CAVALIER HOMES INC
REAL ESTATE NOTE
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<FILENAME>realeastatenote.txt
<DESCRIPTION>REAL ESTATE NOTE
<TEXT>


                                REAL ESTATE NOTE


$10,000,000.00                                                August 6, 2003

         FOR VALUE RECEIVED, the undersigned CAVALIER PROPERTIES, INC., a
Delaware corporation, CAVALIER HOME BUILDERS, LLC, a Delaware limited liability
company, CAVALIER REAL ESTATE CO., INC., a Delaware corporation, and QUALITY
HOUSING SUPPLY, LLC, a Delaware limited liability company, RIDGE POINTE
MANUFACTURING, LLC, an Alabama limited liability company (hereinafter called
"Borrower;" and unless the context clearly indicates otherwise, all references
herein to the Borrower shall be deemed to refer to the foregoing parties both
individually and collectively with full and equal force and effect), jointly and
severally promise to pay to the order of FIRST COMMERCIAL BANK, an Alabama
banking corporation (hereinafter, "Lender"), at its main office in the City of
Birmingham, Alabama, or at such other address as the holder of this Note may
from time to time designate in writing, the principal sum of TEN MILLION AND
NO/100 DOLLARS ($10,000,000.00), together with interest thereon and other agreed
charges as provided herein.

         1. Defined Terms. As used herein, the following terms shall have the
meanings thereafter ascribed:

                  "Advance Date" shall mean the date upon which proceeds of this
         Note are disbursed to the Borrower in accordance with the terms of the
         Loan Agreement.

                  "Default Rate" shall mean a variable per annum rate of
         interest equal to the lesser of (i) two percent (2%) in excess of the
         rate of interest otherwise applicable hereunder at the time the Default
         Rate becomes applicable, or (ii) the maximum rate allowed by applicable
         law.

                  "Event of Default" shall have the meaning set forth in Section
         9 hereof. An Event of Default shall "exist" if an Event of Default
         shall have occurred and is continuing.

                  "First Extension Term" shall mean the period of time beginning
         upon the expiration of the Primary Term and ending sixty (60) calendar
         months thereafter.

                  "Fixed Rate" shall mean a fixed per annum rate of interest
         equal to six and one-half percent (6.5%).

                  "Guarantors"  shall mean Cavalier Homes,  Inc.,  Quality
         Certified  Insurance  Services,Inc., CIS Financial Services,  Inc.,
         BRC Components,  Inc. and The Home Place, LLC (individually, a
         "Guarantor"), in their capacities as guarantors of the Obligations
         pursuant to the Guaranty.

                  "Guaranty" shall mean that certain Guaranty Agreement of even
         date herewith from the Guarantors in favor of the Lender.

                  "Loan" shall mean the loan from Lender to Borrower evidenced
         by this Note in a principal amount not exceeding the sum of
         $10,000,000.00.

                  "Loan Agreement" shall mean that certain Amended and Restated
         Revolving and Term Loan Agreement dated as of March 31, 2000, as
         amended by that certain First Amendment to Amended and Restated
         Revolving and Term Loan Agreement dated as of September 29, 2000, as
         further amended by that certain Second Amendment to Amended and
         Restated Revolving and Term Loan Agreement dated as of May 1, 2001, as
         further amended by that certain Third Amendment to Amended and Restated
         Revolving and Term Loan Agreement dated as of June 21, 2002, as further
         amended by that certain Fourth Amendment to Amended and Restated
         Revolving and Term Loan Agreement dated as of October 25, 2002, and as
         further amended by that certain Fifth Amendment to Amended and Restated
         Revolving and Term Loan Agreement of even date herewith, by and among
         Borrower (or certain predecessors in interest to Borrower) and Lender.

                  "Loan Documents" shall collectively mean this Note, the
         Guaranty, each and every Security Instrument, the Loan Agreement, all
         "Loan Documents" identified in the Loan Agreement, and all other
         documents or instruments evidencing or securing the Obligations, as any
         of the same may be amended, extended, renewed or modified from time to
         time.

                  "Obligations" shall collectively mean all indebtedness or
         other liabilities and obligations of the Borrower to the Lender arising
         out of or secured by the Loan Documents, including, without limitation
         (i) the Borrower's obligation to repay the principal amount of the Loan
         with interest thereon as herein set forth, and (ii) the Borrower's
         obligation to pay all commitment fees, extension fees and other agreed
         charges in connection with the Loan, and (iii) the Borrower's
         obligation to pay certain legal fees, court costs and other costs of
         collection as set forth herein and in the other Loan Documents, and
         (iv) the Borrower's obligation to pay and discharge any and all liens
         or encumbrances upon or tax liabilities with respect to the collateral
         described in the Loan Documents, and (v) any and all indemnity
         obligations of the Borrower in favor of the Lender set forth in any of
         the Loan Documents, and (vi) the Borrower's obligation timely to
         observe and perform all other covenants and agreements set forth in the
         Loan Documents, and (vii) all other "Obligations" as such term is
         defined in the Loan Agreement.

                  "Primary Term" shall mean the period of time beginning on the
         Advance Date and ending sixty (60) calendar months thereafter.

                  "Second Extension Term" shall mean the period of time
         beginning upon the expiration of the First Extension Term and ending
         forty-eight (48) calendar months thereafter.

                  "Security Instrument" shall mean each mortgage, deed of trust,
         deed to secure debt, security agreement, assignment, indemnity or
         similar instrument or agreement granted or given by the Borrower to or
         for the benefit of Lender as security for the Obligations.

Any capitalized term used herein and not defined above shall have the meaning
set forth in the Loan Agreement.

         2. Disbursements. Proceeds of this Note shall be disbursed to or for
the account of the Borrower in accordance with the terms of the Loan Agreement.

         3. Interest Rates.

         (a) Except as otherwise provided herein, during the Primary Term the
outstanding principal balance hereof shall bear interest at a fixed per annum
rate equal to the lesser of (i) the Fixed Rate, or (ii) the maximum rate allowed
by applicable law.

         (b) Except as otherwise provided herein, during the First Extension
Term the outstanding principal balance hereof shall bear interest at a per annum
rate equal to the lesser of (i) such market rate of interest as may then be made
available by Lender to Borrower, which rate shall be confirmed by agreement of
the parties in a separate amendment to this Note to be executed on or about the
commencement of the First Extension Term, or (ii) the maximum rate allowed by
applicable law.

         (c) Except as otherwise provided herein, during the Second Extension
Term the outstanding principal balance hereof shall bear interest at a per annum
rate equal to the lesser of (i) such market rate of interest as may then be made
available by Lender to Borrower, which rate shall be confirmed by agreement of
the parties in a separate amendment to this Note to be executed on or about the
commencement of the Second Extension Term, or (ii) the maximum rate allowed by
applicable law.

         (d) All interest on the outstanding principal balance hereof, whether
accruing at the Fixed Rate, the Default Rate or any other rate, shall be
calculated as simple interest on the basis of a 360-day year by multiplying the
outstanding principal amount by the applicable per annum rate, multiplying the
product thereof by the actual number of days elapsed, and dividing the product
so obtained by 360.

         4. Payments. The outstanding principal balance of this Note, together
with interest accruing thereon, shall be due and payable as follows:

            (a) On the date that is one calendar month after the Advance Date,
         and on the same day of each successive calendar month thereafter
         during the Primary Term, Borrower shall pay to Lender an installment of
         principal and interest in the amount of $90,809.61, said installment
         being the level monthly installment of principal and interest necessary
         to fully amortize the stated principal amount hereof over an assumed
         term of one hundred sixty-eight (168) months at a rate of interest
         equal to the Fixed Rate; and,

            (b) On the date that is one calendar month after commencement of the
         First Extension Term, and on the same day of each successive
         calendar month thereafter during the First Extension Term, Borrower
         shall pay to Lender the level monthly installment of principal and
         interest necessary to fully amortize the outstanding principal balance
         hereof on the first day of the First Extension Term over an assumed
         term of one hundred eight (108) months at the rate of interest
         applicable during the First Extension Term (as determined under
         subsection 3(b) above); and,

            (c) On the date that is one calendar month after commencement
         of the Second Extension Term, and on the same day of each successive
         calendar month thereafter during the Second Extension Term, Borrower
         shall pay to Lender the level monthly installment of principal and
         interest necessary to fully amortize the outstanding principal balance
         hereof on the first day of the Second Extension Term over an assumed
         term of forty-eight (48) months at the rate of interest applicable
         during the Second Extension Term (as determined under subsection 3(c)
         above); and,

            (b) On the last day of the Second Extension Term, Borrower
         shall pay to Lender the entire outstanding principal balance of this
         Note, together with all accrued and unpaid interest thereon.

All payments, including any prepayments pursuant to Section 5 below, will be
applied first to interest then due and payable, with any balance remaining being
applied in reduction of principal. In the event that Borrower shall at any time
prepay the principal of this Note by an amount exceeding $1,000,000.00, Borrower
shall be entitled to request that Lender recalculate the monthly amortizing
payment due under subsections (a), (b) or (c) above based upon the then-current
outstanding principal balance of the Loan and the remaining number of months in
the assumed amortization term.

         5. Prepayments. The Loan shall be prepayable in whole or in part, at
any time and from time to time, without premium or penalty. Amounts prepaid may
not be reborrowed.

         6. Late Charges; Interest on Overdue Installments; Collection Costs.

         (a) Borrower will pay to Lender a late charge equal to five percent
(5%) of the amount of any payment which is in default for more than ten (10)
days, but not more than the maximum amount allowed by applicable law. Collection
or acceptance by Lender of such late charge shall not constitute a waiver of any
rights or remedies of Lender provided herein or in any other Loan Document.

         (b) Upon the occurrence and during the continuation of any Event of
Default hereunder, Borrower agrees to pay interest to Lender on the aggregate
indebtedness represented hereby, including interest earned to maturity and from
maturity until such aggregate indebtedness is paid in full, at a per annum rate
equal to the Default Rate.

         (c) Lender shall be entitled to recover from Borrower all costs of
collecting, securing or attempting to collect or secure this Note, including,
without limitation, court costs and reasonable attorneys' fees, including
attorneys' fees on any appeal by either Borrower or Lender.

         7. Fees. In consideration of the extension of credit evidenced hereby,
Borrower has paid to Lender a commitment fee in the amount of $100,000.00, which
fee shall be deemed fully earned by Lender. No portion of said commitment fee
shall be subject to rebate or proration in the event that the outstanding
principal balance hereof, or any portion thereof, is prepaid by Borrower.

         8. Security. All Obligations of Borrower are secured by the Security
Instruments and the other Loan Documents, and by all collateral described
therein, and are guaranteed by the Guarantor pursuant to the Guaranty.

         9. Events of Default.

         (a) The principal sum evidenced by this Note, together with all accrued
but unpaid interest thereon, shall become immediately due and payable at the
option of Lender upon the occurrence of any of the following events, each of
which shall constitute an "Event of Default" hereunder:

             (1) Nonpayment of Indebtedness. Failure by Borrower to make
         any scheduled payment of interest or principal under the terms of this
         Note within ten (10) days after the due date thereof, or failure by
         Borrower to make any other payment of money required by the terms of
         any Loan Document within ten (10) days after written demand therefor
         from Lender (in each case, a "Monetary Default").

             (2) Failure to Perform Obligations. Failure by Borrower to
         perform any term, condition or covenant herein or in any other Loan
         Document (other than any term, condition or covenant the violation of
         which would constitute a Monetary Default under item (1) above), which
         failure is not cured within thirty (30) days after written notice
         thereof from Lender to Borrower; provided that if such default is not
         reasonably susceptible to being cured within such thirty (30) day
         period, but Borrower commences cure efforts within the initial thirty
         (30) days and thereafter diligently and continuously pursues the same,
         no Event of Default will occur until the expiration of such period of
         time as may be reasonable in the circumstances for a cure to be
         obtained.

             (3) Default Under Loan Documents. The occurrence of any "Event
         of Default" under, and as defined in, any of the other Loan Documents.

         (b) Notwithstanding the foregoing, no notice of default shall be
required if Lender is prevented from giving notice by bankruptcy or other
applicable law, and the cure period, if any, specified with respect to such
event shall commence on the date thereof rather than from the date of notice.
Nothing herein shall require any notice to Borrower except as expressly set
forth above or in the other Loan Documents referred to herein.

         10. Usury. In no event shall the amount of interest due or payable
hereunder exceed the maximum rate of interest allowed by applicable law, and in
the event any such payment is inadvertently paid by Borrower or inadvertently
received by Lender, then such excess sum shall be credited as a payment of
principal, unless Lender elects to have such excess sum refunded to Borrower
forthwith, which refund Borrower hereby agrees to accept. It is the express
intent hereof that Borrower not pay and Lender not receive, directly or
indirectly, interest in excess of that which may be legally paid by Borrower
under applicable law.

         11. Relationship of Parties. Borrower and Lender agree that the
relationship between them shall be solely that of debtor and creditor. Nothing
contained in this Note or in any other Loan Document shall be deemed to create a
partnership, tenancy-in-common, joint tenancy, joint venture or co-ownership by
or between Borrower and Lender. Lender shall not be in any way responsible or
liable for debts, losses, obligations or duties of Borrower with respect to the
Project or otherwise. Borrower, at all times consistent with the terms and
provisions of this Note and the Loan Documents, shall be free to determine and
follow its own policies and practices in the conduct of its business.

         12. Notices. All notices provided for herein, in other Loan Documents,
or required by applicable law in any matter relating to the Loan, shall be given
and received in accordance with Section 10.6 of the Loan Agreement.

         13. Governing Law; Jurisdiction. The validity, interpretation,
enforcement and effect of this Note (including, without limitation, provisions
with respect to interest, late charges, and interest on overdue installments)
shall be governed by, and construed according to the laws of, the State of
Alabama. Lender's principal place of business is located in Jefferson County,
Alabama, and Borrower agrees that this Note has been made and delivered to
Lender, and shall be held by Lender, at such principal place of business. By
execution and delivery of this Note, Borrower expressly and irrevocably assents
and submits to the personal jurisdiction of the state and federal courts
presiding in and over Jefferson County, Alabama, in any legal action or
proceeding arising under, out of, or in any manner relating to this Note or the
extension of credit evidenced hereby, and acknowledges that the negotiation,
execution and delivery of this Note constitute sufficient contacts with the
State of Alabama for purposes of independently conferring such jurisdiction.
Borrower further agrees that the exclusive venue of any such legal action or
proceeding arising out of or in any manner relating to this Note shall be in the
state and/or federal courts presiding in and over Jefferson County, Alabama,
unless Lender shall, at its sole option, elect to bring or permit the
maintenance of any such action in another venue, and Borrower hereby waives any
and all rights under any state or federal law to object to such venue on grounds
of forum non conveniens or otherwise.

         14. Waiver of Jury Trial. BORROWER, AND BY ACCEPTANCE HEREOF LENDER,
HEREBY MUTUALLY WAIVE ANY RIGHT TO A TRIAL BY JURY ON ANY CLAIM, COUNTERCLAIM,
SETOFF, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING OUT OF OR IN ANY WAY
PERTAINING OR RELATING TO THIS NOTE, ANY OTHER LOAN DOCUMENT, OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH
OR THEREWITH, OR (B) IN ANY WAY CONNECTED WITH OR PERTAINING OR RELATING TO OR
INCIDENTAL TO ANY DEALINGS OF THE PARTIES HERETO WITH RESPECT TO THIS NOTE, ANY
OTHER LOAN DOCUMENT, OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR IN CONNECTION WITH ANY
TRANSACTIONS RELATED THERETO OR CONTEMPLATED THEREBY OR THE EXERCISE OF EITHER
PARTY'S RIGHTS AND REMEDIES THEREUNDER, IN ALL OF THE FOREGOING CASES WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE. BORROWER AND LENDER AGREE THAT EITHER OR BOTH OF THEM MAY FILE A COPY
OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY
AND BARGAINED AGREEMENT BETWEEN THE PARTIES IRREVOCABLY TO WAIVE TRIAL BY JURY,
AND THAT ANY DISPUTE OR CONTROVERSY WHATSOEVER BETWEEN THEM SHALL INSTEAD BE
TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
BORROWER HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF LENDER, INCLUDING
LENDER'S COUNSEL, HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT LENDER WOULD
NOT, IN THE EVENT OF SUCH DISPUTE OR CONTROVERSY, SEEK TO ENFORCE THE PROVISIONS
OF THIS PARAGRAPH, AND BORROWER ACKNOWLEDGES THAT LENDER HAS, IN PART, BEEN
INDUCED TO MAKE THE EXTENSION OF CREDIT EVIDENCED BY THIS NOTE IN RELIANCE ON
THE PROVISIONS OF THIS PARAGRAPH.

         15. Miscellaneous.

         (a) All amounts due hereunder shall be payable in lawful money of the
United States of America.

         (b) With respect to the amounts due under this Note, Borrower waives
the following to the fullest extent permitted by law:

                     (1) All rights of exemption of property from levy or
         sale under execution or other process for the collection of debts under
         the Constitution or laws of the United States or any state thereof;

                     (2) Demand, presentment, protest, notice of dishonor,
         notice of non-payment, diligence in collection, and all other
         requirements necessary to charge or hold Borrower liable on any
         obligations hereunder; and

                     (3) Any further receipt for or acknowledgment of any
         collateral now or hereafter deposited as security for the obligations
         hereunder.

         (c) Lender shall not by any act, delay, omission, or otherwise be
deemed to have waived any of its rights or remedies under the Loan Documents,
and no waiver of any kind shall be valid unless in writing and signed by Lender.
All rights and remedies of Lender under the terms of this Note and the other
Loan Documents and applicable statutes or rules of law shall be cumulative and
may be exercised successively or concurrently. Any provision in this Note which
may be unenforceable or invalid under any law shall be ineffective to the extent
of such unenforceability or invalidity without affecting the enforceability or
validity of any other provision hereof.

         (d) Borrower agrees that, as of the date hereof, there are no defenses,
equities, or setoffs with respect to the obligations set forth herein.

         (e) This Note and the obligations of Borrower hereunder shall be
binding upon and enforceable against Borrower and its successors and assigns,
and shall inure to the benefit of Lender and its successors and assigns,
including any subsequent holder of this Note.

         (f) Lender may, at its option, release any collateral given to secure
the indebtedness evidenced hereby, or release any Guarantor from its obligations
under the Guaranty, and no such release shall impair the Obligations of Borrower
to Lender under this Note and the other Loan Documents.

         (g) Section headings are inserted for convenience of reference only and
shall be disregarded in the interpretation of this Note. The provisions of this
Note shall be construed without regard to the party responsible for the drafting
and preparation hereof.

         (h) Time is of the essence of this Note and the performance of each of
the covenants and agreements contained herein.











              [No further text this page; Signature page follows.]




<PAGE>


         IN WITNESS WHEREOF, Borrower has caused this instrument to be properly
executed and delivered as of the day and year first above written.

                              BORROWER:

                              CAVALIER PROPERTIES, INC., a Delaware corporation


                               By:         /s/ Michael R. Murphy
                               Print Name:     Michael R. Murphy
                               Title:          President

                               CAVALIER HOME BUILDERS, LLC, a Delaware limited
                               liability company


                               By:         /s/ Michael R. Murphy
                               Print Name:     Michael R. Murphy
                               Title:          President

                               CAVALIER REAL ESTATE CO., INC., a Delaware
                               corporation


                               By:         /s/ Michael R. Murphy
                               Print Name:     Michael R. Murphy
                               Title:          President

                               QUALITY HOUSING SUPPLY, LLC, a Delaware limited
                               liability company


                               By:         /s/ Michael R. Murphy
                               Print Name:     Michael R. Murphy
                               Title:          Vice President

                               RIDGE POINTE MANUFACTURING, LLC, an Alabama
                               limited liability company


                               By:         /s/ Michael R. Murphy
                               Print Name:     Michael R. Murphy
                               Title:          Manager



</TEXT>
</DOCUMENT>
