Document:

ex101.htm

Exhibit 10.1

 

VHGI COAL, INC.

 

PROMISSORY NOTE

 

	
$3,000,000

	
February 18, 2013

 

FOR VALUE RECEIVED, the undersigned, VHGI Coal, Inc., a Delaware corporation (“Maker”), hereby promises to pay to the order of VHGI Holdings or its successors or assigns (“Payee”), Three Million and No/100 Dollars ($3,000,000), together with interest thereon which shall accrue at a rate equal to three percent (3%) 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 eight percent (8%) per annum.  All payments on this Note shall be due and payable in lawful money of the United States of America.

 

This Note results from an assignment by Paul R. Risinger (“Risinger”) to Payee of $3,000,000 of the principal amount of that certain promissory note made by Maker to Risinger (“Risinger”), dated as of February 16, 2012, pursuant to that certain Exchange Agreement, of even date herewith, by and among Maker, Payee and Risinger of even date herewith (the “Exchange Agreement”).

 

1. Principal and Interest Payments.  The principal of, and accrued but unpaid interest on, this Note shall be due and payable on the earlier of (a) two business days after Maker closes funding sufficient in the sole opinion of Maker to pay the principal and accrued but unpaid interest on this Note in full or (b) March 31, 2014.

 

2. Intercreditor and Subordination Agreements.  Payee agrees to enter into intercreditor and subordination agreements (the “Subordination Agreements”) from time to time with Maker’s senior lenders, as designated by the Board of Directors of Maker, including, but not limited to Platinum Partners Value Arbitrage, LP, subordinating payment of this Note to the obligations of Maker to such senior lenders, as provided in such Subordination Agreements.

 

3. 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.

 

4. 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.

 

 

  

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5. Guaranty.  The repayment of this Note is guaranteed by Scott A. Haire, individually, pursuant to a guaranty dated February 16, 2012, to Risinger, which Risinger assigned in part to Payee pursuant to the Exchange Agreement.

 

6. Events of Default.  The following shall constitute events of default (“Events of Default”) hereunder:

 

(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.

 

7. 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.

 

 

  

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8. 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.

 

9. 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.

 

10. 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.

 

11. 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.

 

12. 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.

 

 

  

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13. 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, Indiana 47882, Attn: Chief Executive Officer, rick@lilygroup.com; and (ii) the address of Payee is, 103 North Court Street, Sullivan, Indiana 47882; rick@lilygroup.com; 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.

 

14. 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.

 

EXECUTED as of the date set forth above.

 

	 	
VHGI COAL, INC.

 

 

 

By:  ______________________________________

 

 

The undersigned executes this Note in order to acknowledge the undersigned’s agreements and obligations set forth herein.

 

	 	
VHGI HOLDINGS, INC.

 

 

 

By:  ______________________________________

 

	 	  

 

  

4ex102.htm

Exhibit 10.2

 

EXCHANGE AGREEMENT

 

This Exchange Agreement (this “Agreement”) is made and entered into as of February 18, 2013, by and among Paul R. Risinger (“Holder”), VHGI Holdings, Inc., a Delaware corporation (“Parent”), and VHGI Coal, Inc., a Delaware corporation and wholly-owned subsidiary of Parent (“VHGI Coal”).  Holder, Parent and VHGI Coal are sometimes each referred to herein as a “Party” and collectively, as the “Parties”.

 

WHEREAS, VHGI Coal issued a promissory note in the original principal amount of $17,000,000 to Holder, dated February 16, 2012, in connection with the purchase by VHGI Coal of the capital stock of Lily Group, Inc. from Holder (the “Note”); and

 

WHEREAS, Holder has previously agreed to waive all current defaults and such future defaults for non-payment under the Note through March 31, 2013 and not take action for any such defaults until after March 31, 2013, pursuant to a letter agreement; and

 

WHEREAS, Parent has determined it is in the best interests of Parent and VHGI Coal to issue preferred stock of Parent to Risinger in exchange for Risinger assigning $3,000,000 of principal of the Note to Parent, as set forth herein;

 

NOW, THEREFORE, in consideration of the mutual agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confessed, the Parties hereby agree as follows:

 

1. Exchange.

 

(a) Holder hereby transfers and assigns to Parent: (i) $3,000,000 of the principal amount of the Note (the “Assigned Principal Amount”); (ii) the rights, titles and interests of Holder under that certain Guaranty, dated February 16, 2012, made by Scott A. Haire (“Haire”) in favor of Holder (the “Guaranty”) pertaining to the guaranty by Haire of the Obligations (as defined in the Guaranty), to the extent of the Assigned Principal Amount; in consideration for which, and simultaneously with the execution of this Agreement, Parent shall issue to Holder 500,000 shares of Parent’s Series D Convertible Preferred Stock, par value $0.001 per share (the “Series D Stock”).   Accrued, but unpaid interest on the Note that has accrued from the date of issuance through the date of this Agreement on the Assigned Amount shall be payable to Risinger in accordance with the terms of the Note.

 

(b) Simultaneously with the execution of this Agreement, VHGI Coal shall issue to Parent a promissory note for the Assigned Amount, which promissory note shall be in substantially the form of Exhibit A attached hereto.

 

(c) The principal amount of the Note is reduced by $3,000,000, and Risinger agrees to attach an original of this Agreement to the Note, and Risinger shall immediately provide confirmation of such to VHGI Coal and Parent.

 

(d) Legend. The certificate representing the Series D Stock shall contain the following restrictive legend:

 

 

  

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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE FEDERAL SECURITIES LAWS OR THE SECURITIES LAWS OF ANY STATE.  SUCH SECURITIES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED AT ANY TIME WHATSOEVER, EXCEPT UPON SUCH REGISTRATION OR UPON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER AND/OR SUBMISSION TO THE COMPANY OF SUCH EVIDENCE AS MAY BE SATISFACTORY TO THE COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, APPLICABLE STATE SECURITIES LAWS AND ANY RULES OR REGULATIONS PROMULGATED THEREUNDER.

 

2. Representations of Holder. Holder hereby represents and warrants as follows:

 

(a) This Agreement has been duly executed and delivered by Holder and constitutes the legal, valid and binding obligations of Holder, enforceable against Holder in accordance with its terms.

 

(b) Holder has the full power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby.  Neither the execution, delivery or performance of this Agreement by Holder nor the consummation of the transactions contemplated hereby will (i) conflict with, or result in a violation or breach of the terms, conditions or provisions of, or constitute a default under any agreement or other instrument under which Holder is bound, or (ii) violate or conflict with any judgment, decree, order, statute, rule or regulation of any court or any public, governmental or regulatory agency or body having jurisdiction over Holder.

 

(c) No consent, authorization, approval, permit or license of, or filing with, any governmental body, agency or authority, any lender or lessor is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement by Holder.

 

(d) Holder has the knowledge and experience in financial, tax and business matters that Holder is capable of evaluating the merits and risks of exchanging the Assigned Amount for the Series D Preferred Stock to be issued to Holder under this Agreement.

 

(e) Holder recognizes that investment in the Series D Preferred Stock involves substantial risks.  Holder further recognizes that no Federal or state agencies have passed upon this offering of the Series D Preferred Stock or made any finding or determination as to the fairness of this investment.  To the extent deemed advisable by Holder, Holder has consulted with his own financial, tax and legal advisors with respect to the transactions contemplated by this Agreement.  Holder has not relied on any financial, tax or legal advice of Parent or any of its directors, shareholders, officers, employees, attorneys or representatives in choosing to execute and deliver this Agreement or in participating in the transactions contemplated herein and therein.

 

 

  

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(f) Other than as set forth in this Agreement Holder has not assigned or otherwise sold the Note or any part thereof

 

3. Binding Effect.  This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the respective Parties to this Agreement.

 

4. Governing Law.  The validity, performance and enforcement of this Agreement shall be construed, interpreted and governed in accordance with the laws of the State of Texas.

 

5. Entire Agreement.  This Agreement constitutes the entire agreement of the Parties hereto regarding the subject matter hereof, and supersede all prior agreements and understandings, both written and oral, between the Parties, or any of them, with respect to the subject matter hereof.

 

6. Counterparts.  This Agreement may be executed in multiple counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.  Facsimile signatures shall be given the same effect as original signatures.

 

This Agreement is executed by the Parties as of the date first written above.

 

	 	
 

VHGI HOLDINGS, INC.

 

By:  _______________________________

 

VHGI COAL, INC.

 

By:  _______________________________

 

 

 

 

 

 

  

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EXHIBIT A

 

Form of Promissory Note

 

 

[See attached document]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

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