Document:

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                                                                   Exhibit 10.1

         ASSIGNMENT No. 26 OF RECEIVABLES IN ADDITIONAL AC- COUNTS, (this
"Assignment") dated as of June 1, 2003, by and between CHASE MANHATTAN BANK USA,
NATIONAL ASSOCIATION, a national banking corporation organized and existing
under the laws of the United States of America ("Chase USA"), and THE BANK OF
NEW YORK, a banking corporation organized and existing under the laws of the
State of New York (the "Trustee") pursuant to the Pooling and Servicing
Agreement referred to below.

                              W I T N E S S E T H:

         WHEREAS, Chase USA, as Transferor on and after June 1, 1996, JPMorgan
Chase Bank, as Transferor prior to June 1, 1996 and as Servicer, and the
Trustee are parties to the Third Amended and Restated Pooling and Servicing
Agree-ment, dated as of November 15, 1999, as amended by the First Amendment
thereto dated as of March 31, 2001 and the Second Amendment thereto dated as of
March 1, 2002 (hereinafter as such agreement may have been, or may from time to
time be, amended, supplemented or otherwise modified, the "Pooling and Servicing
Agree-ment");

         WHEREAS, pursuant to the Pooling and Servicing Agreement, Chase USA
wishes to designate Additional Accounts of Chase USA to be included as Accounts
and to convey the Receivables of such Additional Accounts, whether now existing
or hereafter created, to the Trust as part of the corpus of the Trust (as each
such term is defined in the Pooling and Servicing Agreement); and

         WHEREAS, the Trustee is willing to accept such designation and
conveyance subject to the terms and conditions hereof;

         NOW, THEREFORE, Chase USA and the Trustee hereby agree as follows:

                  1. Defined Terms. All terms defined in the Pooling and
         Servicing Agreement and used herein shall have such defined meanings
         when used herein, unless otherwise defined herein.

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         "Addition Date" shall mean, with respect to the Additional Accounts
designated hereby, June 1, 2003.

         "Notice Date" shall mean, with respect to the Additional Accounts
designated hereby, May 13, 2003.

         2. Designation of Additional Accounts. Chase USA shall deliver to the
Trustee not later than five Business Days after the Addition Date, a computer
file or microfiche list containing a true and complete list of each MasterCard
and VISA account which as of the Addition Date shall be deemed to be an
Additional Account, such accounts being identified by ac-count number and by the
amount of Receivables in such accounts as of the close of business on the
Addition Date. Such list shall be delivered five Busi- ness Days after the date
of this Assignment and shall be marked as Schedule 1 to this Assignment and, as
of the Addition Date, shall be incorporated into and made a part of this
Assignment.

         3. Conveyance of Receivables.

         A. Chase USA does hereby transfer, assign, set-over and otherwise
convey to the Trustee on behalf of the Trust for the benefit of the
Certificateholders, without recourse on and after the Addition Date, all right,
title and interest of Chase USA in and to the Receivables now existing and
hereafter created in the Additional Accounts designated hereby, all monies due
or to become due with respect thereto (including all Finance Charge Receivables)
and all proceeds of such Receivables, Recoveries, Interchange, Insurance
Proceeds relating to such Receivables and the proceeds of any of the foregoing.

         B. In connection with such transfer, Chase USA agrees to record and
file, at its own expense, a financing statement with respect to the Receivables
now existing and hereafter created in the Additional Accounts designated hereby
(which may be a single financing statement with respect to all such Receivables)
for the transfer of accounts as defined in Section 9-102 of the UCC as in effect
in the State of New York meeting the requirements of applicable state law in
such manner and such jurisdictions as are necessary to perfect the assignment of
such Receivables to the Trustee on behalf of the Trust for the benefit of the
Certificateholders (the "Secured Party"), and to deliver a file-stamped copy of
such financing statement or other evidence of such filing (which may, for
purposes of this Section 3, consist of telephone confirmation of such filing) to
the Trustee on or prior to the date of this Assignment.

                                       2

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         C. It is the intention of the parties hereto that all transfers of
Receivables to the Trust pursuant to this Assignment be subject to, and be
treated in accordance with, the Delaware Act and each of the parties hereto
agrees that this Assignment has been entered into by the parties hereto in
express reliance upon the Delaware Act. For purposes of complying with the
requirements of the Delaware Act, each of the parties hereto hereby agrees that
any property, assets or rights purported to be transferred, in whole or in part,
by Chase USA pursuant to this Assignment shall be deemed to no longer be the
property, assets or rights of Chase USA. The parties hereto acknowl- edge and
agree that each such transfer is occurring in connection with a " securitization
transaction" within the meaning of the Delaware Act.

         D. In connection with such transfer, Chase USA further agrees, at its
own expense, on or prior to the date of this Assignment to indi- cate in its
computer files that Receivables created in connection with the Additional
Accounts designated hereby have been transferred to the Trust pursuant to this
Assignment for the benefit of the Certificateholders.

         E. Chase USA hereby grants to the Secured Party a security interest in
all of Chase USA's right, title and interest in, to and under the Receivables
now existing and hereafter created in the Additional Accounts designated hereby,
all monies due or to become due with respect to such Receivables, Insurance
Proceeds relating to such Receivables, Recoveries, Interchange and the proceeds
to any of the foregoing to secure a loan in an amount equal to the unpaid
principal amount of the Investor Certificates issued or to be issued pursuant to
the Pooling and Servicing Agreement and the interests accrued at the related
Certificate Rates, and this Assignment shall constitute a security agreement
under applicable law. Chase USA shall execute continuation statements and
provide other further assurances to maintain the perfection and priority of such
security interest of the Secured Party.

         4. Acceptance by Trustee. The Trustee hereby acknowledges its
acceptance on behalf of the Trust for the benefit of the Certificateholders of
all right, title and interest previously held by Chase USA in and to the
Re-ceivables now existing and hereafter created, and declares that it shall
maintain such right, title and interest, upon the Trust herein set forth, for
the benefit of all Certificateholders.

                                        3

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         5. Representations and Warranties of Chase USA. Chase USA hereby
represents and warrants to the Secured Party as of the Addition Date:

         A. Legal, Valid and Binding Obligation. This Assignment constitutes a
legal, valid and binding obligation of Chase USA en- forceable against Chase USA
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insol- vency, reorganization, moratorium or other similar
laws now or here- after in effect affecting the enforcement of creditors' rights
in general and the rights of creditors of banking associations and except as
such enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity).

         B. Eligibility of Accounts and Receivables. Each Additional Account
designated hereby is an Eligible Account and each Receiv- able in such
Additional Account is an Eligible Receivable.

         C. Selection Procedures. No selection procedures believed by Chase USA
to be materially adverse to the interests of the Investor Certificateholders
were utilized in selecting the Additional Accounts designated hereby from the
available Eligible Accounts in the Bank Portfolio.

         D. Insolvency. Chase USA is not insolvent and, after giving effect to
the conveyance set forth in Section 3 of this Assignment, will not be insolvent.

         E. Transfer. This Assignment constitutes either: (i) a valid transfer
and assignment to the Trust of all right, title and interest of Chase USA in and
to Receivables now existing and hereafter created in the Additional Accounts
designated hereby, and all proceeds (as defined in the UCC) of such Receivables
and Insurance Proceeds relating thereto, and such Receivables and any proceeds
thereof and Insurance Proceeds relating thereto will be held by the Secured
Party free and clear of any Lien of any Person claiming through or under Chase
USA or any of its Affiliates except for (x) Liens permitted

                                        4

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under subsection 2.5(b) of the Pooling and Servicing Agreement, (y) the interest
of the holder of the Transferor Certificate and (z) Chase USA's right to receive
interest accruing on, and investment earnings in respect of, the Finance Charge
Account and the Principal Account as provided in the Pooling and Servicing
Agreement; or (ii) a valid and continuing security interest (as defined in the
UCC) in the Receivables now existing or hereafter created in the Additional
Accounts in favor of the Secured Party, the proceeds (as defined in the UCC)
thereof and Insurance Proceeds relating thereto, upon the conveyance of such Re-
ceivables to the Trust, which security interest is prior to all other Liens, and
is enforceable against creditors of and purchasers from Chase USA, and which
will be enforceable with respect to the Receiv- ables thereafter created in
respect of Additional Accounts designated hereby, the proceeds (as defined in
the UCC) thereof and Insurance Proceeds relating thereto, upon such creation;
and (iii) if this Assign- ment constitutes the grant of a security interest to
the Secured Party in such property, upon the filing of a financing statement
described in Section 3 of this Assignment with respect to the Additional
Accounts designated hereby and in the case of the Receivables of such Addi-
tional Accounts thereafter created and the proceeds (as defined in the UCC)
thereof, and Insurance Proceeds relating to such Receivables, upon such
creation, the Secured Party shall have a first priority per- fected security
interest in such property (subject to Section 9-315 the UCC as in effect in the
State of Delaware), except for Liens permitted under subsection 2.5(b) of the
Pooling and Servicing Agreement. Chase USA has caused or will have caused,
within ten days, the filing of all appropriate financing statements in the
proper filing office in the appropriate jurisdictions under applicable law in
order to perfect the security interest in the Receivables granted to the Secured
Party hereunder. The Receivables constitute "accounts" within the meaning of the
applicable UCC.

         F. Other Liens. Other than the security interest granted to the Secured
Party pursuant to this Assignment, Chase USA has not pledged, assigned, sold,
granted a security interest in, or otherwise conveyed any of the Receivables.
Chase USA has not authorized the filing of and is not aware of any financing
statements against Chase USA that include a description of collateral covering
the Receivables other than any financing statement (i) relating to the security
interest granted to the Secured Party hereunder, (ii) that has been terminated,
or (iii) that names The Bank of New York as secured party. Chase USA is not
aware of any judgment or tax lien filings against Chase USA. Chase USA owns and
has good and marketable title to the Receivables free and clear of any Lien,
claim or encumbrance of any Person.

                                        5

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         G. Breach of Representations and Warranties. The provision set forth in
Section 2.4(d) of the Pooling and Servicing Agreement shall be applicable to any
breach of the representations and warranties of this Section 5 with respect to
any Receivable.

         6. Conditions Precedent. The acceptance by the Trustee set forth in
Section 4 and the amendment of the Pooling and Servicing Agree-ment set forth in
Section 7 are subject to the satisfaction, on or prior to the Addition Date, of
the following conditions precedent:

         A. Officer's Certificate. Chase USA shall have deliv- ered to the
Trustee a certificate of a Vice President or more senior officer substantially
in the form of Schedule 2 hereto, certifying that (i) all requirements set forth
in Section 2.6 of the Pooling and Servic- ing Agreement for designating
Additional Accounts and conveying the Principal Receivables of such Account,
whether now existing or hereafter created, have been satisfied and (ii) each of
the representa- tions and warranties made by Chase USA in Section 5 is true and
correct as of the Addition Date. The Trustee may conclusively rely on such
Officer's Certificate, shall have no duty to make inquiries with regard to the
matters set forth therein, and shall incur no liability in so relying.

         B. Opinion of Counsel. Chase USA shall have deliv- ered to the Trustee
an Opinion of Counsel with respect to the Addi- tional Accounts designated
hereby substantially in the form of Exhibit E to the Pooling and Servicing
Agreement.

         7. Amendment of the Pooling and Servicing Agreement. The Pooling and
Servicing Agreement is hereby amended to provide that all references therein to
the "Pooling and Servicing Agreement," to "this Agree-ment" and "herein" shall
be deemed from and after the Addition Date to be a dual reference to the Pooling
and Servicing Agreement as supplemented by this Assignment and by Assignment No.
1 of Receivables in Additional

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Accounts, dated as of July 1, 1996, Assignment No. 2 of Receivables in
Additional Accounts, dated as of September 1, 1996, Assignment No.3 of
Receivables in Additional Accounts, dated as of December 1, 1997, Assign- ment
No. 4 of Receivables in Additional Accounts, dated as of February 1, 1998,
Assignment No. 5 of Receivables in Additional Accounts, dated as of April 1,
1998, Assignment No. 6 of Receivables in Additional Accounts, dated as of August
1, 1998, Assignment No. 7 of Receivables in Additional Accounts, dated as of
November 1, 1998, Assignment No. 8 of Receivables in Additional Accounts, dated
as of February 1, 1999, Assignment No. 9 of Receivables in Additional Accounts,
dated as of April 1, 1999, Assignment No. 10 of Receivables in Additional
Accounts, dated as of July 1, 1999, Assignment No. 11 of Receivables in
Additional Accounts, dated as of October 1, 1999, Assignment No. 12 of
Receivables in Additional Accounts, dated as of February 1, 2000, Assignment No.
13 of Receivables in Addi- tional Accounts, dated as of April 1, 2000,
Assignment No. 14 of Receivables in Additional Accounts, dated as of May 1,
2000, Assignment No. 15 of Receivables in Additional Accounts, dated as of
August 1, 2000, Assignment No. 16 of Receivables in Additional Accounts, dated
as of July 1, 2001, Assignment No. 17 dated as of September 1, 2001, Assignment
No. 18 of Receivables in Additional Accounts, dated as of November 1, 2001,
Assign- ment No. 19 of Receivables in Additional Accounts, dated as of March 6,
2002, Assignment No. 20 of Receivables in Additional Accounts, dated as of April
1, 2002, Assignment No. 21 of Receivables in Additional Accounts, dated as of
May 1, 2002, Assignment No. 22 of Receivables in Additional Accounts, dated as
of September 1, 2002, Assignment No. 23 of Receivables in Additional Accounts,
dated as of November 1, 2002, Assignment No. 24 of Receivables in Additional
Accounts, dated as of February 1, 2003, Assign- ment No. 25 of Receivables in
Additional Accounts, dated as of April 1, 2003, Reassignment No. 1 of
Receivables in Removed Accounts, dated as of September 30, 1997 and Reassignment
No. 2 of Receivables in Removed Accounts, dated as of December 1, 1997. Except
as expressly amended here-by, all of the representations, warranties, terms,
covenants and conditions to the Pooling and Servicing Agreement shall remain
unamended and shall continue to be, and shall remain, in full force and effect
in accordance with its terms and except as expressly provided herein shall not
constitute or be deemed to constitute a waiver of compliance with or a consent
to noncompli- ance with any term or provisions of the Pooling and Servicing
Agreement.

         8. Survival. The representations, warranties and cove- nants of the
parties hereto shall survive the assignment of the Receivables pursuant to this
Assignment and the termination of this Assignment, and shall inure to the
benefit of the Trust. Notwithstanding to the contrary in this Assignment, the
representations and warranties of the Chase USA herein shall not survive after
the tenth (10th ) anniversary of the Addition Date.

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         9. Waivers and Amendments. This Assignment may be amended, superseded,
canceled, renewed or extended and the terms hereof may be waived, only by a
written instrument signed by authorized representa-tives of the parties or, in
the case of a waiver, by an authorized representative of the party waiving
compliance and, in all cases, subject to confirmation by each Rating Agency then
rating any Investor Certificates. No such written instrument shall be effective
unless it expressly recites that it is intended to amend, supersede, cancel,
renew or extend this Assignment or to waive compliance with one or more of the
terms hereof, as the case may be. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any such right, power
or privilege, or any single or partial exercise of any such right, power or
privilege, preclude any further exercise thereof or the exercise of any other
such right, power or privilege.

         10. Counterparts. This Assignment may be executed in two or more
counterparts (and by different parties on separate counterparts), each of which
shall be an original, but all of which together shall constitute one and the
same instrument.

         11. GOVERNING LAW. THIS ASSIGNMENT SHALL BE GOVERNED BY, CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELA-WARE WITHOUT
REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.

         12. Tax Treatment. Nothing in this Assignment shall be deemed to
require any securitization transaction involving the Receivables to be treated
as a sale for federal or state income tax purposes or to preclude treatment of
any such securitization transaction as debt for federal or state income tax
purposes.

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         IN WITNESS WHEREOF, the undersigned have caused this Assign- ment of
Receivables in Additional Accounts to be duly executed and delivered by their
respective duly authorized officers on the day and year first above written.

                                    CHASE MANHATTAN BANK USA,
                                    NATIONAL ASSOCIATION

                                    By: /s/Patricia Garvey
                                        -------------------------------
                                    Name:  Patricia Garvey
                                    Title: Vice President

                                    THE BANK OF NEW YORK,
                                    as Trustee

                                    By: /s/Dan Rothman
                                        -------------------------------
                                    Name:  Dan Rothman
                                    Title: Assistant Treasurer

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                                                                     Schedule 1

                                                               to Assignment of
                                                                 Receivables in
                                                            Additional Accounts
                                                            -------------------

                               ADDITIONAL ACCOUNTS
                               -------------------<PAGE>

                                                                  EXHIBIT 10.11

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.
                                             CONVERTIBLE NOTE

Principal Amount:   $__________                        Dated:   ______________

         MILITARY RESALE GROUP,  INC., a New York  corporation  (the "Company"),
for  value  received,  hereby  promises  to pay to  ______________,  or  assigns
("Holder"),     on    June    30,    2003,     the    principal     amount    of
_____________________________  Dollars ($_____) (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 June 30, 2002 and,  thereafter,  at the annual rate of nine percent
(9%) until the 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.

                  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.

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                  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)
June 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 June 30, 2003, 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,  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,

                                       2
<PAGE>

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.

                            (a)  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 closing price is less than $0.75 per share, a
proportionate  reduction  to the $0.50  price,  but in no event to a  conversion
price  that is less than $0.10 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.

                            (b) In the event  that the  shares  of Common  Stock
issuable  upon  conversion  of this  Note  have not been  registered  under  the
Securities Act, on or prior to June 30, 2003, until such time as such shares are
so  registered,  at the option of the Holder and in lieu of taking any  remedial
action in respect of the Event of Default  resulting  therefrom,  the Holder may
convert  this Note into a number of shares of Common  Stock as is equal to twice
the number of shares of Common Stock as would have been issuable had such shares
been registered under the Securities Act on the date of conversion.

                                       3
<PAGE>

                  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,  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 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 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.

                                       4
<PAGE>

                  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  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.

                                       5
<PAGE>

                            (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.

                  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.

                                       6
<PAGE>

                  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.

                  Section  4.07  SUPERSEDES  PRIOR  NOTES.  The  terms  of  this
Convertible  Note amend and  supersede the terms of the  convertible  promissory
note  originally  issued  to the  Holder on the date set  forth  above,  and any
amendments thereto.

         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

Receipt  of this  Convertible  Note is hereby  acknowledged  by the  undersigned
Holder.

------------------------
 (Please sign name above)

                                       7
<PAGE>

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