EX. 10.3
 
THIS PROMISSORY NOTE (THIS “NOTE”) HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “ACT”).  THIS NOTE MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS NOTE UNDER THE ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO VHGI HOLDINGS, INC., THAT SUCH REGISTRATION IS NOT REQUIRED AND
THE SURRENDER OF THIS NOTE FOR REISSUANCE TO THE NEW HOLDER.
 
VHGI HOLDINGS, INC.

 
PROMISSORY NOTE
 
$211,918
September 24, 2012

 
FOR VALUE RECEIVED, the undersigned, VHGI Holdings, Inc., a Delaware corporation
(“Maker”), hereby promises to pay to the order of Lily Group Holdings Company,
or its successors or assigns (“Payee”), Two Hundred Eleven Thousand Nine Hundred
Eighteen  and No/100 Dollars  ($211,918), together with interest thereon which
shall accrue at a rate equal to .25 percent per annum; provided, however, upon
the occurrence of an Event of Default (as defined below), then to the extent
permitted by law, Maker will pay interest to the Payee on the outstanding
principal balance of this Promissory Note (this “Note”) from the date of the
Event of Default until payment in full at the rate of three percent (3%) per
annum.  All payments on this Note shall be due and payable in lawful money of
the United States of America.
 
1. Principal and Interest Payments.  The principal of, and accrued but unpaid
interest on, this Note shall be due and payable on March 31, 2014.
 
2. Prepayments.  Maker may at its sole option prepay all or any part of the
principal of this Note, or interest thereon, before maturity without penalty or
premium.  All such prepayments shall first be applied to accrued interest under
this Note, and the remaining balance of any such prepayments, if any, shall be
applied to principal of this Note.
 
3. Method of Payment.  All payments made under this Note, whether of principal
or interest, shall be made by Maker to Payee on the date specified or provided
herein and shall be delivered by means of certified or cashiers’ check or wire
transfer of immediately available funds to an account specified by the holder
hereof.  Whenever payment hereunder shall be due on a day which is not a
Business Day, the date for payment thereof shall be extended to the next
succeeding Business Day.  If the date for any payment is extended by operation
of law or otherwise, interest thereon shall be payable for such extended
time.  “Business Day” means every day which is not a Saturday, Sunday or legal
holiday.
 
4. Events of Default.  The following shall constitute events of default (“Events
of Default”) hereunder:
 
 
 
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(a) failure of Maker to make any payment on this Note as and when the same
becomes due and payable in accordance with the terms hereof and the continuance
of such failure for a period of five (5) days after written notice specifying
such default has been delivered to Maker by Payee;
 
(b) failure of Maker to perform any other covenant contained herein, if the same
has continued for thirty (30) days after written notice specifying such default
has been delivered to Maker by Payee;
 
(c) if Maker makes an assignment for the benefit of creditors, or petitions or
applies for the appointment of a liquidator, receiver or custodian (or similar
official) of it or of any substantial part of its assets, or if Maker commences
any proceeding or case relating to it under the Bankruptcy Code or any other
bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation or similar law of any jurisdiction, or takes any
action to authorize any of the foregoing; or
 
(d) if any petition or application of the type described in subparagraph (c)
immediately above is filed or if any such proceeding or case described in
subparagraph (c) is commenced against Maker and is not dismissed within sixty
(60) days, or if Maker indicates its approval thereof, consents thereto or
acquiesces therein, or if an order is entered appointing any such liquidator or
receiver or custodian (or similar official), or adjudicating Maker bankrupt or
insolvent, or approving a petition in any such proceeding, or if a decree or
order for relief is entered in respect of Maker in an involuntary case under the
Bankruptcy Code or any other bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation or similar law of
any jurisdiction.
 
In the event any one or more of the Events of Default specified above occurs and
is continuing, the holder of this Note may (i) accelerate the maturity of this
Note with notice to Maker at which time all such amounts shall be immediately
due and payable, (ii) proceed to protect and enforce its rights either by suit
in equity or by action at law, or by other appropriate proceedings, whether for
the specific performance of any covenant or agreement contained in this Note or
in aid of the exercise of any power or right granted by this Note, and/or (iii)
enforce any other legal or equitable right of the holder of this Note.
 
5. Delay or Omission Not Waiver.  No delay or omission on the part of the holder
of this Note in the exercise of any power, remedy or right under this Note, or
under any other instrument executed pursuant hereto, shall operate as a waiver
thereof, nor shall a single or partial exercise of any such power or right
preclude any other or further exercise thereof or the exercise of any other
right or power hereunder.
 
6. Waiver.  Any term, covenant, agreement or condition of this Note may, with
the written consent of Maker and Payee, be amended or compliance therewith may
be waived (either generally or in a particular instance and either retroactively
or prospectively), altered, modified or amended.
 
7. Attorneys’ Fees and Costs.  In the event an Event of Default shall occur, and
in the event that thereafter this Note is placed in the hands of an attorney for
collection, or in the event this Note is collected in whole or in part through
legal proceedings of any nature, then and in any such case Maker promises to pay
all costs of collection, including, but not limited to, reasonable attorneys’
fees and court costs incurred by the holder hereof on account of such
collection, whether or not suit is filed.
 
 
 
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8. Successors and Assigns.  All of the covenants, stipulations, promises and
agreements in this Note made by Maker and Payee shall bind its successors and
assigns, whether so expressed or not.
 
9. Maximum Lawful Rate. It is the intent of the Maker and holder of this Note to
conform to and contract in strict compliance with applicable usury law from time
to time in effect.  In no way, nor in any event or contingency (including but
not limited to prepayment, default, demand for payment, or acceleration of the
maturity of any obligation), shall the rate of interest taken, reserved,
contacted for, charged or received under this Note exceed the highest lawful
interest rate permitted under applicable law.  If the holder of this Note shall
ever receive anything of value which is characterized as interest under
applicable law and which would apart from this provision be in excess of the
highest lawful interest rate permitted under applicable law, an amount equal to
the amount which would have been excessive interest shall, without penalty, be
applied to the reduction of the principal amount owing on this Note in the
inverse order of its maturity and not to the payment of interest, or refunded to
Maker or the other payor thereof if and to the extent such amount which would
have been excessive exceeds such unpaid principal.  All interest paid or agreed
to be paid to the holder hereof shall, to the extent permitted by applicable
law, be amortized, prorated, allocated and spread throughout the full stated
term (including any renewal or extension) of this Note so that the amount of
interest on account of such obligation does not exceed the maximum permitted by
applicable law.  As used in this Section, the term “applicable law” shall mean
the laws of the State of Texas or the federal laws of the United States,
whichever laws allow the greater interest, as such laws now exist or may be
changed or amended or come into effect in the future.
 
10. Governing Law; Venue.  This Note shall be governed by and construed in
accordance with the substantive laws (but not the rules governing conflicts of
laws) of the State of Texas.  Any and all disputes arising or relating to this
Note shall be adjudicated exclusively in Dallas, Texas.
 
11. Notice.  Any notice or demand given hereunder shall be deemed to have been
given and received (i) when actually received by the receiving party, if
delivered in person, by facsimile transmission (as evidenced by confirmation),
by e-mail or by overnight courier service, or (ii) if mailed, on the earlier of
the date actually received or (whether ever received or not) five Business Days
after a letter containing such notice, certified or registered, with postage
prepaid, addressed to the receiving party, is deposited in the United States
mail.  The address of: (i) Maker is 103 North Court Street, Sullivan, IN 47882,
Attn: Chief Executive Officer; and (ii) Payee is as provided on the signature
page of this Note; in each case of (i) or (ii) above, or such other address as
either Maker or Payee shall advise the other by the procedure set forth above.
 
12. Severability.  In case any one or more of the provisions contained in this
Note shall for any reason be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision hereof.
 
 
 
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EXECUTED as of the date set forth above.
 

 
VHGI HOLDINGS, INC.
 
 
By: ______________________________
Michael E. Fasci
Chief Financial Officer

 
 
 
 
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