Promissory Note (Variable Rate) 1. Fundamental Provisions. The following terms will be used as defined terms in this Promissory Note (hereinafter "Note"): Date of this Note: ____________, 20__. Borrower: ___________________________, a California corporation. Lender: _________________________, a California corporation. Principal Amount: ________________________________ Dollars ($__________). Interest Rate: One percent (1%) per annum above the Index Rate. The Interest Rate shall be adjusted on the fifteenth (15th) day of each calendar month to reflect changes, if any, in the Index Rate. Default Rate: Five percent (5%) per annum above the Index Rate. The Default Rate shall be adjusted on the fifteenth (15th) day of each calendar month to reflect changes, if any, in the Index Rate. Index Rate: The rate of interest announced from time to time by Norwest Bank, Minneapolis, Minnesota, as its "prime rate" for unsecured commercial loans. Maturity Date: Sixty (60) months following the Date of this Note. Prepayment Charge: None. 2. Promise to Pay. For good and valuable consideration, Borrower promises to pay to Lender, or order, the Principal Amount, or so much thereof as shall be been advanced from time to time, with interest at the Interest Rate from the date of advance, or at the Default Rate as hereinafter provided, until paid, in accordance with the terms contained herein. Interest shall be computed on the basis of a 360-day year and the actual number of days elapsed. Should any interest not be paid when due, it shall thereafter accrue interest as principal. 3. Payment Schedule. Borrower shall pay one installment of interest only from the date on which any portion of the Principal Amount is advanced by Lender until the first (1st) day of the first calendar month immediately following such date. Thereafter, on the first day of each calendar month through and including ______________, 19__, Borrower shall pay monthly installments of interest only. Commencing on ______________, 19__, and continuing thereafter on the first day of each calendar month, Borrower shall pay monthly installments equal to (a) the amount of the unpaid interest accrued on the Principal Amount, plus (b) an amount computed by dividing the Principal Amount then outstanding by the number of full calendar months remaining before the Maturity Date. All payments shall be applied first to late charges and all other charges due hereunder, then to accrued interest, and then to the outstanding Principal Amount. 4. Place and Manner of Payment. All payments shall be made at ______________________________________________________, or at such other place as the holder of this Note may from time to time designate. All payments shall be made in lawful money of the United States. Checks will constitute payment only when collected. 5. Conditions to Advances. Borrower acknowledges and agrees that Lender shall not be required to advance any portion of the Principal Amount until such time as Borrower shall have supplied Lender with evidence reasonably satisfactory to Lender (a) that at least $_____________ of capital has been contributed to Borrower by ___________________________________, and (b) that Borrower has obtained enforceable commitments to provide wholesale floor plan financing adequate to support the sale of __________________. Borrower further acknowledges and agrees that Lender shall not be required to advance any portion of the Principal Amount following any Event of Default, as defined herein. In no event shall Lender be required to advance more than $_________ in the aggregate, or to advance any portion of the Principal Amount which has been previously advanced and repaid. 6. Late Charges. If Borrower fails to make any payment of principal or interest within ten (10) days after the date on which the same is due and payable, a late charge constituting damages shall be immediately due and payable. Borrower recognizes that a default in making the payments herein agreed to be made as and when due will result in the holder's incurring additional expenses in servicing this Note, in loss to the holder of the use of the money due, and in frustration to the holder in meeting its other commitments, but that it is extremely difficult and impractical to ascertain the extent of such damages. Accordingly Borrower agrees that the late charge for any such payment described above that is not paid within ten (10) days after the date when due shall be an amount equal to five cents ($.05) for each dollar ($1.00) of each payment which becomes so delinquent, as a reasonable estimate of the said damages to the holder of this Note, which sum shall be immediately due and payable. 7. Default Interest Rate. Commencing on the first to occur of (a) the Maturity Date, or (b) the occurrence of an Event of Default followed by the acceleration of this Note and the lapse of such time (if any) as may then be required by law during which Lender must allow Borrower to reinstate the obligation evidenced hereby as if no acceleration had occurred, and continuing thereafter until this Note has been paid in full, all amounts due and owing under this Note shall bear interest at the Default Rate. The provisions of this paragraph shall not limit the Lender's right to compel prompt performance hereunder. 8. Prepayments. Borrower may prepay the principal of this Note in whole or in part at any time and from time to time, without penalty. 9. Substituted Index Rate. If the Index Rate specified in paragraph 1 of this Note ceases to exist or is no longer published or announced, then the term Index Rate shall mean the floating commercial loan rate announced from time to time by a major commercial bank selected by Lender as its "prime," "base" or "reference" rate. These substituted definitions of Index Rate shall become effective on the date that the previously defined Index Rate ceases to exist or the last date it is published or announced. 10. Financial Information. Borrower agrees to provide Lender with (a) monthly operating statements, certified to be accurate by an officer of Borrower, within twenty (20) days after the close of each calendar month, and (b) audited financial statements, prepared by an independent certified public accountant, within sixty (60) days after the close of each fiscal year. 11. Event of Default. At the option of Lender, it shall be an "Event of Default" hereunder if (a) Borrower fails to pay when due any sum payable under this Note, or (b) Borrower fails to perform any obligation or commits a breach of any agreement set forth in this Note, or (c) Borrower defaults under any Sales and Service Agreement or other similar dealership or franchise agreement between Borrower and _____________________________, or any of its affiliates, or (d) Borrower defaults under any of its wholesale floor plan financing agreements. 12. Acceleration. Upon the occurrence of an Event of Default, then at the option of Lender, the entire sum of principal, interest, and all other charges due under this Note shall become immediately due and payable. 13. Loan Documents. This Note is secured by a Guaranty of even date herewith executed by ________________________________. This Note, the Guaranty, and all other documents or instruments now or hereafter executed by Borrower in connection with or to evidence or to secure payment of the indebtedness evidenced by this Note, including without limitation any security agreements, assignments and other documents or instruments related thereto, if any, are referred to collectively herein as the "Loan Documents." 14. Attorneys' Fees. If Lender refers this Note to an attorney to enforce, construe or defend any provisions hereof, or as a consequence of any Event of Default hereunder, with or without the filing of any legal action or proceeding, Borrower shall pay to Lender upon demand the amount of all attorneys' fees, costs and other expenses incurred by Lender in connection therewith, together with interest thereon from the date of demand at the rate applicable to the principal balance of this Note. The reference to "attorneys' fees" in this paragraph shall include without limitation such amounts as may then be charged by Lender for legal services furnished by attorneys in the employ of Lender, at rates not exceeding those that would be charged by outside attorneys for comparable services. 15. No Waiver. No delay or omission of Lender in exercising any right or power arising in connection with any Event of Default shall be construed as a waiver or as an acquiescence therein, nor shall any single or partial exercise thereof preclude any further exercise thereof. Lender may, at its option, waive any of the conditions herein and no such waiver shall be deemed to be a waiver of Lender's rights hereunder, but rather shall be deemed to have been made in pursuance of this Note and not in modification thereof. No waiver of any Event of Default shall be construed to be a waiver of or acquiescence in or consent to any preceding or subsequent Event of Default. 16. Waiver of Notices. Borrower, all endorsers, all guarantors and all persons liable or to become liable on this Note waive presentment, protest, demand, notice of protest, dishonor or nonpayment of this Note, and any and all other notices or matters of a like nature, consent to any and all renewals and extensions of the time of payment hereto, and agree further that at any time and from time to time without notice, the terms of payment hereof may be modified, or the security described in any of the Loan Documents at any time securing this Note may be released in whole or in part, or increased, changed or exchanged by agreement between the holder hereof and any owner of collateral affected thereby, without in any way affecting the liability of any party to this Note, any endorser, any guarantor, or any person liable or to become liable with respect to any indebtedness evidenced hereby. 17. Maximum Permissible Interest Rate. In no contingency or event whatsoever, whether by reason of advancement of the proceeds under this Note, acceleration or maturity of the unpaid principal balance of this Note, or otherwise, shall the amount paid or agreed to be paid to the holder hereof for the use, forbearance or detention of the money to be advanced hereunder exceed the highest lawful rate permissible under applicable usury laws. If, from any circumstances whatsoever, the fulfillment of any provisions of this Note or any other agreement referred to herein or otherwise relating to the Note, at the time that performance of such provisions shall be due, shall involve exceeding the limit of validity prescribed by law which a court of competent jurisdiction may deem applicable hereto, then ipso facto, the obligation to be fulfilled shall be reduced to the limit of such validity, and if from any circumstance, Lender shall ever receive as interest an amount which would exceed the highest lawful rate, such amount which would be excessive interest shall be applied to the reduction of the unpaid Principal Amount due hereunder as of the date such amount is received or deemed to be received by Lender and not to the payment of interest. Notwithstanding the foregoing, if the provisions of any law or regulation of the United States or any agency or instrumentality thereof, as amended, would permit the holder of this Note to charge or receive a rate of interest with respect to the indebtedness (if any) in excess of the maximum rate of interest (if any) permitted to be charged or received by the holder under applicable laws of the State of California, the less restrictive provisions of any such United States law or regulation shall apply in determining the rate of interest permitted to be charged or received. 18. Miscellaneous Provisions. No provisions of this Note may be amended, modified, supplemented, changed, waived, discharged or terminated unless Lender consents thereto in writing. In case any one or more of the provisions contained in this Note should be held to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. This Note shall be binding upon and inure to the benefit of Borrower, Lender and their respective successors and assigns. Time is of the essence of this Note and the performance of each of the covenants and agreements contained herein. This Note shall be governed by and construed in accordance with the laws of the State of California. IN WITNESS WHEREOF, Borrower has executed this Note on the Date of this Note. "Borrower" [CORPORATION NAME], a California corporation By:_____________________________ Name:_____________________________ Its:_____________________________ This legal form should not be used without consulting an attorney first. 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