Document:

EXHIBIT 10.13

THIS CONVERTIBLE NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES OR BLUE SKY LAWS, AND MAY NOT BE SOLD,
OFFERED FOR SALE, TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS IT IS SO
REGISTERED OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.

                           MILITARY RESALE GROUP, INC.
                               8% CONVERTIBLE NOTE

Principal Amount:   $50,000                                       August 7, 2002

     MILITARY RESALE GROUP,  INC., a New York corporation  (the "Company"),  for
value received,  hereby promises to pay to Atlantic Investment Trust, or assigns
("Holder"),  on July 30, 2003, the principal  amount of Fifty  Thousand  Dollars
($50,000) (or so much thereof as shall not have been prepaid or surrendered  for
conversion)  in such coin or currency of the United  States of America as at the
time of  payment  shall be legal  tender for the  payment of public and  private
debts,  together with interest  (computed on the basis of 360-day year of twelve
30-day  months) on the  unpaid  portion of the  principal  amount  hereof at the
annual  rate of eight  percent  (8%)  from the date  hereof  until the date such
unpaid portion of such principal amount shall have become due and payable.

     Section 1. DEFINITIONS.

          Section 1.01.  TERMS  DEFINED.  The terms defined in this Section 1.01
(except as herein otherwise  expressly  provided or unless the context otherwise
requires) for all purposes of this  Convertible  Note shall have the  respective
meanings specified in this Section 1.01.

          COMMON  STOCK.  The term "Common  Stock" means shares of the Company's
Common Stock, par value $.0001 per share.

          COMPANY.  The term "Company" means MILITARY RESALE GROUP,  INC., a New
York corporation,  and any successor  corporation to the Company  (including the
corporation surviving any subsequent merger).

          CURRENT  CONVERSION  PRICE. The term "Current  Conversion Price" means
the Conversion Price as most recently adjusted pursuant to Section 3.06.

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          EVENT  OF  DEFAULT.  The term  "Event  of  Default"  means  any  event
specified in Section  2.01,  continued for the period of time, if any, and after
the giving of notice, if any, therein designated.

          MATURITY.   The  term  "Maturity"  when  used  with  respect  to  this
Convertible Note means the date on which the principal (and premium,  if any) of
this Convertible Note becomes due and payable as herein provided, whether at (a)
July 30, 2003, (b) declaration of acceleration or (c) otherwise.

          REGISTRATION  STATEMENT.  The term  "Registration  Statement"  means a
Registration Statement on Form SB-2 filed by the Company with the Securities and
Exchange  Commission  pursuant to which the shares of Common Stock issuable upon
conversion of this Convertible Note are registered under the Securities Act.

          SECURITIES ACT. The term  "Securities Act" means the Securities Act of
1933, as amended.

     Section 2. REMEDIES.

          Section 2.01.  EVENTS OF DEFAULT.  An "Event of Default" occurs if one
or more of the  following  shall happen (for any reason  whatsoever  and whether
such happening shall be voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance  with any  judgment,  decree or
order of any court or any order,  rule or  regulation of any  administrative  or
governmental body):

               (a)  if default be made in the punctual  payment of the principal
of (or  premium,  if any) or interest on this  Convertible  Note when and as the
same shall become due and payable; or

               (b)  the Registration  Statement is not declared effective by the
Securities  and Exchange  Commission  on or before  December  30, 2002,  or such
Registration Statement does not remain effective for at least 90 days; or

               (c)  the  Company  pursuant  to or  within  the  meaning  of  any
Bankruptcy Law: (i) commences a voluntary case, (ii) consents to the entry of an
order for relief against it in an involuntary  case, (iii) to the appointment of
a Custodian  of it or for any  substantial  part of its  property,  (iv) makes a
general assignment for the benefit of its creditors; or

               (d)  a court of competent  jurisdiction enters an order or decree
under any  Bankruptcy  Law that:  (i) is for relief  against  the  Company in an
involuntary  case,  (ii)  appoints  a  Custodian  of  the  Company  or  for  any
substantial  part of its property,  (iii) orders the liquidation of the Company;
and the order or decree remains unstayed and in effect for 30 days.

          The term  "Bankruptcy  Law" means Title 11,  U.S.  Code or any similar
federal or state law for the relief of debtors.  The term "Custodian"  means any
receiver, trustee, assignee,

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liquidator, sequestrator or similar official under any Bankruptcy Law.

          Section  2.02.  REMEDIES.  In case  any one or more of the  Events  of
Default  specified in Section 2.01 shall have  occurred and be  continuing,  the
Holder of this Convertible Note may proceed to protect and enforce its rights by
suit in  equity,  action  at law or by other  appropriate  proceedings  or both,
whether for the specific  performance of any covenant or agreement  contained in
this  Convertible  Note or in aid of the  exercise of any power  granted in this
Convertible Note, or may proceed to enforce the payment of this Convertible Note
or to  enforce  any  other  legal  or  equitable  right  of the  Holder  of this
Convertible Note.

          Section 2.03. REMEDIES CUMULATIVE. No remedy herein conferred upon the
Holder of this  Convertible Note is intended to be exclusive of any other remedy
and each and every such remedy shall be  cumulative  and shall be in addition to
every other  remedy given  hereunder  or now or hereafter  existing at law or in
equity or by statute or otherwise.

          Section  2.04.  ENFORCEMENT.  If there  shall be any Event of  Default
under this  Convertible  Note and this  Convertible  Note shall be placed in the
hands of an attorney for  collection,  or shall be collected  through any court,
including any bankruptcy  court, the Company promises to pay to the order of the
Holder hereof the Holder's  reasonable  attorneys' fees and court costs incurred
in  collecting or attempting to collect or securing or attempting to secure this
Convertible Note or enforcing the holder's rights with respect to any collateral
securing this  Convertible  Note, to the extent allowed by the laws of the State
of New  York or any  state in  which  any  collateral  for  this  Note  shall be
situated.

     Section 3. CONVERSION.

          Section 3.01. RIGHT OF CONVERSION, CONVERSION PRICE.

               Subject  to and  upon  compliance  with  the  provisions  of this
Section 3, at any time  following  the issuance of this  Convertible  Note,  the
Holder shall have the right,  at his option,  at any time during usual  business
hours to convert the principal  and accrued  interest of this  Convertible  Note
owned by the Holder  into fully paid and  nonassessable  shares of Common  Stock
that have been registered  under the Securities Act pursuant to the Registration
Statement,  at the rate of $0.50 of  principal  for each  share of Common  Stock
(provided,  that the closing price per share of Common Stock, as reported on the
OTC Bulletin Board,  on the date of conversion,  is at least $0.75 per share, or
if such price is less than $0.75 per share,  a  proportionate  reduction  to the
$0.50 price,  but in no event less than $0.25 per share, so that the Holder will
be able to immediately  sell such shares on the OTC Bulletin Board and receive a
50% rate of  return  on the  principal  amount of this  Note)  (the  "Conversion
Price"), which price per share shall be payable by surrender of this Convertible
Note.

          Section 3.02. MANNER OF EXERCISE.

               (a)  In order to exercise  the  conversion  right,  the Holder of
this Convertible Note shall surrender this Convertible Note at the office of the
Company,

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accompanied by written notice to the Company  stating (i) that the Holder elects
to convert this Convertible Note or, if less than the entire principal amount of
this  Convertible  Note is to be converted,  the portion  thereof (a multiple of
$1,000) to be  converted,  and (ii) the name or names (with  addresses) in which
the  certificate  or  certificates  for shares of Common Stock  issuable on such
conversion shall be issued.  Convertible  Notes surrendered for conversion shall
be  accompanied  by proper  assignment  thereof  to the  Company or in blank for
transfer if the shares are to be issued in a name other than that of the Holder.

               (b)  In the event this  Convertible  Note which is  converted  in
part only,  upon such  conversion  the Company  shall execute and deliver to the
Holder,  at the expense of the Company,  a new  Convertible  Note of  authorized
denominations  in  principal  amount  equal to the  unconverted  portion of this
Convertible Note.

          Section 3.03. ISSUANCE OF SHARES OF COMMON STOCK ON CONVERSION.

               (a)  As promptly as practicable  after the receipt of such notice
and the  surrender of this  Convertible  Note as  aforesaid,  the Company  shall
issue, at its expense, and shall deliver to the Holder, or on his written order,
at the aforesaid office of the Company (i) a certificate or certificates for the
number of full  shares of Common  Stock  issuable  upon the  conversion  of this
Convertible  Note (or specified  portion  thereof),  and (ii) a  certificate  or
certificates for any fractional  shares of Common Stock issuable upon conversion
of this  Convertible  Note (or specified  portion  thereof) or, at the Company's
option, cash in lieu of scrip for any fraction of a share to which the Holder is
entitled upon conversion as provided in Section 3.05.

               (b)  Such  conversion  shall  be  deemed  to have  been  effected
immediately  prior to the close of business on the date  ("Conversion  Date") on
which the  Company  shall have  received  both such  notice and the  surrendered
Convertible Note as aforesaid, and at such time the rights of the Holder of this
Convertible  Note  shall  cease and the Person or Persons in whose name or names
any  certificate  or  certificates  for shares of Common Stock shall be issuable
upon such conversion  shall be deemed to have become the holder or the Holder of
record of the shares represented thereby.

               (c)  In the event this  Convertible Note is converted in whole or
in part into shares of Common  Stock  pursuant to Section  3.01(b)  hereof,  the
certificates  representing  such  shares  shall  contain an  appropriate  legend
indicating  that the shares  represented  thereby  are  "restricted  securities"
within the meaning of the  Securities  Act,  and may not be  transferred  unless
registered  under the  Securities  Act or  transferred  pursuant to an exemption
therefrom.

          Section 3.04. NO ADJUSTMENTS FOR INTEREST OR DIVIDENDS.  No payment or
adjustment  shall be made by or on  behalf  of the  Company  on  account  of any
interest  accrued on this  Convertible  Note  surrendered  for  conversion or on
account of any cash  dividends  on the shares of Common  Stock  issued upon such
conversion  which were  declared  for  payment to the

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Holder of shares of Common Stock of record as of a date prior to the  Conversion
Date. All payments of accrued interest on this Convertible Note shall be made in
cash or additional stock at the Conversion Price, at the Holder's option.

          Section 3.05. FRACTIONAL SHARES. The Company, at its option, may issue
fractional  shares of Common Stock upon any conversion of this  Convertible Note
or, in lieu of any fraction of a share of Common Stock to which any Holder would
otherwise be entitled  upon  conversion of this  Convertible  Note (or specified
portions thereof), the Company may pay a cash adjustment for such fraction in an
amount equal to same fraction of the Conversion Price per share.

          Section 3.06.  ADJUSTMENT OF CONVERSION  PRICE.  The Conversion  Price
shall be adjusted as set forth in this section.

               (a)  In the event that the Company shall make any distribution of
its assets upon or with respect to its shares of Common Stock,  as a liquidating
or partial  liquidating  dividend,  or other than as a dividend  payable  out of
earnings or any surplus  legally  available for dividends  under the laws of the
state of incorporation of the Company, the Holder of this Convertible Note, upon
the exercise of his right to convert after the record date for such distribution
or,  in the  absence  of a record  date,  after  the date of such  distribution,
receive,  in addition to the shares  subscribed  for,  the amount of such assets
(or, at the option of the Company,  a sum equal to the value thereof at the time
of distribution as determined by the Board of Directors in its sole  discretion)
which would have been distributed to the Holder if he had exercised his right to
convert  immediately  prior to the record date for such  distribution or, in the
absence of a record date, immediately prior to the date of such distribution.

               (b)  In  case  at  any  time  the  Company  shall  subdivide  its
outstanding  shares of Common Stock into a greater number of shares, the Current
Conversion  Price  in  effect  immediately  prior to such  subdivision  shall be
proportionately reduced and conversely, in case the outstanding shares of Common
Stock of the Company  shall be  combined  into a smaller  number of shares,  the
Current  Conversion Price in effect  immediately prior to such combination shall
be proportionately increased.

               (c)  If any capital  reorganization  or  reclassification  of the
capital  stock of the Company,  or  consolidation  or merger of the Company with
another corporation,  or the sale, transfer or lease of all or substantially all
of its assets to another  corporation,  shall be effected in such a way that the
holder of shares of Common Stock shall be entitled to receive shares, securities
or assets with respect to or in exchange for shares of Common Stock,  then, as a
condition of such  reorganization,  reclassification,  consolidation,  merger or
sale, the Company or such successor or purchasing  corporation,  as the case may
be, shall  execute an  amendment to this  Convertible  Note  providing  that the
Holder of this  Convertible  Note shall have the right  thereafter and until the
expiration of the period of convertibility to convert this Convertible Note into
the kind and  amount  of  shares,  securities  or  assets  receivable  upon such
reorganization,  reclassification,  consolidation, merger or sale by a holder of
the number of shares of Common

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Stock into which this  Convertible  Note might have been  converted  immediately
prior to such reorganization,  reclassification,  consolidation, merger or sale,
subject to adjustments which shall be as nearly equivalent as may be practicable
to the adjustments provided for in this Section 3.

               (d)  Upon such adjustment of the Conversion Price pursuant to the
provisions of this Section 3.06, the number of shares  issuable upon  conversion
of this  Convertible  Note  shall be  adjusted  to the  nearest  full  amount by
multiplying a number equal to the Conversion Price in effect  immediately  prior
to such  adjustment  by the  number  of shares of  Common  Stock  issuable  upon
exercise of this  Convertible  Note  immediately  prior to such  adjustment  and
dividing the product so obtained by the adjusted Conversion Price.

          Section 3.07. COVENANT TO RESERVE SHARES FOR CONVERSION.

               The Company  covenants that it will at all times reserve and keep
available out of its authorized shares of Common Stock, such number of shares of
Common  Stock  as  shall  then  be  deliverable  upon  the  conversion  of  this
Convertible Note. All shares of Common Stock which shall be deliverable shall be
duly and validly issued and fully paid and nonassessable.

          Section  3.08.  NOTICE OF CHANGE OF  CONVERSION  PRICE.  Whenever  the
Conversion  Price is adjusted,  as herein  provided,  the Company shall promptly
send to the Holder a certificate  of a firm of  independent  public  accountants
(who may be the accountants  regularly  employed by the Company) selected by the
Board of Directors  setting forth the Conversion Price after such adjustment and
setting forth a brief  statement of the facts  requiring such  adjustment.  Such
certificate shall be conclusive evidence of the correctness of such adjustment.

     Section 4. MISCELLANEOUS.

          Section  4.01.  OPTIONAL  PREPAYMENTS.  The  Company  shall  have  the
privilege, at any time and from time to time prior to Maturity, upon at least 90
days prior written  notice to the Holder,  of prepaying this  Convertible  Note,
either  in  whole  or in  part,  by  payment  of the  principal  amount  of this
Convertible Note, or portion thereof to be prepaid, and accrued interest thereon
to the date of such prepayment,  without premium or penalty; provided,  however,
that nothing in this Section 4.01 shall prohibit the Holder from converting this
Convertible  Note in accordance  with Section 3 hereof after the date of receipt
of notice of prepayment  and prior to the date of receipt in cash of all amounts
to be prepaid.

          Section 4.02.  GOVERNING LAW. This Convertible Note shall be construed
in  accordance  with the laws of the State of New York  applicable  to contracts
entered into and to be performed wholly within said State.

          Section 4.03. SUCCESSORS AND ASSIGNS. All the covenants, stipulations,
promises and  agreements in this  Convertible  Note contained by or on behalf of
the Company shall bind its successors and assigns, whether so expressed or not.

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<PAGE>

          Section  4.04.  COURSE OF  DEALING;  NO  WAIVER.  No course of dealing
between the Company and the Holder shall operate as a waiver of any right of the
Holder and no delay on the part of the Holder in exercising any right  hereunder
shall so operate.

          Section 4.05. WAIVER OF COMPLIANCE.  Any term, covenant,  agreement or
condition hereof may be amended,  or compliance  therewith may be waived (either
generally   or  in  a   particular   instance   and  either   retroactively   or
prospectively),  if the Company  shall have obtained the agreement or consent in
writing of the Holder.

          Section  4.06.   OTHER   PROVISIONS.   The  Company   waives   demand,
presentment,  protest, notice of dishonor and any other form of notice, that may
be required to hold the Company liable on this Note.

     IN WITNESS WHEREOF,  the undersigned has caused this Convertible Note to be
signed in its corporate name by one of its officers  thereunto duly  authorized,
and to be dated as of the date first written above.

                                                MILITARY RESALE GROUP, INC.

                                                By:         /s/ EDWARD T. WHELAN
                                                    ----------------------------
                                                       Edward T. Whelan
                                                       Chief Executive Officer

                                       7EXHIBIT 10.14

THIS CONVERTIBLE NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES OR BLUE SKY LAWS, AND MAY NOT BE SOLD,
OFFERED FOR SALE, TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS IT IS SO
REGISTERED OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.

                           MILITARY RESALE GROUP, INC.
                               8% CONVERTIBLE NOTE

Principal Amount:   $50,000                                       August 7, 2002

     MILITARY RESALE GROUP,  INC., a New York corporation  (the "Company"),  for
value received,  hereby promises to pay to Eastern  Investment Trust, or assigns
("Holder"),  on July 30, 2003, the principal  amount of Fifty  Thousand  Dollars
($50,000) (or so much thereof as shall not have been prepaid or surrendered  for
conversion)  in such coin or currency of the United  States of America as at the
time of  payment  shall be legal  tender for the  payment of public and  private
debts,  together with interest  (computed on the basis of 360-day year of twelve
30-day  months) on the  unpaid  portion of the  principal  amount  hereof at the
annual  rate of eight  percent  (8%)  from the date  hereof  until the date such
unpaid portion of such principal amount shall have become due and payable.

     Section 1. DEFINITIONS.

          Section 1.01.  TERMS  DEFINED.  The terms defined in this Section 1.01
(except as herein otherwise  expressly  provided or unless the context otherwise
requires) for all purposes of this  Convertible  Note shall have the  respective
meanings specified in this Section 1.01.

          COMMON  STOCK.  The term "Common  Stock" means shares of the Company's
Common Stock, par value $.0001 per share.

          COMPANY.  The term "Company" means MILITARY RESALE GROUP,  INC., a New
York corporation,  and any successor  corporation to the Company  (including the
corporation surviving any subsequent merger).

          CURRENT  CONVERSION  PRICE. The term "Current  Conversion Price" means
the Conversion Price as most recently adjusted pursuant to Section 3.06.

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<PAGE>

          EVENT  OF  DEFAULT.  The term  "Event  of  Default"  means  any  event
specified in Section  2.01,  continued for the period of time, if any, and after
the giving of notice, if any, therein designated.

          MATURITY.   The  term  "Maturity"  when  used  with  respect  to  this
Convertible Note means the date on which the principal (and premium,  if any) of
this Convertible Note becomes due and payable as herein provided, whether at (a)
July 30, 2003, (b) declaration of acceleration or (c) otherwise.

          REGISTRATION  STATEMENT.  The term  "Registration  Statement"  means a
Registration Statement on Form SB-2 filed by the Company with the Securities and
Exchange  Commission  pursuant to which the shares of Common Stock issuable upon
conversion of this Convertible Note are registered under the Securities Act.

          SECURITIES ACT. The term  "Securities Act" means the Securities Act of
1933, as amended.

     Section 2. REMEDIES.

          Section 2.01.  EVENTS OF DEFAULT.  An "Event of Default" occurs if one
or more of the  following  shall happen (for any reason  whatsoever  and whether
such happening shall be voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance  with any  judgment,  decree or
order of any court or any order,  rule or  regulation of any  administrative  or
governmental body):

               (a)  if default be made in the punctual  payment of the principal
of (or  premium,  if any) or interest on this  Convertible  Note when and as the
same shall become due and payable; or

               (b)  the Registration  Statement is not declared effective by the
Securities  and Exchange  Commission  on or before  December  30, 2002,  or such
Registration Statement does not remain effective for at least 90 days; or

               (c)  the  Company  pursuant  to or  within  the  meaning  of  any
Bankruptcy Law: (i) commences a voluntary case, (ii) consents to the entry of an
order for relief against it in an involuntary  case, (iii) to the appointment of
a Custodian  of it or for any  substantial  part of its  property,  (iv) makes a
general assignment for the benefit of its creditors; or

               (d)  a court of competent  jurisdiction enters an order or decree
under any  Bankruptcy  Law that:  (i) is for relief  against  the  Company in an
involuntary  case,  (ii)  appoints  a  Custodian  of  the  Company  or  for  any
substantial  part of its property,  (iii) orders the liquidation of the Company;
and the order or decree remains unstayed and in effect for 30 days.

          The term  "Bankruptcy  Law" means Title 11,  U.S.  Code or any similar
federal or state law for the relief of debtors.  The term "Custodian"  means any
receiver, trustee, assignee,

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<PAGE>

liquidator, sequestrator or similar official under any Bankruptcy Law.

          Section  2.02.  REMEDIES.  In case  any one or more of the  Events  of
Default  specified in Section 2.01 shall have  occurred and be  continuing,  the
Holder of this Convertible Note may proceed to protect and enforce its rights by
suit in  equity,  action  at law or by other  appropriate  proceedings  or both,
whether for the specific  performance of any covenant or agreement  contained in
this  Convertible  Note or in aid of the  exercise of any power  granted in this
Convertible Note, or may proceed to enforce the payment of this Convertible Note
or to  enforce  any  other  legal  or  equitable  right  of the  Holder  of this
Convertible Note.

          Section 2.03. REMEDIES CUMULATIVE. No remedy herein conferred upon the
Holder of this  Convertible Note is intended to be exclusive of any other remedy
and each and every such remedy shall be  cumulative  and shall be in addition to
every other  remedy given  hereunder  or now or hereafter  existing at law or in
equity or by statute or otherwise.

          Section  2.04.  ENFORCEMENT.  If there  shall be any Event of  Default
under this  Convertible  Note and this  Convertible  Note shall be placed in the
hands of an attorney for  collection,  or shall be collected  through any court,
including any bankruptcy  court, the Company promises to pay to the order of the
Holder hereof the Holder's  reasonable  attorneys' fees and court costs incurred
in  collecting or attempting to collect or securing or attempting to secure this
Convertible Note or enforcing the holder's rights with respect to any collateral
securing this  Convertible  Note, to the extent allowed by the laws of the State
of New  York or any  state in  which  any  collateral  for  this  Note  shall be
situated.

     Section 3. CONVERSION.

          Section 3.01. RIGHT OF CONVERSION, CONVERSION PRICE.

               Subject to and  upon  compliance  with  the  provisions  of  this
Section 3, at any time  following  the issuance of this  Convertible  Note,  the
Holder shall have the right,  at his option,  at any time during usual  business
hours to convert the principal  and accrued  interest of this  Convertible  Note
owned by the Holder  into fully paid and  nonassessable  shares of Common  Stock
that have been registered  under the Securities Act pursuant to the Registration
Statement,  at the rate of $0.50 of  principal  for each  share of Common  Stock
(provided,  that the closing price per share of Common Stock, as reported on the
OTC Bulletin Board,  on the date of conversion,  is at least $0.75 per share, or
if such price is less than $0.75 per share,  a  proportionate  reduction  to the
$0.50 price,  but in no event less than $0.25 per share, so that the Holder will
be able to immediately  sell such shares on the OTC Bulletin Board and receive a
50% rate of  return  on the  principal  amount of this  Note)  (the  "Conversion
Price"), which price per share shall be payable by surrender of this Convertible
Note.

          Section 3.02. MANNER OF EXERCISE.

               (a)  In order to exercise  the  conversion  right,  the Holder of
this Convertible Note shall surrender this Convertible Note at the office of the
Company,

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<PAGE>

accompanied by written notice to the Company  stating (i) that the Holder elects
to convert this Convertible Note or, if less than the entire principal amount of
this  Convertible  Note is to be converted,  the portion  thereof (a multiple of
$1,000) to be  converted,  and (ii) the name or names (with  addresses) in which
the  certificate  or  certificates  for shares of Common Stock  issuable on such
conversion shall be issued.  Convertible  Notes surrendered for conversion shall
be  accompanied  by proper  assignment  thereof  to the  Company or in blank for
transfer if the shares are to be issued in a name other than that of the Holder.

               (b)  In the event this  Convertible  Note which is  converted  in
part only,  upon such  conversion  the Company  shall execute and deliver to the
Holder,  at the expense of the Company,  a new  Convertible  Note of  authorized
denominations  in  principal  amount  equal to the  unconverted  portion of this
Convertible Note.

          Section 3.03. ISSUANCE OF SHARES OF COMMON STOCK ON CONVERSION.

               (a)  As promptly as practicable  after the receipt of such notice
and the  surrender of this  Convertible  Note as  aforesaid,  the Company  shall
issue, at its expense, and shall deliver to the Holder, or on his written order,
at the aforesaid office of the Company (i) a certificate or certificates for the
number of full  shares of Common  Stock  issuable  upon the  conversion  of this
Convertible  Note (or specified  portion  thereof),  and (ii) a  certificate  or
certificates for any fractional  shares of Common Stock issuable upon conversion
of this  Convertible  Note (or specified  portion  thereof) or, at the Company's
option, cash in lieu of scrip for any fraction of a share to which the Holder is
entitled upon conversion as provided in Section 3.05.

               (b)  Such  conversion  shall  be  deemed  to have  been  effected
immediately  prior to the close of business on the date  ("Conversion  Date") on
which the  Company  shall have  received  both such  notice and the  surrendered
Convertible Note as aforesaid, and at such time the rights of the Holder of this
Convertible  Note  shall  cease and the Person or Persons in whose name or names
any  certificate  or  certificates  for shares of Common Stock shall be issuable
upon such conversion  shall be deemed to have become the holder or the Holder of
record of the shares represented thereby.

               (c)  In the event this  Convertible Note is converted in whole or
in part into shares of Common  Stock  pursuant to Section  3.01(b)  hereof,  the
certificates  representing  such  shares  shall  contain an  appropriate  legend
indicating  that the shares  represented  thereby  are  "restricted  securities"
within the meaning of the  Securities  Act,  and may not be  transferred  unless
registered  under the  Securities  Act or  transferred  pursuant to an exemption
therefrom.

          Section 3.04. NO ADJUSTMENTS FOR INTEREST OR DIVIDENDS.  No payment or
adjustment  shall be made by or on  behalf  of the  Company  on  account  of any
interest  accrued on this  Convertible  Note  surrendered  for  conversion or on
account of any cash  dividends  on the shares of Common  Stock  issued upon such
conversion  which were  declared  for  payment to the

                                       11
<PAGE>

Holder of shares of Common Stock of record as of a date prior to the  Conversion
Date. All payments of accrued interest on this Convertible Note shall be made in
cash or additional stock at the Conversion Price, at the Holder's option.

          Section 3.05. FRACTIONAL SHARES. The Company, at its option, may issue
fractional  shares of Common Stock upon any conversion of this  Convertible Note
or, in lieu of any fraction of a share of Common Stock to which any Holder would
otherwise be entitled  upon  conversion of this  Convertible  Note (or specified
portions thereof), the Company may pay a cash adjustment for such fraction in an
amount equal to same fraction of the Conversion Price per share.

          Section 3.06.  ADJUSTMENT OF CONVERSION  PRICE.  The Conversion  Price
shall be adjusted as set forth in this section.

               (a)  In the event that the Company shall make any distribution of
its assets upon or with respect to its shares of Common Stock,  as a liquidating
or partial  liquidating  dividend,  or other than as a dividend  payable  out of
earnings or any surplus  legally  available for dividends  under the laws of the
state of incorporation of the Company, the Holder of this Convertible Note, upon
the exercise of his right to convert after the record date for such distribution
or,  in the  absence  of a record  date,  after  the date of such  distribution,
receive,  in addition to the shares  subscribed  for,  the amount of such assets
(or, at the option of the Company,  a sum equal to the value thereof at the time
of distribution as determined by the Board of Directors in its sole  discretion)
which would have been distributed to the Holder if he had exercised his right to
convert  immediately  prior to the record date for such  distribution or, in the
absence of a record date, immediately prior to the date of such distribution.

               (b)  In  case  at  any  time  the  Company  shall  subdivide  its
outstanding  shares of Common Stock into a greater number of shares, the Current
Conversion  Price  in  effect  immediately  prior to such  subdivision  shall be
proportionately reduced and conversely, in case the outstanding shares of Common
Stock of the Company  shall be  combined  into a smaller  number of shares,  the
Current  Conversion Price in effect  immediately prior to such combination shall
be proportionately increased.

               (c)  If any capital  reorganization  or  reclassification  of the
capital  stock of the Company,  or  consolidation  or merger of the Company with
another corporation,  or the sale, transfer or lease of all or substantially all
of its assets to another  corporation,  shall be effected in such a way that the
holder of shares of Common Stock shall be entitled to receive shares, securities
or assets with respect to or in exchange for shares of Common Stock,  then, as a
condition of such  reorganization,  reclassification,  consolidation,  merger or
sale, the Company or such successor or purchasing  corporation,  as the case may
be, shall  execute an  amendment to this  Convertible  Note  providing  that the
Holder of this  Convertible  Note shall have the right  thereafter and until the
expiration of the period of convertibility to convert this Convertible Note into
the kind and  amount  of  shares,  securities  or  assets  receivable  upon such
reorganization,  reclassification,  consolidation, merger or sale by a holder of
the number of shares of Common

                                       12
<PAGE>

Stock into which this  Convertible  Note might have been  converted  immediately
prior to such reorganization,  reclassification,  consolidation, merger or sale,
subject to adjustments which shall be as nearly equivalent as may be practicable
to the adjustments provided for in this Section 3.

               (d)  Upon such adjustment of the Conversion Price pursuant to the
provisions of this Section 3.06, the number of shares  issuable upon  conversion
of this  Convertible  Note  shall be  adjusted  to the  nearest  full  amount by
multiplying a number equal to the Conversion Price in effect  immediately  prior
to such  adjustment  by the  number  of shares of  Common  Stock  issuable  upon
exercise of this  Convertible  Note  immediately  prior to such  adjustment  and
dividing the product so obtained by the adjusted Conversion Price.

          Section 3.07. COVENANT TO RESERVE SHARES FOR CONVERSION.

               The  Company covenants that it will at all times reserve and keep
available out of its authorized shares of Common Stock, such number of shares of
Common  Stock  as  shall  then  be  deliverable  upon  the  conversion  of  this
Convertible Note. All shares of Common Stock which shall be deliverable shall be
duly and validly issued and fully paid and nonassessable.

          Section  3.08.  NOTICE OF CHANGE OF  CONVERSION  PRICE.  Whenever  the
Conversion  Price is adjusted,  as herein  provided,  the Company shall promptly
send to the Holder a certificate  of a firm of  independent  public  accountants
(who may be the accountants  regularly  employed by the Company) selected by the
Board of Directors  setting forth the Conversion Price after such adjustment and
setting forth a brief  statement of the facts  requiring such  adjustment.  Such
certificate shall be conclusive evidence of the correctness of such adjustment.

     Section 4. MISCELLANEOUS.

          Section  4.01.  OPTIONAL  PREPAYMENTS.  The  Company  shall  have  the
privilege, at any time and from time to time prior to Maturity, upon at least 90
days prior written  notice to the Holder,  of prepaying this  Convertible  Note,
either  in  whole  or in  part,  by  payment  of the  principal  amount  of this
Convertible Note, or portion thereof to be prepaid, and accrued interest thereon
to the date of such prepayment,  without premium or penalty; provided,  however,
that nothing in this Section 4.01 shall prohibit the Holder from converting this
Convertible  Note in accordance  with Section 3 hereof after the date of receipt
of notice of prepayment  and prior to the date of receipt in cash of all amounts
to be prepaid.

          Section 4.02.  GOVERNING LAW. This Convertible Note shall be construed
in  accordance  with the laws of the State of New York  applicable  to contracts
entered into and to be performed wholly within said State.

          Section 4.03. SUCCESSORS AND ASSIGNS. All the covenants, stipulations,
promises and  agreements in this  Convertible  Note contained by or on behalf of
the Company shall bind its successors and assigns, whether so expressed or not.

                                       13
<PAGE>

          Section  4.04.  COURSE OF  DEALING;  NO  WAIVER.  No course of dealing
between the Company and the Holder shall operate as a waiver of any right of the
Holder and no delay on the part of the Holder in exercising any right  hereunder
shall so operate.

          Section 4.05. WAIVER OF COMPLIANCE.  Any term, covenant,  agreement or
condition hereof may be amended,  or compliance  therewith may be waived (either
generally   or  in  a   particular   instance   and  either   retroactively   or
prospectively),  if the Company  shall have obtained the agreement or consent in
writing of the Holder.

          Section  4.06.   OTHER   PROVISIONS.   The  Company   waives   demand,
presentment,  protest, notice of dishonor and any other form of notice, that may
be required to hold the Company liable on this Note.

     IN WITNESS WHEREOF,  the undersigned has caused this Convertible Note to be
signed in its corporate name by one of its officers  thereunto duly  authorized,
and to be dated as of the date first written above.

                                           MILITARY RESALE GROUP, INC.

                                           By:   /s/ EDWARD T. WHELAN
                                               ---------------------------------
                                               Edward T. Whelan
                                               Chief Executive Officer

                                       14

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