CAVALIER HOMES, INC.

            1993 AMENDED AND RESTATED NONQUALIFIED STOCK OPTION PLAN



                                    ARTICLE I

                                   DEFINITIONS


Section 1.1       Definitions


         As used herein, the following terms shall have the meanings hereinafter
set forth unless the context clearly indicates to the contrary:


         (a)      "1934 Act" shall mean the Securities  Exchange Act of 1934, as
   amended.

         (b)      "Board" shall mean the Board of Directors of the Company.

         (c)      "Company"   shall  mean  Cavalier   Homes,   Inc,  a  Delaware
   corporation.

         (d)      "Committee"  shall  mean  the  Compensation  Committee  of the
   Board.

         (e)      "Executive Officers" shall have the meaning afforded that term
   by Rule 3b-7 promulgated under the 1934 Act.

         (f)      "Fair Market  Value" shall mean the closing price per share of
    the   Stock on the principal United States  securities  exchange  registered
    under the 1934  Act,  or the last  sales  price  per  share of Stock  quoted
    on an automated  quotation  system  of a registered  securities association,
    if  applicable, on which such Stock is sold in the regular way.

         (g)      "Stock" with respect to each share to which that term  refers,
    shall mean one (1) share of Common Stock, par value $0.10 per share,  of the
    Company  now  authorized;  any  other  shares  of the  Stock of the  Company
    hereafter  authorized;  and  securities  of the  Company  which,  under  any
    conditions, will be converted into or exchanged for any such Stock.

         (h)    "Option" shall mean an option to purchase Stock granted pursuant
    to the provisions of Article VI hereof.



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         (i)  "Optionee"  shall mean an officer  (who may also be a director) or
    other key  employee  of the  Company or any of its  subsidiaries  to whom an
    Option has been granted hereunder.



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         (j)  "Plan"  shall mean the  Cavalier  Homes,  Inc.  1993  Amended  and
    Restated  Nonqualified  Stock Option Plan,  the terms of which are set forth
    herein.

         (k) "Stock  Option  Agreement"  shall mean the  agreement  between  the
    Company  and the  Optionee  under  which the  Optionee  may  purchase  Stock
    hereunder.



                                   ARTICLE II

                                    THE PLAN

Section 2.1      Name


         This Plan shall be known as the  "Cavalier  Homes,  Inc.  1993  Amended
and  Restated  Nonqualified  Stock Option Plan."


Section 2.2      Purpose


         The purpose of the Plan is to advance the  interests of the Company and
its  stockholders by affording to officers (who may also be directors) and other
key employees of the Company and its  subsidiaries  an opportunity to acquire or
increase their proprietary interest in the Company by the grant to such officers
and employees of Options  under the terms set forth  herein.  The purpose of the
Plan is also to provide compensation to selected officers and employees for past
services rendered to the Company or its subsidiaries.  By thus compensating such
officers and  employees  and  encouraging  such officers and employees to become
owners of Stock of the Company, the Company seeks to attract, retain, compensate
and motivate those highly competent individuals upon whose judgment, initiative,
leadership,  and  continued  efforts the success of the Company in large measure
depends.


Section 2.3      Effective Date


         The Plan shall be deemed  adopted and shall become  effective as of the
date of its approval by the Board,  subject to its  subsequent  approval  within
twelve (12) months from the date of such action by the Board by the  affirmative
vote of a majority of the outstanding  shares of Stock of the Company present in
person or by proxy at the  stockholders  meeting and  entitled to vote  thereon,
voting in  accordance  with the Restated  Certificate  of  Incorporation  of the
Company and the General  Corporation Law of the State of Delaware,  at an annual
or special meeting of the stockholders of the Company. The Plan shall expire ten
(10) years from the date of its adoption by the Board.  Any Option granted prior
to stockholder  approval of the Plan as herein provided shall be subject to such
approval and shall have no legal effect and shall convey no rights to the holder
thereof in the event said stockholder approval of the Plan is not obtained.


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                                   ARTICLE III

                                  PARTICIPANTS


Section 3.1     Eligibility


         Except as  otherwise  provided  herein,  any officer (who may also be a
director)  and any key  employee  of the  Company or its  subsidiaries  shall be
eligible to  participate in the Plan.  Subject to the express  provisions of the
Plan, the Committee may grant Options to any eligible officer or employee of the
Company  or its  subsidiaries  in  accordance  with such  determinations  as the
Committee  from  time to time  in its  sole  discretion  shall  make;  provided,
however, that no member of the Committee shall be eligible to participate in the
Plan.



                                   ARTICLE IV

                                 ADMINISTRATION


Section 4.1      Duties and Powers of the Committee


         The Plan shall be administered by the Committee. Subject to the express
provisions of the Plan, the Committee  shall have sole  discretion and authority
to determine  from among eligible  officers and employees  those to whom and the
time or times at which Options may be granted,  the number of shares of Stock to
be subject to each Option, the exercise price of each Option, and the period for
the exercise of such Option which need not be the same for each grant hereunder.
Subject to the express  provisions of the Plan,  the  Committee  shall also have
complete authority to interpret the Plan, to prescribe, amend, and rescind rules
and regulations  relating to it, to determine the details and provisions of each
Stock  Option  Agreement,  and to make all  other  determinations  necessary  or
advisable in the administration of the Plan.


Section 4.2      Majority Rule


         The  Committee  currently  consists of two persons,  and the  concerted
actions  of both  such  persons  in  administering  the Plan  shall be final and
binding on all  parties.  In the event that the Board  hereafter  appoints  more
persons to serve on the  Committee,  a majority of the members of the  Committee
shall  constitute  a quorum,  and any action  taken by a  majority  present at a
meeting  at which a quorum is  present  or any  action  taken  without a meeting
evidenced  by a writing  executed  by a majority  of the whole  Committee  shall
constitute the action of the Committee.


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Section 4.3      Company Assistance


         The Company shall supply full and timely  information  to the Committee
on all matters relating to eligible  officers and employees,  their  employment,
death,  retirement,  disability,  or other  termination of employment,  and such
other  pertinent  facts as the Committee may require.  The Company shall furnish
the  Committee  with such  clerical and other  assistance as is necessary in the
performance of its duties.



                                    ARTICLE V

                         SHARES OF STOCK SUBJECT TO PLAN


Section 5.1       Limitations


         The number of shares of Stock  which may be issued  and sold  hereunder
shall not exceed 330,000 shares of Common Stock,  subject to adjustment pursuant
to the  provisions of Section 5.3 hereof.  Such shares may be either  authorized
and unissued shares or shares issued and thereafter acquired by the Company, and
such amount of shares shall be and is hereby reserved for issuance  pursuant to
this Plan.  Any of such shares which may remain unsold and which are not subject
to outstanding Options at the termination of the Plan shall cease to be reserved
for the purpose of the Plan, but until the  termination of the Plan, the Company
shall  at  all  times  reserve  a  sufficient  number  of  shares  to  meet  the
requirements of the Plan. No Optionee  hereunder shall receive Options which, in
the aggregate, exceed 100,000 shares of Stock.


Section 5.2       Options Granted Under Plan


         Shares of Stock with respect to which an Option granted hereunder shall
have been exercised shall not again be available for grant hereunder. If Options
granted hereunder shall expire, terminate, or be canceled for any reason without
being wholly exercised, new Options may be granted hereunder covering the number
of shares to which such Option expiration, termination or cancellation relates.


Section 5.3       Antidilution




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         In the  event  that  the  outstanding  shares  of Stock  hereafter  are
increased, decreased or changed into or exchanged for a different number or kind
of shares  or other  securities  of the  Company  by  reason of  reorganization,
recapitalization, reclassification, combination of shares, stock split, or stock
dividend after the date that the Board initially adopts this Plan,

         (a)      the   aggregate  number and kind of shares subject  to Options
which may be granted  hereunder shall be adjusted appropriately; and

         (b) rights under outstanding Options granted hereunder,  both as to the
number of subject shares and the Option price, shall be adjusted appropriately.

         In the event of (i) a dissolution or  liquidation of the Company,  (ii)
any merger,  consolidation or combination involving the Company,  other than (A)
any  merger,  consolidation  or  combination  that is solely for the  purpose of
changing  the  domicile of the  Company,  and (B) any merger,  consolidation  or
combination  that  would  result  in  the  voting   securities  of  the  Company
outstanding  immediately  prior  thereto  continuing  to  represent  (either  by
remaining  outstanding  or by being  converted  into  voting  securities  of the
surviving  entity) at least fifty percent (50%) of the combined  voting power of
the voting  securities  of the Company (or such  surviving  entity)  outstanding
immediately after such merger,  consolidation or combination,  or (iii) any sale
of substantially  all the assets of the Company or a sufficient  amount of stock
in the  Company  (whether by tender  offer,  original  issuance,  or a single or
series of  related  stock  purchase  and sale  agreements  and/or  transactions)
sufficient  to  confer  on  the  purchaser  or   purchasers   thereof   (whether
individually  or in a group) the  ability  to elect a  majority  of the Board of
Directors  of the Company,  each  outstanding  Option  granted  hereunder  shall
terminate,  but the  Optionee  shall have the right,  immediately  prior to such
dissolution, liquidation, merger, consolidation,  combination, or asset or stock
sale to exercise  outstanding Options in full, without regard to any installment
exercise  provisions  and  whether  the  Option  by its  terms  is at such  time
immediately  exercisable  in full,  to the  extent  that it shall  not have been
exercised.  In the event of a transaction of the nature described in (ii) above,
nothing  contained  herein shall prevent the Board and the Board of Directors of
the surviving  corporation  and/or the acquiring  corporation from converting an
Option  into  an  option  to  purchase  stock  in  the  surviving  or  acquiring
corporation on a fair and equitable basis.

         The  foregoing  adjustments  and  the  manner  of  application  of  the
foregoing  provisions shall be determined solely by the Committee,  and any such
adjustment shall provide for the elimination of fractional share interests.



                                   ARTICLE VI

                                     OPTIONS


Section 6.1      Option Grant and Agreement


         Each Option  granted  hereunder  shall be  evidenced  by a Stock Option
Agreement  dated as of the date of grant and  executed  by the  Company  and the
Optionee,  which  Agreement  shall set forth such terms and conditions as may be
determined by the Committee consistent with the Plan.


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Section 6.2      Option Price


         The per  share  price of the  Stock  subject  to each  Option  shall be
determined  by  the  Committee  in the  exercise  of its  discretion,  with  due
consideration for the compensation and incentive purposes of this Plan, but said
per share  price  shall not be less than the greater of (i) the par value of the
Stock on the date the Option is granted or any time  during  which the Option is
exercisable,  or (ii) 60% of the Fair  Market  Value of the Stock on the date of
grant.


Section 6.3      Option Period


         Each Option granted hereunder must be granted within ten years from the
effective  date of the Plan. The period for the exercise of each Option shall be
determined  by the  Committee,  but in no instance  shall such period exceed ten
years.  Options  granted to Executive  Officers  and  employee  directors of the
Company shall not be  exercisable  within the first six months after the date of
grant,  unless it should  become  exercisable  upon a change of  control  of the
Company  pursuant to Section 5.3 hereof.  The  Committee in its  discretion  may
accelerate  the times when  Options  are  exercisable  after the  initial  grant
thereof; provided,  however, that the Committee may not exercise such power in a
manner that would shorten the initial six-month period for Executive Officers or
employee directors of the Company referred to in the foregoing sentence if to do
so would  cause a  violation  of  Section  16 of the 1934 Act or the  rules  and
regulations promulgated thereunder. For purposes of grants of Options made under
this Plan prior to the date of  stockholder  approval of the Plan, the six-month
period shall be deemed to commence as of the date of stockholder approval.


Section 6.4      Option Exercise


         (a) Options may be exercised  with  respect to whole  shares only,  for
such shares of Stock and within the period  permitted by the exercise thereof as
determined by the Committee,  and shall be exercised by written notice of intent
to exercise the Option with respect to a specified number of shares delivered to
the Company at its principal office in the State of Alabama, and payment in full
to the Company at said  office of the amount of the Option  price for the number
of shares of Stock with respect to which the Option is then being exercised.

         (b) No Option  granted  hereunder  shall be  exercisable  unless at all
times during the period beginning on the date of the granting of such Option and
ending on the day which is three months  before the date of exercise,  or ending
on a day which is twelve  (12)  months  before the date of exercise in the event
that the Optionee is an  Executive  Officer (or ending on such other date at the
discretion of the Compensation Committee), the Optionee was a full-time employee
of either the Company or a parent or subsidiary of the Company, or a corporation
(or parent or subsidiary of such corporation) issuing or assuming such Option in
accordance with the terms of this Plan.




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Section 6.5      Nontransferability of Option


         No Option shall be transferred by an Optionee otherwise than by will or
the laws of descent  and  distribution,  or  pursuant  to a  qualified  domestic
relations order as defined by the Internal Revenue Code of 1986, as amended (the
"Code"),  or Title I of the Employee  Retirement Income Security Act, as amended
("ERISA"), or the rules thereunder.


Section 6.6      Effect of Disability, Death or Other Termination of Employment


         (a) In the event that the  employment  of an Optionee to whom an Option
shall have been granted shall be terminated  for any reason other than for cause
(as  defined  below),  such  Option may be  exercised  (to the  extent  that the
Optionee  shall have been entitled to do so at the date of his  termination)  by
such Optionee,  (i) if such Optionee is not an Executive  Officer of the Company
at any time after such termination and before the earlier of three months or the
original expiration date of the Option, but only to the extent such Optionee had
the right to exercise  such Option at the date of such  termination;  or (ii) if
such  Optionee is an Executive  Officer of the  Company,  at any time after such
termination  and before the earlier of twelve months or the original  expiration
date of the  Option,  but only to the  extent  such  Optionee  had the  right to
exercise such Option at the date of such termination.

         (b) If the  employment of an Optionee to whom an Option shall have been
granted is terminated for cause,  as defined below,  such Option shall terminate
immediately  upon such  termination.  For purposes of this Section 6.6, the term
"for cause" shall be defined as a good faith express  determination by the Board
that the Optionee has been guilty of willful misconduct or dishonesty, or a good
faith express determination by the Board that the Optionee has been derelict in,
has breached or has grossly neglected the Optionee's duty to the Company.

         (c) If an Optionee to whom an Option shall have been granted  shall die
or become totally and  permanently  disabled while he is employed by the Company
or its  subsidiaries,  or  within  twelve  months  (in the case of an  Executive
Officer)  or three  months (in the case of an Optionee  who is not an  Executive
Officer) after the termination of continuous  employment with the Company or its
subsidiaries, and the Optionee has not otherwise been terminated for cause, such
Option may be exercised (to the extent that the Optionee  would  otherwise  have
been  entitled  to do so at the  date  of  his  death  or  total  and  permanent
disability)  by such  Optionee,  his personal  representatives,  the executor or
administrator of the estate of the Optionee, or the person or persons to whom an
Option granted hereunder shall have been validly transferred  pursuant to a will
or the laws of descent and distribution.

         (d) No transfer of an Option by the  Optionee by will or by the laws of
descent and  distribution  shall be  effective  to bind the  Company  unless the
Company  shall  have  been   furnished   with  written  notice  thereof  and  an
authenticated  copy of the will and/or such other  evidence as the Committee may
deem  necessary to establish the validity of the transfer and the  acceptance by
the transferee or transferees of the terms and conditions of such Option.



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         (e) The Compensation Committee may, in their sole discretion, either at
the date of  execution  of Stock  Option  Agreement  or at any time  thereafter,
increase   the  amount  of  time  during  which  an  Optionee  or  his  personal
representative, executor, administrator or other legatee or devisee may exercise
such Option following such Optionee's  termination  other than for cause, as set
forth in paragraphs (a) and (b) above.


Section 6.7      Rights as Stockholder


         An  Optionee  or a  transferee  of an Option  shall have no rights as a
stockholder  with  respect  to any  shares subject to such  Option  prior to the
purchase of such shares by exercise of such Option as provided herein.



                                   ARTICLE VII

                               STOCK CERTIFICATES


Section 7.1     Stock Certificates


         The Company  shall not be required to issue or deliver any  certificate
for shares of Stock  purchased upon the exercise of an Option granted  hereunder
or any portion thereof, prior to fulfillment of all of the following conditions:

         (a) the completion of any  registration or other  qualification of such
shares under any federal or state law or under the rulings or regulations of the
Securities and Exchange  Commission or any other  governmental  regulatory body,
which the Committee shall in its sole discretion deem necessary or advisable;

         (b) the obtaining of any approval or other  clearance  from any federal
or state  governmental  agency which the Committee  shall in its sole discretion
determine to be necessary or advisable;

         (c) the lapse of such reasonable  period of time following the exercise
of the Option as the  Committee  from time to time may  establish for reasons of
administrative convenience;

         (d)      the  compliance  with any and all applicable federal, state or
local laws; and

         (e) such other terms and conditions as may be set forth in the Plan.



<PAGE>





                                  ARTICLE VIII

             TERMINATION, AMENDMENT, AND MODIFICATION OF THE PLAN


Section 8.1    Termination, Amendment, and Modification of the Plan


         The Board may at any time terminate,  and may at any time and from time
to time and in any respect amend or modify, the Plan; provided, however, that no
such action of the Board without approval of the stockholders of the Company may

         (a) materially  increase the total number of shares of Stock subject to
the Plan, except as contemplated in Section 5.3 hereof;

         (b)      materially   increase   the benefits  accruing to participants
under the Plan; or

         (c)      materially  modify  the  requirements  as  to  eligibility for
participation in the Plan; and

provided,  further, that no termination,  amendment, or modification of the Plan
shall in any  manner  affect  any Stock  Option  Agreement  theretofore  granted
pursuant to the Plan  without the consent of the Optionee or  transferee  of the
Option.  Except as may be necessary to comport with changes in the Code,  ERISA,
and the rules thereunder,  this Plan may not be amended more than once every six
months.



                                   ARTICLE IX

                                  MISCELLANEOUS


Section 9.1      Employment


         Nothing in the Plan or in any Option granted  hereunder or in any Stock
Option  Agreement  relating  thereto shall confer upon any employee the right to
continue in the employ of the Company or any of its subsidiaries.


Section 9.2      Other Compensation Plans




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         The  adoption  of the Plan shall not affect any other  stock  option or
incentive  or other  compensation  plans in effect for the Company or any of its
subsidiaries,  nor shall the Plan  preclude  the Company from  establishing  any
other forms of incentive or other  compensation  for employees of the Company or
any of its subsidiaries.


Section 9.3      Plan Binding on Successors


         The Plan  shall be  binding  upon the  successors  and  assigns  of the
Company.


Section 9.4      Singular, Plural; Gender


         Whenever used herein,  nouns in the singular  shall include the plural,
and the masculine pronoun shall include the feminine gender.


Section 9.5      Headings, Etc., No Part of Plan


         Headings of Articles and Sections  hereof are inserted for  convenience
and references; they constitute no part of the Plan.


Section 9.6      Investment Representation


         Each Stock  Option  Agreement  shall  contain an agreement  that,  upon
demand by the Committee for such a representation, the Optionee shall deliver to
the Committee at the time of any exercise of an Option a written  representation
that the shares of Stock to be acquired  upon such  exercise  are to be acquired
for  investment and not for resale or with a view to the  distribution  thereof.
Upon such demand,  delivery of such representation  prior to the delivery of any
shares  issued  upon  exercise of an Option and prior to the  expiration  of the
Option  period  shall be a condition  precedent  to the right of the Optionee or
such other persons to purchase any such shares.


Section 9.7       Compliance with Section 16


         With  respect  to  persons  subject  to  Section  16 of the  1934  Act,
transactions  under  this  Plan are  intended  to  comply  with  all  applicable
provisions  of Section 16 of the 1934 Act and the rules  promulgated  thereunder
(including,  without limitation,  Rule 16b-3) or their successors under the 1934
Act. To the extent any  provision of the Plan or any Stock  Option  Agreement or
any  action by the  Committee  fails to so comply,  it shall be deemed  null and
void, to the extent permitted by law and deemed advisable by the Committee,  and
it shall be restructured  to the extent deemed  advisable by the Committee so to
comply.



<PAGE>



Section 9.8       Compliance with Other Laws and Regulations


         The  Plan,  the grant  and  exercise  of  Options  thereunder,  and the
obligation of the Company to sell and deliver  shares under such Options,  shall
be subject to all applicable  federal and state laws,  rules and regulations and
to  such  approvals  by  any  governmental  or  regulatory  agency  or  national
securities  exchange as may be  required.  The Company  shall not be required to
issue or deliver any certificates for shares of Stock prior to the completion of
any registration or qualification of such shares under any federal or state law,
or any ruling or  regulation  of any  governmental  body or national  securities
exchange  which the  Company  shall,  in its sole  discretion,  determine  to be
necessary or advisable.


Section 9.9       Withholding by the Company


         A Stock Option Agreement  executed  pursuant to this Plan may contain a
provision to the effect that the Optionee  will consent to any  withholding  and
other actions that the Company deems reasonably  necessary to enable the Company
to obtain the benefit of an income tax deduction under the Code, and any related
state or local  income tax laws,  in the amount of the  difference  between  the
Option  exercise  price of the  Stock and its fair  market  value on the date of
exercise or the lapse of a restriction, as applicable.