of interest with
shareholders. In furtherance of this objective, the Company awards to its
executive officers stock options under the Stock Compensation Plan. Stock
options encourage and reward effective management which results in long-term
corporate financial success, as measured by stock price appreciation. Stock
options generally are exercisable at the fair market value at the date of grant
and in five installments beginning at least one year after the date of grant.
The Company also has the ability under the Stock Compensation Plan to award
other stock-based compensation incentives, such as restricted stock and stock
appreciation rights, although it has not done so to date.

Rationale for Co-Chief Executive Officer Compensation. The compensation
packages of Messrs. Teeter and Dawson have been designed to encourage short- and
long-term performance in line with the interests of

7
<PAGE> 11

the Company's shareholders. For fiscal 1997, Messrs. Teeter and Dawson each had
an annual salary of $216,667 and annual incentives as described above. For
fiscal 1998, and pursuant to separate employment agreements each has with the
Company and described elsewhere herein, their respective base salary amounts
remain unchanged, and incentive compensation is on an annual basis. If approved
by the Company's shareholders, each will also receive option grants under the
Option Agreements described in Proposal No. 2. In addition, each has a
significant stock ownership position in the Company, as described elsewhere
herein, and therefore, each has a substantial incentive to enhance shareholders'
interests and value. The Compensation Committee believes Messrs. Teeter's and
Dawson's total compensation is competitive in the external marketplace and
reflects individual and Company performance.

This report is submitted by the members of the Compensation Committee as of
the end of the 1997 fiscal year.

William O. Hunt
Jack L. McDonald

The Report of the Compensation Committee on Executive Compensation shall
not be deemed incorporated by reference by any general statement incorporating
by reference this proxy statement into any filing under the Securities Exchange
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), except to the extent that the Company specifically incorporates
this information by reference, and shall not otherwise be deemed filed under
such Acts.

8
<PAGE> 12

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth certain information regarding compensation
to the Company's Co-Chief Executive Officers and the four most highly
compensated executive officers for services rendered in all capacities during
the Company's last three fiscal years (collectively referred to herein as the
"Named Executive Officers").

<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------ ----------------------- -------
SECURITIES
OTHER UNDERLYING ALL OTHER
ANNUAL RESTRICTED OPTIONS/ LTIP COMPEN-
NAME AND PRINCIPAL FISCAL SALARY BONUS COMPEN- STOCK SARS PAYOUTS SATION
POSITION YEAR ($) ($) SATION ($) AWARDS ($) (#) ($) ($)
------------------ ------ ------- ------- ---------- ---------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Finis F. Teeter 1997 216,667 347,865 -- -- 156,250(8) -- 36,751(1)
Chairman of the Board 1996 180,000 232,477 -- -- 31,250(7) -- 35,796(1)
and Co-Chief Executive Officer 1995 180,000 170,390 -- -- -- -- 17,599(1)

Laurence A. Dawson, Jr. 1997 216,667 347,865 -- -- 156,250(8) -- 26,909(2)
President and Co-Chief 1996 180,000 232,477 -- -- 31,250(7) -- 30,073(2)
Executive Officer 1995 180,000 170,390 -- -- -- -- 35,500(2)

Craig A. Reynolds 1997 120,000 154,606 -- -- 26,250(7) -- 4,704(3)
Executive Vice-President, 1996 120,000 103,323 -- -- 23,438(7) -- 4,268(3)
Chief Financial Officer 1995 96,000 125,122 -- -- -- -- 3,588(3)
and Secretary

Charles N. Carney, Jr. 1997 100,000 256,031 -- -- 26,250(7) -- 2,310(4)
Vice President of the 1996 100,000 235,172 -- -- 23,438(7) -- 3,278(4)
Company and President of 1995 96,000 239,041 -- -- -- -- 1,500(4)
the Retail Division

James J. Fallon 1997 60,000 473,720 -- -- 21,250(7) -- 4,818(5)
Vice President of the 1996 60,000 408,019 -- -- 18,750(7) -- 2,137(5)
Company and President of 1995 60,000 260,244 -- -- 4,688(7) -- 1,500(5)
Oak Creek Homes, Inc.

Jackie H. Holland 1997 100,000 186,918 -- -- 21,250(7) -- 8,723(6)
Vice President and 1996 79,200 115,608 -- -- 18,750(7) -- 6,461(6)
Treasurer 1995 79,200 86,777 -- -- 4,688(7) -- 6,300(6)
</TABLE>

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

(1) Consists of $9,000 car allowance in fiscal 1995, 1996 and 1997, $1,500, $895
and $2,160 of Company contributions to the Company's Saving Plan in fiscal
1995, 1996 and 1997, respectively, $7,099, $7,886 and $8,128 for payments of
term-life and disability insurance in fiscal 1995, 1996 and 1997,
respectively, and $18,015 and $17,463 for equivalent compensation as
provided for in Mr. Teeter's employment agreement in fiscal 1996 and 1997,
respectively.

(2) Consists of $9,000 car allowance in fiscal 1995, 1996 and 1997, $1,500,
$2,310 and $2,375 of Company contributions to the Company's Savings Plan in
fiscal 1995, 1996 and 1997, respectively, and payments of $25,000, $18,763
and $15,534 for various insurance premiums, including split-dollar life,
term-life, disability, automobile and health in fiscal 1995, 1996 and 1997,
respectively.

(3) Consists of $960, $1,090 and $1,200 of Company contributions to the
Company's Savings Plan in fiscal 1995, 1996 and 1997, respectively, and
$2,628, $3,178 and $3,504 for payments of term-life and disability insurance
in fiscal 1995, 1996 and 1997, respectively.

(4) Consists of $1,500, $2,294 and $1,326 of Company contributions to the
Company's Savings Plan in fiscal 1995, 1996 and 1997, respectively, and $984
for payment of term-life and disability insurance in fiscal 1996 and 1997.

(5) Consists of $1,500, $2,137 and $1,900 of Company contributions to the
Company's Savings Plan in fiscal 1995, 1996 and 1997, respectively and
$2,918 for payment of term-life and disability insurance in fiscal 1997.

9
<PAGE> 13

(6) Consists of car allowance of $4,800 in fiscal 1995, 1996 and 1997, $1,500,
$1,661 and $1,645 of Company contributions to the Company's Savings Plan in
fiscal 1995, 1996 and 1997, respectively, and $2,278 for payment of
term-life and disability insurance in fiscal 1997.

(7) Options granted pursuant to the Stock Compensation Plan. Options have been
adjusted for the 5-for-4 stock split on February 7, 1997.

(8) Includes 62,500 options granted pursuant to the Stock Compensation Plan and
93,750 options pursuant to the Option Agreements which are subject to
shareholder approval under Proposal No. 2. Options have been adjusted for
the 5-for-4 stock split on February 7, 1997.

OPTION/STOCK APPRECIATION RIGHT GRANTS DURING FISCAL 1997

<TABLE>
<CAPTION>
PERCENTAGE
TOTAL POTENTIAL REALIZABLE
NUMBER OF OPTIONS/ VALUE AT ASSUMED
SECURITIES SARS EXERCISE ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO OR BASE PRICE APPRECIATION FOR
OPTIONS/ EMPLOYEES PRICE OPTION TERM
SARS IN FISCAL PER ------------------------
NAME GRANTED YEAR SHARE EXPIRATION DATE 5% 10%
---- ---------- ---------- -------- ----------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Finis F. Teeter.................
Option Agreement.............. 93,750(1) 14.41% $13.60 November 15, 2006 $ 801,841 $2,032,022
Non-Qualified Options......... 51,125 7.86% $13.60 November 15, 2003 283,057 659,643
Incentive Stock Options....... 11,375 1.75% $14.96 November 15, 2001 47,015 103,890
------- ----- ---------- ----------
156,250 24.02% $1,131,913 $2,795,555
------- ----- ---------- ----------
Laurence A Dawson, Jr...........
Option Agreement.............. 93,750(1) 14.41% $13.60 November 15, 2006 $ 801,841 $2,032,022
Non-Qualified Options......... 51,125 7.86% $13.60 November 15, 2003 283,057 659,643
Incentive Stock Options....... 11,375 1.75% $14.96 November 15, 2001 47,015 103,890
------- ----- ---------- ----------
156,250 24.02% $1,131,913 $2,795,555
------- ----- ---------- ----------
Craig A. Reynolds............... 26,250 4.03% $13.60 November 15, 2003 $ 145,335 $ 338,692
Charles N. Carney, Jr........... 26,250 4.03% $13.60 November 15, 2003 $ 145,335 $ 338,692
Jackie Holland.................. 21,250 3.27% $13.60 November 15, 2003 $ 117,652 $ 274,179
James J. Fallon................. 21,250 3.27% $13.60 November 15, 2003 $ 117,652 $ 274,179
</TABLE>

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

(1) These options are subject to shareholder approval of the Option Agreements
under Proposal No. 2 in this Proxy Statement.

AGGREGATED OPTION/STOCK APPRECIATION RIGHT EXERCISES DURING FISCAL 1997 AND
FISCAL YEAR END OPTION/STOCK APPRECIATION RIGHT VALUES

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS/SARS AT IN-THE-MONEY
ACQUIRED ON MAY 31, 1997 OPTIONS/SARS AT
EXERCISE VALUE EXERCISABLE/ MAY 31, 1997(1)
NAME (#) REALIZED($) UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- ------------ --------------- ----------------------------
<S> <C> <C> <C> <C>
Finis F. Teeter................... -- -- 7,813/179,687 $96,412/1,273,743
Laurence A. Dawson, Jr............ -- -- 7,813/179,687 $96,412/1,273,743
Craig A. Reynolds................. -- -- 4,688/45,000 $ 61,132/412,500
Charles N. Carney, Jr............. -- -- 4,688/45,000 $ 61,132/412,500
James J. Fallon................... -- -- 5,626/39,062 $ 76,815/373,443
Jackie H. Holland................. -- -- 5,626/39,062 $ 76,815/373,443
</TABLE>

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

(1) Value is calculated based on the difference between the option exercise
price and $20.00 (the last price of the Common Stock on May 30, 1997)
multiplied by the number of shares of Common Stock underlying the option.

10
<PAGE> 14

COMPENSATION OF DIRECTORS

Directors of the Company who are employees or affiliates of the Company do
not receive compensation for their services as directors, although they are
reimbursed for travel and lodging expenses in connection with their attendance
at board meetings. The Company pays an annual fee in the amount of $15,000 and
meeting fees of $1,000 per meeting to its directors who are not employees or
affiliates of the Company ("Independent Directors"). In addition, each
Independent Director will receive a non-qualified stock option to purchase 5,000
shares of Common Stock upon each person's initial election to the Board of
Directors, which such options becoming immediately exercisable. Following his
initial term as an Independent Director, if reelected, and every fourth year
reelected thereafter, each Independent Director will receive a non-qualified
option to purchase 10,000 shares of Common Stock. Each of such options would
vest 25% annually, with the initial 25% becoming exercisable on the date of
grant of the option and an additional 25% becoming exercisable on each of the
first three anniversaries of the grant date.

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS

The Company has entered into employment agreements, effective as of October
1, 1996, with Messrs. Teeter and Dawson (the "Employment Agreements"). Under the
Employment Agreements, Messrs. Teeter and Dawson will each (a) receive a base
salary of $235,000 per year, subject to increase from time to time as may be
determined by the Company's Board of Directors; (b) be entitled to receive
bonuses equal to 2.25%, subject to increase from time to time as may be
determined by the Company's Board of Directors, of the Company's after-tax
consolidated net income (paid annually); and (c) receive a car allowance of $750
per month, plus reimbursement for all automobile expenses. Each Employment
Agreement further provides that (a) the Company will maintain the existing
Salary Continuation Agreement with the executive, which provides that, if the
executive dies prior to the expiration of the term of his Employment Agreement
or if he dies after he has become partially or permanently disabled during the
term of his Employment Agreement, the Company will pay to the executive's
beneficiary an amount equal to 75% of his compensation, which amount shall be
payable in 60 equal monthly installments; and (b) the Company will maintain the
existing Disability Compensation Agreement with the executive, which provides
the executive with disability benefits equaling 100% of his compensation for the
first ninety days or such other applicable waiting period under the policies
underlying the agreement and 75% thereafter until the disability terminates or
the executive dies. The Company partially insures its obligations under the
Disability Compensation Agreements. Mr. Dawson's Employment Agreement provides
that the Company will fund a split-dollar whole-life insurance policy, in the
aggregate amount of $2.25 million, of which Mr. Dawson's life insurance trust is
the beneficiary. The Company maintains a $1.5 million key-man life insurance
policy on Mr. Dawson, with the Company as the beneficiary. Mr. Teeter's
Employment Agreement provides that the Company will fund certain term-life
insurance policies, aggregating $1 million in death benefits, with Mr. Teeter's
spouse as owner and beneficiary, and provide to Mr. Teeter other benefits
comparable to those provided to Mr. Dawson (or equivalent compensation).

Each Employment Agreement continues until May 31, 2000, unless sooner
terminated by the Company for "just cause" (as defined therein) or for other
than "just cause" or by reason of the death or disability (as defined therein)
of such executive. If either Employment Agreement is terminated by the Company
for "just cause" or as a result of the executive's death or disability, such
executive will be entitled to receive an amount equal to the compensation earned
and accrued by him as of the date of such termination. In the event either
Employment Agreement is terminated by the Company for any other reason
(including the expiration of the term), such executive will be entitled to
continue to receive his base salary, bonuses and benefits for the longer of one
year thereafter or the remainder of the term of such Employment Agreement. Each
Employment Agreement further provides that upon termination of any such
Employment Agreement, for any reason, such executive will be subject to a
one-year noncompetition agreement; provided, however, that in the event such
termination is for any reason other than "just cause," such executive may
terminate the noncompetition provision upon written notice to the Company, in
which event all of the above post-termination compensation shall thereafter
terminate.

11
<PAGE> 15

STOCK PERFORMANCE CHART

The line graph below compares the cumulative total shareholder return on
the Company's Common Stock from July 12, 1994, the date of its initial public
offering, through May 31, 1997, with the Nasdaq Stock Market-U.S. ("the Nasdaq
Index") and a Peer Group Index. The companies included in the Peer Group Index
include Cavalier Homes, Inc., Champion Enterprises, Inc., Clayton Homes, Inc.,
Fleetwood Enterprises, Inc., Palm Harbor Homes, Inc., Oakwood Homes Corporation,
Schult Homes Corporation, Skyline Corporation and Southern Energy Homes, Inc.
The graph assumes that $100 was invested at the beginning of the period and that
any dividends during the period were reinvested. The Company's Initial Public
Offering price of $5.12 was used as the beginning price of the Company's Common
Stock.

<TABLE>
<CAPTION>
MEASUREMENT PERIOD AMERICAN
(FISCAL YEAR COVERED) HOMESTAR CORP. NASDAQ INDEX PEER GROUP INDEX
<S> <C> <C> <C>
7/12/94 100 100 100
5/31/95 139 122 101
5/31/96 348 176 184
5/31/97 391 198 167
</TABLE>

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During fiscal 1997, the members of the Executive Committee were primarily
responsible for determining executive compensation, although the Compensation
Committee reviewed and approved all elements of executive compensation, and
determined the compensation for the Company's Co-Chief Executive Officers.

MOAMCO Properties, Inc. ("MOAMCO"), a corporation owned by Mr. Teeter
leased to the Company two retail sales centers. Between June 1, 1996 and August
1, 1997, the Company and its subsidiaries paid $97,500 to MOAMCO under such
leases. The Company believes that all of such lease agreements are on terms as
favorable to the Company as generally available to unaffiliated parties for
comparable properties.

It is the policy of the Company that any future transactions with
affiliated individuals or entities will be on terms as favorable to the Company
as those reasonably available from unrelated third parties, and any such
affiliated transactions will require the approval of a majority of the
Independent Directors.

12
<PAGE> 16

SECTION 16 REQUIREMENTS

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file initial reports of
ownership and reports of changes in ownership with the Securities and Exchange
Commission (the "SEC"). Directors, officers and greater than 10% beneficial
owners are required by SEC regulation to furnish the Company with copies of all
Section 16(a) forms they file. Based solely on representations from certain
reporting persons, the Company believes that, during the year ended May 31,
1997, each of the officers, directors and greater than 10% shareholders complied
with all such applicable filing requirements.

PROPOSAL NO. 3

INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors has selected KPMG Peat Marwick LLP as independent
certified public accountants to audit the consolidated financial statements of
the Company and its subsidiaries for the fiscal year ending May 31, 1998 and
proposes that the Company's shareholders ratify this selection. KPMG Peat
Marwick LLP has served the Company in this capacity since 1983. Representatives
of KPMG Peat Marwick LLP are expected to be present at the Meeting, will have
the opportunity to make a statement, if they desire to do so, and will be
available to respond to appropriate questions.

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL TO
RATIFY THE SELECTION OF KPMG PEAT MARWICK LLP.

SHAREHOLDER PROPOSALS

Shareholders may submit proposals on matters appropriate for shareholder
action at subsequent annual meetings of the Company consistent with Rule 14a-8
promulgated under the Exchange Act. For such proposals to be considered for
inclusion in the Proxy Statement and Proxy relating to the Company's 1998 Annual
Meeting of Shareholders, such proposals must be received by the Company not
later than April 30, 1998. Such proposals should be directed to American
Homestar Corporation, 2450 South Shore Boulevard, Suite 300, League City, Texas
77573, Attention: Secretary.

OTHER BUSINESS

The Board of Directors knows of no matter other than those described herein
that will be presented for consideration at the Meeting. However, should any
other matters properly come before the Meeting or any adjournment thereof, it is
the intention of the persons named in the accompanying Proxy to vote on such
matters in accordance with their best judgment in the interest of the Company.

MISCELLANEOUS

All costs incurred in the solicitation of Proxies will be borne by the
Company. In addition to solicitation by mail, officers and employees of the
Company may solicit Proxies by telephone, telegraph or personally, without
additional compensation. The Company may also make arrangements with brokerage
houses and other custodians, nominees and fiduciaries for the forwarding of
solicitation materials to the beneficial owners of shares of Common Stock held
of record by such persons, and the Company may reimburse such brokerage houses
and other custodians, nominees and fiduciaries for their out-of-pocket expenses
incurred in connection therewith.

Accompanying this Proxy Statement is a copy of the Company's Annual Report
for the fiscal year ended May 31, 1997 (the "Annual Report"). The Annual Report
is not to be deemed a part of this Proxy Statement.

13
<PAGE> 17

A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL
STATEMENTS AND THE FINANCIAL STATEMENT SCHEDULES, BUT NOT INCLUDING EXHIBITS,
WILL BE FURNISHED AT NO CHARGE TO EACH PERSON TO WHOM A PROXY STATEMENT IS
DELIVERED UPON THE WRITTEN REQUEST OF SUCH PERSON ADDRESSED TO AMERICAN HOMESTAR
CORPORATION, ATTN: CRAIG A. REYNOLDS, SECRETARY, 2450 SOUTH SHORE BOULEVARD,
SUITE 300, LEAGUE CITY, TEXAS 77573.

By Order of the Board of Directors

/s/ CRAIG A. REYNOLDS
------------------------------------
Craig A. Reynolds
Secretary

Houston, Texas
August 28, 1997

14
<PAGE> 18

EXHIBIT A

NON-QUALIFIED STOCK OPTION AGREEMENTS
(shares and exercise prices not adjusted to reflect the
5-for-4 stock split on February 7, 1997)
<PAGE> 19

AMERICAN HOMESTAR CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT

1. Grant of Option. Pursuant to a resolution of the Compensation Committee
of the Board of Directors of American Homestar Corporation, a Texas corporation,
(the "Company"), dated November 15, 1996 (the "Date of Grant"), the Company
hereby grants Finis F. Teeter ("Optionee") a Non-Qualified Stock Option (the
"Option") to purchase from the Company a total of 75,000 shares of the Company's
common stock, par value $0.05 per share (the "Common Stock") at an exercise
price of $17.00 per share, in the amounts, during the periods, and upon the
terms and conditions set forth herein; provided, however, that notwithstanding
anything herein to the contrary, the granting of the Option is subject to the
approval of the shareholders of the Company, and this Option may not be
exercised, in whole or in part, until and unless such approval has been
obtained.

2. Term of Exercise. The Option shall terminate on November 15, 2006.
Subject to the previous sentence, the Option may be exercised after November 15,
2005; provided, however, that this Option may be exercised earlier according to
the following schedule:

25,000 shares: if the Company's Market Cap equals or
exceeds $300 million at any time on
or prior to November 15, 2000

25,000 additional shares: if the Company's Market Cap equals or
exceeds $400 million at any time on
or prior to November 15, 2000

25,000 additional shares: if the Company's Market Cap equals or
exceeds $500 million at any time on
or prior to November 15, 2000

As used herein, the term "Company's Market Cap" shall mean the market
capitalization of the Company which shall be determined, on any given day, by
multiplying the last closing price of the Common Stock on such day by the number
of issued and outstanding shares of Common Stock on such day.

3. Restrictions on Exercise. The Option:

(a) may be exercised only with respect to full shares of Common Stock
and no fractional shares of Common Stock shall be issued upon exercise of
the Option; and

(b) may be exercised, in whole or in part, but no certificates
representing shares of Common Stock subject to the Option shall be
delivered if any requisite registration with, clearance by, or consent,
approval or authorization of, any governmental authority of any kind having
jurisdiction over the exercise of the Option, or issuance of securities
upon such exercise, shall have not been taken or secured, or an opinion of
counsel for the Company has not been received stating that no such consent,
approval or authorization is necessary.

4. Manner of Exercise. The Option may be exercised by written notice to
the Company of the number of shares of Common Stock being purchased and the
exercise price to be paid accompanied by the following:

(a) full payment of the exercise price in United States dollars, or in
shares of Common Stock then owned by the Optionee, or in any other form of
valid consideration, or a combination of any of the foregoing as required
or permitted by the Board of Directors in its discretion; and

(b) an undertaking to furnish or execute such documents as the Company
in its discretion shall deem necessary (i) to evidence such exercise, in
whole or in part, of the Option, (ii) to determine whether registration is
then required under the Securities Act of 1933, as then in effect, and
(iii) to comply with or satisfy the requirements of the Securities Act of
1933 (the "Securities Act"), or any other federal, state or local law, as
then in effect.

Upon due exercise of the Option, the Company shall issue certificates
representing shares of Common Stock registered in the name of the person
exercising the Option.

A-1
<PAGE> 20

5. Withholding of Taxes. The Company shall be entitled to withhold from
any payments otherwise due Optionee such amounts as may be necessary to satisfy
any federal income tax withholding requirement with respect to the exercise of
the Option, the transfer of shares of Common Stock, or the disposition of such
shares, and may, if necessary, collect from Optionee additional amounts
necessary to satisfy the withholding requirement.

6. Non-Transferability of Option. The Option is not assignable or
transferable by Optionee otherwise than by will or the laws of descent and
distribution and during the lifetime of Optionee may only be exercised by
Optionee.

7. Rights as Shareholder. Neither the Optionee nor any of Optionee's
beneficiaries shall be deemed to have any rights as a shareholder of the Company
with respect to any shares covered by the Option until the issuance of a
certificate to the Optionee for such shares. Except as provided in Section 9
below, no adjustment shall be made for dividends or other rights for which the
record date is prior to the issuance of such certificate or certificates.

8. Capital Adjustments. The aggregate number of shares of Common Stock
covered by the Option and the exercise price per share of Common Stock covered
by the Option shall be proportionately adjusted for any increase or decrease in
the number of shares of Common Stock through the declaration of a stock dividend
or through any recapitalization resulting in a stock split-up, combination or
exchange of shares of Common Stock.

9. Rights in Event of Death of Optionee. If Optionee dies prior to
termination of Optionee's rights to exercise the Option in accordance with the
provisions of this Agreement without having exercised the Option as to all
shares covered hereby, the Option may be exercised by Optionee's estate or a
person who acquired the right to exercise the Option by request or inheritance
or by reason of the death of Optionee; provided, however, that, the period
during which the Option may be so exercised shall not continue beyond the
expiration of the Option or one year from the date of Optionee's death,
whichever date first occurs.

10. Shares Purchased for Investment. Optionee agrees that any shares of
Common Stock acquired on exercise of this Option shall be acquired solely for
Optionee's own account and not as a nominee or agent for any other person, for
investment, and not with a view to, or for offer or resale in connection with,
any distribution thereof within the meaning of the Securities Act or other
applicable securities laws. Optionee understands that any shares of Common Stock
acquired on exercise of this Option have not been registered under the
Securities Act or under any applicable blue sky or other state securities law or
regulation (hereinafter collectively referred to as "blue sky laws") and that
Optionee cannot offer for sale, sell, pledge, transfer or otherwise dispose of
such shares of Common Stock unless such shares of Common Stock have been
registered under the Securities Act and under any applicable blue sky laws, or
unless an exemption from such registration is available with respect to any such
proposed offer, sale, pledge, transfer or other disposition. Optionee agrees
that a restrictive legend addressing the foregoing restrictions on transfer may
be placed on certificates representing any shares of Common Stock acquired on
exercise of this Option and that transfer of such shares of Common Stock may be
refused by the Company or its transfer agent, if any, if in the opinion of
counsel to the Company any proposed sale or other disposition thereof by
Optionee would not be in compliance with the Securities Act or any other
applicable federal securities laws or blue sky laws.

11. Notices. Each notice relating to this Agreement shall be in writing and
delivered in person or by certified mail to the proper address. Each notice
shall be deemed to have been given on the date it is received. Each notice to
the Company shall be addressed to it at 2450 South Shore Boulevard, Suite 300,
League City, Texas 77573, Attention: Craig A. Reynolds. Each notice to Optionee
or other person or persons then entitled to exercise the Option shall be
addressed to Optionee at the address specified below or such other person or
persons at Optionee's address specified below. Anyone to whom a notice may be
given under this Agreement may designate a new address by notice to that effect.

12. No Obligation to Exercise Option. This Agreement does not impose any
obligation upon Optionee to exercise the Option.

A-2
<PAGE> 21

13. Law Governing. THIS AGREEMENT IS INTENDED TO BE PERFORMED IN THE STATE
OF TEXAS AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF SUCH STATE.

EXECUTED as of the date first set forth above.

AMERICAN HOMESTAR CORPORATION

By: /s/ CRAIG A. REYNOLDS
----------------------------------
Its: Vice President -- Finance

OPTIONEE:

/s/ FINIS F. TEETER
------------------------------------
Finis F. Teeter

A-3
<PAGE> 22

AMERICAN HOMESTAR CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT

1. Grant of Option. Pursuant to a resolution of the Compensation Committee
of the Board of Directors of American Homestar Corporation, a Texas corporation,
(the "Company"), dated November 15, 1996 (the "Date of Grant"), the Company
hereby grants Laurence A. Dawson, Jr. ("Optionee") a Non-Qualified Stock Option
(the "Option") to purchase from the Company a total of 75,000 shares of the
Company's common stock, par value $0.05 per share (the "Common Stock") at an
exercise price of $17.00 per share, in the amounts, during the periods, and upon
the terms and conditions set forth herein; provided, however, that
notwithstanding anything herein to the contrary, the granting of the Option is
subject to the approval of the shareholders of the Company, and this Option may
not be exercised, in whole or in part, until and unless such approval has been
obtained.

25,000 shares: if the Company's Market Cap equals or exceeds
$300 million at any time on or prior to
November 15, 2000

25,000 additional shares: if the Company's Market Cap equals or exceeds
$400 million at any time on or prior to
November 15, 2000

25,000 additional shares: if the Company's Market Cap equals or exceeds
$500 million at any time on or prior to
November 15, 2000

3. Restrictions on Exercise. The Option:

(a) may be exercised only with respect to full shares of Common Stock
and no fractional shares of Common Stock shall be issued upon exercise of
the Option; and

4. Manner of Exercise. The Option may be exercised by written notice to the
Company of the number of shares of Common Stock being purchased and the exercise
price to be paid accompanied by the following:

Upon due exercise of the Option, the Company shall issue certificates
representing shares of Common Stock registered in the name of the person
exercising the Option.

A-4
<PAGE> 23

5. Withholding of Taxes. The Company shall be entitled to withhold from any
payments otherwise due Optionee such amounts as may be necessary to satisfy any
federal income tax withholding requirement with respect to the exercise of the
Option, the transfer of shares of Common Stock, or the disposition of such
shares, and may, if necessary, collect from Optionee additional amounts
necessary to satisfy the withholding requirement.

12. No Obligation to Exercise Option. This Agreement does not impose any
obligation upon Optionee to exercise the Option.

A-5
<PAGE> 24

13. Law Governing. THIS AGREEMENT IS INTENDED TO BE PERFORMED IN THE STATE
OF TEXAS AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF SUCH STATE.

EXECUTED as of the date first set forth above.

AMERICAN HOMESTAR CORPORATION

By: /s/ CRAIG A. REYNOLDS
----------------------------------
Its: Vice President -- Finance

OPTIONEE:

/s/ LAURENCE A. DAWSON, JR.
------------------------------------
Laurence A. Dawson, Jr.

A-6
<PAGE> 25

AMERICAN HOMESTAR CORPORATION
PROXY - ANNUAL MEETING OF SHAREHOLDERS

P The undersigned hereby appoints Laurence A. Dawson, Jr. and
Craig A. Reynolds, each with power to act without the other and with
R full power of substitution, as Proxies to represent and to vote, as
designated on the reverse side, all stock of American Homestar
O Corporation owned by the undersigned at the Annual Meeting of
Shareholders to be held at South Shore Harbour Hotel, 2500 South Shore
X Boulevard, League City, Texas, 77573, on Thursday, October 2, 1997, at
10:00 a.m., local time, upon such business as may properly come before
Y the meeting or any adjournment thereof, including the matters set forth
on the reverse side.

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO SPECIFIC DIRECTION
IS GIVEN, THIS PROXY WILL BE VOTED (i) FOR THE ELECTION OF THE NOMINEES
FOR DIRECTOR, (ii) FOR THE APPROVAL OF NON-QUALIFIED STOCK OPTION
AGREEMENTS, (iii) FOR THE RATIFICATION OF THE SELECTION OF KPMG PEAT
MARWICK LLP AS THE COMPANY'S INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
AND (iv) IN THE DISCRETION OF THE PROXY HOLDERS ON ANY OTHER MATTER THAT
MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS THEREOF.

(Continued on reverse side)

FOLD AND DETACH HERE

<PAGE> 26
(CONTINUED FROM OTHER SIDE) PLEASE MARK [X]
YOUR VOTE AS
INDICATED IN
THIS EXAMPLE

Election as Directors of the eight nominees listed below (except as indicated
to the contrary below):

<TABLE>
<S> <C> <C>
FOR ALL WITHHOLD AUTHORITY INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, CHECK THE WITHHOLD
NOMINEES to vote on one or BOX AND STRIKE THROUGH THE NOMINEE'S NAME BELOW.
more nominees as
struck out to the Finis F. Teeter, Laurence A. Dawson, Jr., Craig A. Reynolds, Jackie H. Holland, Charles N.
right Carney, Jr., James J. Fallon, William O. Hunt and Jack L. McDonald

[ ] [ ]

Approval of Non-Qualified Stock Agreements. 3. Ratification of the selection of KPMG 4. In their discretion on any other
Peat Marwick LLP as the Company's matter that may properly come
independent certified public before the meeting or any
accountants. adjournments thereof.

FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN

[ ] [ ] [ ] [ ] [ ] [ ]

Dated: _________________________________, 1997

______________________________________________
Signature

______________________________________________
(Signature if held jointly)

Please date, sign exactly as shown hereon and
mail promptly this proxy in the enclosed
envelope. When there is more than one owner,
each should sign. When signing as an attorney,
administrator, executor, guardian or trustee,
please add your title as such. If executed by
a corporation, this proxy should be signed by
by a duly authorized officer. If executed by
a partnership, please sign in the partnership
name by an authorized person.

This proxy may be revoked prior to the
exercise of the powers conferred by the proxy.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS.

- ------------------------------------------------------------------------------------------------------------------------------------
--FOLD AND DETACH HERE--
</TABLE>