Document:

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                                                                    EXHIBIT 10.3
                                REVOLVING CREDIT
                                PROMISSORY NOTE

January 19, 2005                                                      $2,000,000

      THIS NOTE is made in Peoria, Illinois as of January 19, 2005, for Two
Million Dollars ($2,000,000), with interest as provided herein.

                                    RECITALS:

      A. This Note is made by Pioneer Railcorp ("Borrower"), and is payable to
the order of National City Bank of the Midwest ("Lender"). The holder from time
to time of this Note is referred to as "Payee."

      B. This Note evidences the obligation of Borrower to pay to Lender the
principal amount of Two Million Dollars ($2,000,000), or, if less, the aggregate
unpaid principal amount of all advances made by Lender to Borrower hereunder,
with interest on the balance remaining from time to time unpaid at the "Interest
Rate" (as hereinafter defined) on the basis hereinafter set forth. The Loan
evidenced by this Note is referred to herein as the "Loan." This Note evidences
a revolving credit, which may be drawn by Borrower from time to time and be
repaid and used again up to the face principal amount hereof.

      C. Lender and Borrower have entered into a Loan Agreement of even date
herewith (the "Loan Agreement") with respect to the Loan and other borrowings.

      D. Payment of this Note is secured by the Loan Documents, as that term is
defined in the Loan Agreement. Reference is made to the Loan Documents for a
description of the property and the rights of Payee with respect to such
security. All of the agreements, conditions, covenants, provisions and
stipulations contained in the Loan Documents are hereby made a part of this Note
to the same extent and with the same force and effect as if they were fully set
forth herein and Borrower covenants and agrees to keep and perform them, or
cause them to be kept and performed, strictly in accordance with their
respective terms.

      1.    Payment.

      (a) Borrower hereby promises to pay to the order of Payee the principal
sum of Two Million Dollars ($2,000,000), or, if less, the aggregate unpaid
principal amount, with interest thereon at the Interest Rate, as follows:

      (i)   Commencing February 1, 2005 and on the first day of each month
            thereafter to and including January 1, 2007, a payment of all unpaid
            interest accrued on the outstanding principal balance of the Loan;

      (ii)  All outstanding principal and interest remaining unpaid, and all
            other sums then due to Payee with respect to the Loan, on January
            19, 2007.

      (b) The term "Interest Rate" means, the interest rate from time to time
announced by Lender as its prime rate for commercial loans (which may or may not
be the lowest rate charged by Lender).

      (c) The term "Maturity Date" shall mean January 19, 2007, subject to the
acceleration provisions of this Note.

<PAGE>

      (d) In the event any installment of principal or interest hereunder shall
become overdue for a period in excess of ten (10) days, Borrower shall pay to
the Payee a "late charge" equal to five percent (5%) of the amount unpaid or
$25.00, whichever is greater, up to a maximum amount of $250 per payment.

      (e) Payment of all amounts due under this Note shall be made at the office
of Lender at 301 S. W. Adams Street, Peoria, Illinois 61602, or such other place
as Payee may from time to time designate in writing.

      (f) This Note may be prepaid, in whole or in part, as set forth in the
Loan Agreement.

      (g) The obligations of Borrower on this Promissory Note shall be absolute
and unconditional in any and all circumstances, and shall not be affected by any
circumstances of any character, including, but not limited to any set-off,
counterclaim, recoupment, real or personal defense or other right which Borrower
may have against the Lender, its successors and assigns, or anyone else for any
reason whatsoever.

      (h) Notwithstanding any provisions of this Note or any instrument securing
payment of the indebtedness evidenced by this Note to the contrary, it is the
intent of Borrower and Payee that Payee shall never be entitled to receive,
collect or apply, as interest on principal of the indebtedness, any amount in
excess of the maximum rate of interest permitted to be charged by applicable
law; and if under any circumstance whatsoever, fulfillment of any provision of
this Note, at the time performance of such provision shall be due, shall involve
transcending the limit of validity prescribed by applicable law, then the
obligation to be fulfilled shall be reduced to the limit of such validity; and
in the event Payee ever receives, collects or applies as interest any such
excess, such amount which would be excess interest shall be deemed a permitted
partial prepayment of principal and treated hereunder as such; and if the
principal of the indebtedness secured hereby is paid in full, any remaining
excess funds shall forthwith be paid to Borrower. In determining whether or not
interest of any kind payable hereunder, under any specific contingency, exceeds
the highest lawful rate, Borrower and Payee shall, to the maximum extent
permitted under applicable law, (1) characterize any non-principal payment as an
expense, fee or premium rather than as interest and (2) amortize, prorate,
allocate and spread to the end that the interest on account of such indebtedness
does not exceed the maximum amount permitted by applicable law; provided that if
the amount of interest received for the actual period of existence thereof
exceeds the maximum lawful rate, Payee shall refund to Borrower the amount of
such excess. Payee shall not be subject to any penalties provided by any laws
for contracting for, charging or receiving interest in excess of the maximum
lawful rate.

      (i) Upon default, including failure to pay upon final maturity, Lender, at
its option, may also, if permitted under applicable law, do one or both of the
following: (1) increase the applicable interest rate on this Note 2.00
percentage points, and (b) add any unpaid accrued interest to principal and such
sum will bear interest therefrom until paid at the rate provided in this Note
(including any increased rate). The interest rate will not exceed the maximum
rate permitted by applicable law.

      (j) Unless otherwise agreed to, in writing, or otherwise required by
applicable law, payments will be applied first to accrued, unpaid interest, then
to principal, and any remaining amount to any unpaid collection costs, late
charges and other charges; provided, however, upon delinquency or other default,
Lender reserves the right to apply payments among principal, interest, late
charges, collection costs and other charges at its discretion. All prepayments
shall be applied to the indebtedness owing hereunder in such order and manner as
Lender may from time to time determine in its sole discretion.

      2.    Intentionally omitted.

                                       2

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      3.    Default and Remedies.

      (a) In the event (1) default is made in the payment of any part of the
principal or interest of this Note or any of the other Notes (as that term is
defined in the Loan Agreement as such payments become due and payable), (2)
default is made in the payment of any other sum due pursuant to the terms of
this Note, any of the Notes, the Loan Agreement or any Loan Document, or (3) if
an event of default shall occur under and as defined in any of the Notes, the
Loan Agreement or any Loan Document (collectively, "Events of Default"), Payee
shall have the option, without demand or notice, to declare the unpaid principal
of this Note, together with all accrued interest and other sums owing hereunder,
at once due and payable, and to exercise any and all other rights and remedies
available in any Loan Document or at law or in equity.

      (b) The remedies of Payee, as provided herein, shall be cumulative and
concurrent, and may be pursued singularly, successively or together, at the sole
discretion of Payee, and may be exercised as often as occasion therefor shall
arise. No act of omission or commission of Payee, including specifically any
failure to exercise any right, remedy or recourse, shall be deemed to be a
waiver or release of the same, such waiver or release to be effected only
through a written document executed by Payee and then only to the extent
specifically recited therein. A waiver or release with reference to any one
event shall not be construed as continuing, as a bar to, or as a waiver or
release of, any subsequent right, remedy or recourse as to a subsequent event.

      (c) Upon occurrence of an Event of Default, Borrower irrevocably
authorizes any attorney of any court of record to appear therein on its behalf
and to confess a judgment, without service of process, against it in such amount
as may then appear to be due and payable hereon, and all costs and expenses
incurred in connection therewith, including reasonable attorneys' fees, and it
hereby admits and confesses the allegations of any complaint filed in connection
with this Promissory Note, waives and releases any errors intervening in such
proceedings and consents to an immediate execution on such judgment, hereby
ratifying and confirming all acts that attorney may perform by virtue hereof.

      4.    Costs and Attorneys' Fees.

Borrower promises to pay all costs of collection of every kind, including but
not limited to all reasonable attorneys' fees, court costs, and expenses of
every kind, incurred by Payee in connection with such collection or the
protection or enforcement of any or all of the security for this Note, whether
or not any lawsuit is filed with respect thereto.

      5.    Waiver.

Except as otherwise provided herein, each maker, surety, guarantor and endorser
hereon waives grace, notice, notice of intent to accelerate, notice of default,
protest, demand, presentment for payment and diligence in the collection of this
Note, and in the filing of suit hereon, and agrees that his or its liability and
the liability of his or its heirs, beneficiaries, successors and assigns for the
payment hereof shall not be affected or impaired by any release or change in the
security or by any increase, modification, renewal or extension of the
indebtedness or its mode and time of payment. It is specifically agreed by the
undersigned that the Payee shall have the right at all times to decline to make
any such release or change in any security given to secure the payment hereof
and to decline to make any such increase, modification, renewal or extension of
the indebtedness or its mode and time of payment. This Note shall constitute a
joint and several obligation when signed by more than one party.

                                       3

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      6.    Nonpermitted Transfers.

The Loan Documents provide that any sale, transfer or other alienation of the
property securing this Note, or any portion thereof or interest therein, other
than as expressly permitted therein, constitutes an Event of Default thereunder
and permits the holder of this Note to invoke any remedies therein provided.

      7.    Notices.

All notices or other communications required or permitted hereunder shall be (a)
in writing and shall be deemed to be given (i) when delivered in person, (ii)
when received after deposit in a regularly maintained receptacle of the United
States mail as registered or certified mail, postage prepaid, (iii) when
received if sent by private courier service, or (iv) on the day on which the
party to whom such notice is addressed refuses delivery by mail or by private
courier service and (b) addressed as follows:

            If to Lender:

            National City Bank of the Midwest
            301 SW Adams St, Locator C-P02-22
            PO Box 749
            Peoria, IL 61652-0749
            Attn: Michael A. Zeller

            with copy to:

            Michael R. Seghetti
            Elias, Meginnes, Riffle & Seghetti
            416 Main Street, Suite 1400
            Peoria, IL  61602

            If to Debtor:

            Pioneer Railcorp
            1318 S. Johanson Rd
            Peoria, IL 61707-1130
            Attn: J. Michael Carr

or to each such party at such other addresses as such party may designate in a
written notice to the other parties.

      8.    Miscellaneous.

      (a) The headings of the paragraphs of this Note are inserted for
convenience only and shall not be deemed to constitute a part hereof.

      (b) All payments under this Note shall be payable in lawful money of the
United States which shall be legal tender for public and private debts at the
time of payment. Each payment of principal or interest under this Note shall be
paid not later than 2:00 P.M. Peoria, Illinois time on the date due therefor and
funds received after that hour shall be deemed to have been received by Payee on
the following day. Except as otherwise provided herein, all payments (whether of
principal, interest or other amounts) which are applied at

                                       4

<PAGE>

any time by Payee to indebtedness evidenced by this Note may be allocated by
Payee to principal, interest or other amounts as Payee may determine in Payee's
sole discretion. Lender shall notify Borrower when it allocates payments other
than to interest and principal.

      (c) This Note shall be governed by and construed under the laws of the
State of Illinois.

      9.    Severability.

If any provision of this Note or any payments pursuant to the terms hereof shall
be invalid or unenforceable to any extent, the remainder of this Note and any
other payments hereunder shall not be affected thereby and shall be enforceable
to the greatest extent permitted by law.

      10.   Transfer by Holder.

Payee may assign or sell all of its interest in this Note and all of its rights
and security hereunder.

      IN WITNESS WHEREOF, Borrower has executed and delivered this Note as of
the date and year first above written.

                                           PIONEER RAILCORP

                                           BY:  /s/ J. M. Carr
                                                --------------------------------

                                           ITS: President
                                                --------------------------------

                                       5<PAGE>

                                                                    EXHIBIT 10.4

                                   PLEDGE AND
                               SECURITY AGREEMENT

      THIS PLEDGE AND SECURITY AGREEMENT is dated as of January 19, 2005,
between Pioneer Railcorp ("Borrower") and National City Bank of the Midwest
("Bank").

      1. Grant of Security Interest. Borrower hereby pledges and grants to Bank
a security interest in the following described property and all additions,
accessions and substitutions thereto or therefor ("Collateral"):

            a. The following investment property owned by Borrower:

                  - 300,000 shares of common stock of Alabama Railroad Co.;

                  - 15,000,000 shares of common stock of Alabama & Florida
                    Railway Co. Inc.;

                  - 500,000 shares of common stock of Decatur Junction Railway
                    Co.;

                  - 1,000 shares of common stock of Elkhart & Western Railroad
                    Co.;

                  - 300,000 shares of common stock of Fort Smith Railroad Co.;

                  - 250 shares of common stock of The Garden City Western
                    Railway, Inc.;

                  - 1,000 shares of common stock of Gettysburg & Northern
                    Railroad Co.;

                  - 1,000 shares of common stock of Indiana Southwestern Railway
                    Co.;

                  - 1,000 shares of common stock of Kendallville Terminal
                    Railway Co.;

                  - 189,430 shares of common stock of Keokuk Junction Railway
                    Co.;

                  - 2,000,000 shares of common stock of Michigan Southern
                    Railroad Company;

                  - 1,100,000 shares of common stock of Mississippi Central
                    Railroad Co.;

                  - 1,000 shares of common stock of Pioneer Industrial Railway
                    Co.;

                  - 100 shares of common stock of Shawnee Terminal Railroad Co.;

                  - 10 shares of common stock of Vandalia Railroad Company; and

                  - 60,000 shares of common stock of West Michigan Railroad Co.;

            b. All present and future dividends, distributions, cash
      instruments, proceeds, including insurance proceeds, and products
      received, and all other right, title and interest of Borrower, with
      respect to (a) above.

      2. Obligations. Bank and Borrower have entered into a Loan Agreement of
even date herewith (the "Loan Agreement") providing for certain loans from Bank
to Borrower. Bank has required, as a condition to its execution of the Loan
Agreement and its disbursement of said loan, that

<PAGE>

Borrower grant a security interest in the Collateral to secure said loans.
Accordingly, the security interest granted hereby is to secure the payment and
performance of all of the liabilities and obligations of Borrower to Bank
hereunder and all obligations of Borrower to Bank described in the Loan
Agreement or any other document executed in connection therewith (all
hereinafter called "Obligations").

      3. Warranties. Borrower represents and warrants as follows:

            a.    Borrower is duly organized and existing under the laws of the
                  jurisdiction of its formation and is duly qualified and in
                  good standing in every other state in which it is doing
                  business.

            b.    The execution, delivery and performance hereof are within
                  Borrower's organizational powers, have been duly authorized,
                  are not in contravention of law or the terms of Borrower's
                  organizational documents, or of any indenture, agreement or
                  undertaking to which Borrower is a party or by which it is
                  bound.

            c.    Borrower's (i) sole place of business (or its chief executive
                  office, if it has more than one place of business); and (ii)
                  the office where it keeps its records concerning the
                  Collateral is at the address stated in Section 16 of this
                  Agreement.

            d.    The Borrower is the sole and absolute owner of the Collateral
                  free and clear of liens and encumbrances of every kind and
                  nature except only the lien and encumbrance hereby granted and
                  created, other liens and encumbrances to Bank and other liens
                  and encumbrances disclosed in writing to Bank by Borrower.

            e.    The Borrower has signed no financing statements covering the
                  above described property, except the financing statements
                  signed with respect to this Security Agreement, other
                  financing statements in favor of Bank and the other financing
                  statements disclosed in writing to Bank by Borrower.

            f.    The officer of the Borrower executing this Security Agreement
                  has been duly elected and qualified and has been duly
                  authorized and empowered so to execute and deliver this
                  Security Agreement on behalf of the Borrower.

      4. Records. Borrower will at all reasonable times and from time to time
allow Bank by or through any of its officers, agents, employees, attorneys or
accountants, to examine and inspect and make extracts or copies from Borrower's
books and other records to arrange for verification of the Collateral, directly
with account debtors or by other methods. Borrower will furnish to Bank upon
request statements of any account, together with all notes or other papers
evidencing the same and any guaranties, securities or other documents and
information relating thereto; and generally at all times and from time to time
furnish to Bank such statements and information as it may reasonably request.

      5. Covenants. The Borrower hereby covenants and agrees with Bank that so
long as the Borrower shall owe any amounts under any of the Obligations to Bank,
the Borrower will from time to time at the request of Bank, do, make, execute
and deliver all such additional and further acts, things, deeds, assurances and
instruments as Bank may require, to more completely vest in and assure to Bank
its rights hereunder and in or to the Collateral and the proceeds thereof.

                                        2

<PAGE>

      6. Financing Statements. At the request of Bank, Borrower execute one or
more financing statements pursuant to the Illinois Commercial Code in a form
satisfactory to Bank and will pay the cost of filing the same in all public
offices wherever filing is deemed by Bank to be necessary or desirable. Without
the written consent of Bank, Borrower will not allow any financing statement
covering any Collateral, proceeds thereof or any of Borrower's inventory to be
on file in any public office. The Borrower will pay all costs of filing any
financing, continuation or termination statements with respect to the security
interest created by this Security Agreement.

      7. Certificates. Borrower warrants that all of the Collateral is evidenced
by certificates which have been delivered to the Bank, and the number of shares
listed for each corporation in Section 1 above constitutes all of the
outstanding shares of capital stock of such company.

      8. Control. Borrower agrees to take all steps necessary for Bank to obtain
"control" of the Collateral as defined in Section 8-106 of the Illinois Uniform
Commercial Code (810 ILCS 5/8-106), and agrees that it will not allow any other
party to obtain "control" over all or any part of the Collateral.

      9. Taxes. All taxes that may be assessed upon or paid by Bank with respect
to any of the Collateral shall be charged to and paid by the Borrower who agrees
to indemnify Bank against loss by reason of any such taxes. The Borrower will
make due and timely payment or deposit of all federal, state and local taxes,
assessments or contributions required of the Borrower by law, and will execute
and deliver to Bank, on demand, appropriate certificates attesting to the
payment or deposit thereof.

      10. Proceeds. The proceeds from the sale or other disposition of the
Collateral that are delivered by Borrower to Bank, or the net sums collected
directly by Bank, after first deducting all costs of collection, shall be
credited against the amount owed by Borrower.

      11. Default.

            a.    If Borrower fails to pay when due to Bank any amount payable
                  on any Obligations, or fails to observe or perform any of the
                  covenants and warranties in this Security Agreement, or if an
                  event of default occurs under the Loan Agreement or any
                  document or agreement executed in connection therewith,
                  Borrower shall be in default.

            b.    In addition, at the election of Bank and without necessity of
                  demand or notice, all or any part of the indebtedness of
                  Borrower secured hereby shall become immediately due and
                  payable, irrespective of any agreed maturity date, on the
                  occurrence of any of the following events of default:

                  (i)   Any warranty, representation, financial statement, or
                        other information made, given, or furnished to Bank by
                        or on behalf of Borrower shall prove to have been untrue
                        in any material respect when made, given, or furnished;
                        or

                  (ii)  The issuance or filing of any attachment, levy,
                        garnishment, or other judicial process of or on Borrower
                        or any of the Collateral; or

                  (iii) The sale or other disposition by Borrower of any
                        substantial portion of its assets or property, except in
                        the ordinary course of business; or, dissolution,
                        termination of existence, insolvency, business failure,
                        or assignment for the benefit of creditors of or by
                        Borrower; or

                                        3

<PAGE>

                        commencement of any proceedings under any
                        state or federal bankruptcy or insolvency laws by or
                        against Borrower; or the appointment of a receiver or
                        trustee for all or any party of the property of
                        Borrower.

      12. Remedies. On any such default and at any time thereafter:

            a.    Bank may declare all Obligations secured under this Security
                  Agreement immediately due and payable and may proceed to
                  enforce payment and exercise any and all of the rights and
                  remedies provided by the Illinois Commercial Code, as well as
                  any and all other rights and remedies possessed by Bank.

            b.    Bank shall have the right to take immediate possession of the
                  Collateral, and for that purpose may pursue the same wherever
                  the Collateral may be found.

            c.    Bank may sell at public or private sale, for such price as
                  Bank may deem fair, any and all of the Collateral and any
                  other security or property held by Bank. Bank may be the
                  purchaser of the Collateral or other property or security so
                  sold and may hold the Collateral thereafter in its own right
                  absolutely against any claims of Borrower or right of
                  redemption.

            d.    In the case of public sale, notice shall be deemed to be
                  adequate and reasonable if such notice appears three (3) times
                  in a newspaper published in the City or County wherein the
                  sale is to be held, the first such publication being at least
                  ten (10) days before such sale. In the case of a private sale,
                  notice shall be deemed to be adequate and reasonable if such
                  notice is mailed to the Borrower at its last known address at
                  least ten (10) days before such sale.

            e.    The net proceeds of any sale or sales shall be applied against
                  the amount owed Bank by Borrower and any other indebtedness of
                  Borrower to Bank. Borrower shall forthwith pay to Bank any
                  deficiency on demand of Bank and shall be entitled to any
                  surplus resulting from such sale or sales. Demand of
                  performance, advertisement, and presence of the Collateral at
                  sale are hereby waived by Borrower. All demands and
                  presentments of every kind or nature are expressly waived by
                  Borrower.

            f.    Bank may require Borrower to assemble the Collateral at a
                  place mutually convenient to Bank and Borrower at the expense
                  of Borrower.

      13. Expenses. Borrower shall pay to Bank on demand any and all expenses,
including legal expenses and reasonable attorneys' fees, reasonably incurred or
expended by Bank in the recovery and sale or attempted recovery and sale of
Collateral and in protecting and enforcing the Obligations and other rights of
Bank hereunder.

      14. Termination. This Security Agreement shall be terminable only by the
filing of a termination statement in accordance with applicable provisions of
the Illinois Commercial Code. Until terminated, the security interest created
hereunder shall continue in full force and effect and shall secure and be
applicable to all advances now or hereafter made by Bank to Borrower, whether or
not Borrower is indebted to Bank immediately prior to the time of any such
advance. Any termination of this Security Agreement by either party shall not
affect the obligation of Borrower or Bank with respect to accounts assigned by
Borrower to Bank prior to such termination.

                                        4

<PAGE>

      15. Applicable Law.

            a.    The validity of this Security Agreement and any provision
                  hereof shall be determined under and shall be construed
                  according to the Illinois Commercial Code and other applicable
                  laws of the State of Illinois, and all duties of the parties
                  created under this Security Agreement are performable in the
                  State of Illinois.

            b.    Unless otherwise defined, all terms used in this Security
                  Agreement that are defined in the Illinois Commercial Code
                  shall have the same meaning in this Security Agreement as
                  therein defined.

      16. Notices. All notices provided for herein shall be in writing and shall
be deemed to have been given when delivered personally or when deposited in the
United States mail, postage prepaid, addressed as follows, or to such other
address as may hereafter be designated in writing by the respective parties
hereto:

          If to Lender:

          National City Bank of the Midwest
          301 SW Adams St, Locator C-P02-22
          PO Box 749
          Peoria, IL 61652-0749
          Attn: Michael A. Zeller

          with copy to:

          Michael R. Seghetti
          Elias, Meginnes, Riffle & Seghetti
          416 Main Street, Suite 1400
          Peoria, IL  61602

          If to Debtor:

          Pioneer Railcorp
          1318 S. Johanson Rd
          Peoria, IL 61707-1130
          Attn: J. Michael Carr

      17. No Waiver. The failure of Bank to exercise any right or remedy,
including acceptance by Bank of partial or delinquent payments, shall not
constitute a waiver of any obligation from Borrower or right of Bank or
constitute a waiver of any other similar default occurring subsequently.

      18. Intent. This Security Agreement expresses the entire understanding of
the parties and may not be altered or amended except with the written consent of
each of the parties and except as provided in any other written document signed
and delivered by Borrower to Bank.

      19. Successors and Assigns. This Security Agreement shall be binding upon
and inure to the benefit of the Borrower and Bank and their respective
successors and assigns.

                                       5

<PAGE>

NATIONAL CITY BANK OF THE MIDWEST         PIONEER RAILCORP

BY: /s/ Michael A. Zeller                 BY: /s/ J. M. Carr
    ---------------------------------         ---------------------------------

ITS: Vice-President                       ITS: President

304-1440.d2

                                       6

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