-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VA2Yy7zY576zu8z/7mEmIhjQP2NhZ1IXX/joaGKvAtNtqzktUHVZaIoxQuYq/H25 AR7M1YRrEwkezKaJuTR6qw== 0000930413-05-000407.txt : 20050125 0000930413-05-000407.hdr.sgml : 20050125 20050125164200 ACCESSION NUMBER: 0000930413-05-000407 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20050111 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Changes in Control of Registrant ITEM INFORMATION: Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050125 DATE AS OF CHANGE: 20050125 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MILITARY RESALE GROUP INC CENTRAL INDEX KEY: 0001088436 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-GROCERIES & GENERAL LINE [5141] IRS NUMBER: 112665282 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-26463 FILM NUMBER: 05547529 BUSINESS ADDRESS: STREET 1: 2180 EXECUTIVE CIRCLE CITY: COLORADO SPRINGS STATE: CO ZIP: 80906 BUSINESS PHONE: 7193914564 MAIL ADDRESS: STREET 1: 2180 EXECUTIVE CIRCLE CITY: COLORADO SPRINGS STATE: CO ZIP: 80906 FORMER COMPANY: FORMER CONFORMED NAME: BACTROL TECHNOLOGIES INC /FL DATE OF NAME CHANGE: 19990610 8-K 1 c35227_8k.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 JANUARY 11, 2005 (Date of Report) MILITARY RESALE GROUP, INC. (Exact name of registrant as specified in its charter) NEW YORK 000-26463 52-2062187 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 2180 EXECUTIVE CIRCLE COLORADO SPRINGS, COLORADO 80906 (Address of principal executive offices) (719) 391-4564 (Registrant's telephone number, including area code) N/A (Former name or former address, if changed since last report.) SECTION 1 - REGISTRANT'S BUSINESS AND OPERATIONS ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT. SECTION 5 - CORPORATE GOVERNANCE AND MANAGEMENT ITEM 5.01 CHANGES IN CONTROL OF REGISTRANT. ITEM 5.02 DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS. SECTION 8 - OTHER EVENTS ITEM 8.01 OTHER EVENTS. As of January 11, 2005, the Registrant entered into the Agreement, dated as of January 11, 2005 (the "AGREEMENT"), between the Registrant and Lee Brukman ("BRUKMAN"). A copy of the Agreement is filed herewith as Exhibit 10.1. Brukman served as a director and officer of the Registrant on dates prior to the date of the Agreement. In such capacity, Brukman incurred expenses on behalf of the Registrant (the "BRUKMAN EXPENSES") and was entitled to, but did not receive, salary during his period of service as an officer of the Registrant (the "BRUKMAN UNPAID SALARY"). On June 11, 2004, Brukman made a loan (the "BRUKMAN LOAN") to the Registrant in the amount of $75,000 represented by the 8% note, dated June 11, 2004, by the Registrant in favor of Brukman. On June 11, 2004, Brukman caused his affiliate Data Recovery Continuum, Inc. ("DRC") to transfer its ownership of Ohio Street Partners, LLC ("OHIO STREET") to the Registrant in exchange for 1,920,000 shares (the "DISPUTED SHARES") of common stock, par value $0.0001 per share (the "REGISTRANT COMMON STOCK"), of the Registrant, and warrants (the "DISPUTED WARRANTS", and, together with the Disputes Shares, the "DISPUTED SECURITIES") to purchase an aggregate of 960,000 shares of Registrant Common Stock. Issues arose as to encumbrances covering the title to the assets of Ohio Street in breach of the documents evidencing such exchange. The Agreement was negotiated for the purpose of resolving all outstanding disputes between the Registrant and Brukman. Pursuant to the Agreement, the parties agreed to the following actions: o To the extent that Brukman was or may have been serving as an officer and/or director of the Registrant as of the date of the Agreement, effective upon the execution of the Agreement, Brukman resigned from all positions as an officer and as a director of the Registrant; o The Registrant and Brukman agreed that the aggregate amount owed by the Registrant to Brukman is $120,000, which amount includes the repayment of the Brukman Loan, the reimbursement of the Brukman Expenses, and the payment of the Brukman Unpaid Salary, which amounts are represented by a promissory note (the "NOTE"), the form of which has been filed herewith as Exhibit 10.2; o The terms of the Note are as follows: o 10% interest; o $6,000 payable on each of February 1, 2005, February 22, 2005; March 8, 2005; and March 29, 2005 (the "PERIODIC PAYMENTS"); o Balance payable on or prior to July 8, 2005; and o Commencing on the date of first Periodic Payment, the Note shall be mandatorily prepaid by the Registrant to the extent of the excess of (A) over (B), where (A) equals twenty-five (25%) percent of any capital raised by the Registrant, whether in the form of equity, derivative securities (e.g., warrants, options, convertible securities, exchangeable securities, or otherwise), or indebtedness (other than trade indebtedness), and (B) equals the Periodic Payments made through the date of the prepayment; -2- o The Registrant shall deliver to Brukman evidence of the Registrant's ownership of Ohio Street, duly endorsed and in proper form for transfer; o Brukman shall cause his affiliates to deliver to the Registrant the stock certificates and warrants comprising the Disputed Securities, duly endorsed and in proper form for transfer. Upon receipt thereof, the Registrant shall cause the Disputed Shares to become authorized, but unissued, shares of Registrant Common Stock, and shall cancel the Disputed Warrants; and o The Registrant and Brukman granted to one another general releases, subject to the carve-outs set forth in the Agreement. Upon receipt of the Disputed Securities, or any securities issued upon the exercise of the Disputed Warrants, the Registrant intends to cancel the Disputed Shares and return the Disputed Shares to the authorized, but unissued shares of capital stock of the Registrant, and cancel the Disputed Warrants. As a result of the foregoing, the transactions contemplated by the previous announcement of the regarding its intent to acquire a large, high quality, distribution facility in Colorado Springs, Colorado from DRC, an entity affiliated with Brukman, for $5.5 million, and 2,400 residential lots south of Phoenix, Arizona from DRC for $7.5 million and convertible securities, have been terminated. The Registrant delivered no cash or securities in connection with such transactions. Upon the resignation of Brukman, Ethan Hokit, the sole remaining director on the Board of Directors, appointed Edward T. Whelan to as director to fill the vacancy created by such resignation. Certain biographical information regarding Mr. Whelan is set forth below: Mr. Whelan was a co-founder of MRG-Maryland in October 1997 and served as its Chairman and Chief Executive Officer until the consummation of its reverse acquisition by the Registrant in November 2001, at which time he became the Registrant's Chairman of the Board and Chief Executive Officer. From April 1998 until October 2003, Mr. Whelan also served as the President and a principal stockholder of Xcel Associates, Inc., a company engaged in providing financial consulting to small and medium-sized companies and to high net worth individuals. From 1989 to December 2001, Mr. Whelan also served as President and a principal shareholder of Shannon Investments, Inc., a consulting firm to small and medium-sized companies. From 1968 to 1971, Mr. Whelan attended St. Peters College in Jersey City, New Jersey, where he majored in Economics. On January 24, 2005, the Registrant issued the press release attached as Exhibit 99.1 relating to the foregoing. ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS. (c) Exhibits. 10.1 Form of Agreement, dated as of January 11, 2005, between the Registrant and Lee Brukman 10.2 Form of Promissory Note, dated January 11, 2005, by the Registrant in favor of Lee Brukman -3- 99.1 Press Release [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] -4- SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. DATED: JANUARY 24, 2005 MILITARY RESALE GROUP, INC, By: /s/ Ethan Hokit --------------------------------- Name: Ethan Hokit Title: President -5- EX-10.1 2 c35227_ex10-1.txt EXHIBIT 10.1 AGREEMENT, dated as of January 11, 2005, between MILITARY RESALE GROUP, INC., a New York corporation with offices located at 2180 Executive Circle Colorado Springs, Colorado 80906 (the "COMPANY"); and LEE BRUKMAN, an individual residing at c/o Data Recovery Continuum, Inc., P.O. Box 105, La Jolla, California 92038 ("BRUKMAN"). INTRODUCTION Brukman has served as a director and officer of the Company on dates prior to the date hereof. In such capacity, Brukman incurred expenses on behalf of the Company (the "BRUKMAN EXPENSES") and was entitled to, but did not receive, salary during his period of service as an officer of the Company (the "BRUKMAN UNPAID SALARY"). On JUNE 11, 2004, Brukman made a loan (the "BRUKMAN LOAN") to the Company in the amount of $75,000 represented by the 8% note, dated June 11, 2004, by the Company in favor of Brukman. On June 11, 2004, Brukman caused his affiliate Data Recovery Continuum, Inc. to transfer its ownership of Ohio Street Partners, LLC ("OHIO STREET") to the Company in exchange for 1,920,000 shares (the "DISPUTED SHARES") of common stock, par value $0.0001 per share (the "COMPANY COMMON STOCK"), of the Company, and warrants (the "DISPUTED WARRANTS", and, together with the Disputes Shares, the "DISPUTED SECURITIES") to purchase an aggregate of 960,000 shares of Company Common Stock. Disputes exist between the Company and Brukman with respect to (i) whether Brukman is currently serving in any capacity with the Company, (ii) the amount and existence of the Brukman Expenses, (iii) the amount of the Brukman Unpaid Salary, and (iv) the title to the assets of Ohio Street. The parties desire to resolve such disputes on the terms, and subject to the conditions, set forth herein. The parties hereto, intending to be legally bound, hereby agree as follows: I. RESIGNATION SECTION 1.01 OFFICERSHIPS. To the extent that Brukman is or may be currently serving as an officer of the Company, effective upon the execution hereof, Brukman hereby resigns from all positions as an officer of the Company. SECTION 1.02 DIRECTORSHIPS. To the extent that Brukman is or may be currently serving as a director of the Company, effective upon the execution hereof, Brukman hereby resigns from his position as a director of the Company. SECTION 1.03 BENEFITS. Commencing upon the execution and delivery hereof, the parties hereto hereby agree that Brukman shall no longer be eligible to participate in any employee or executive benefit, pension, health, or other plan or program of the Company, subject to availability of healthcare benefits under any applicable COBRA continuation and other legal requirements. II. BRUKMAN LOAN; BRUKMAN EXPENSES; BRUKMAN UNPAID SALARY SECTION 2.01 AGREEMENT AS TO AGGREGATE AMOUNTS. The parties hereby agree that the amount of the Brukman Loan is and shall be $75,000. the amount of the Brukman Expenses shall be $20,000; and the amount of the Brukman Unpaid Salary shall be $25,000. SECTION 2.02 STRUCTURE OF PAYMENT. The aggregate amount of the Brukman Loan, the Brukman Expenses, and the Brukman Unpaid Salary shall be paid as set forth in the note attached hereto as Exhibit 2.02 hereof. III. UNWINDING OF OHIO STREET TRANSACTION SECTION 3.01 DELIVERY OF EVIDENCE OF OWNERSHIP. Upon the execution and delivery hereof, the Company shall deliver to Brukman evidence of the Company's ownership of Ohio Street, duly endorsed and in proper form for transfer. SECTION 3.02 DELIVERY OF DISPUTED SECURITIES. Upon the execution and delivery hereof, Brukman shall cause his affiliates to deliver to the Company the stock certificates and warrants comprising the Disputed Securities, duly endorsed and in proper form for transfer. Upon receipt thereof, the Company shall cause the Disputed Shares to become authorized, but unissued, shares of Company Common Stock, and shall cancel the Disputed Warrants. IV. RELEASES; INDEMNIFICATION; NON-DISPARAGEMENT SECTION 4.01 RELEASES. (a) Except as otherwise as set forth, and to the extent set forth, herein, the Company hereby fully and unconditionally releases and discharges all claims and causes of action which it or its successors (if applicable), or assigns ever had, now have, or hereafter may have against Brukman, in connection with any and all matters relating to the matters set forth herein, provided, however, that the Company expressly does not release Brukman for (i) violations by Brukman of, and actions of Brukman in contravention of, Federal, state, and other laws, rules, and regulations, whether in his capacity as an officer or director of the Company or otherwise or (ii) this Agreement. 2 (b) Except as otherwise as set forth, and to the extent set forth, herein, Brukman hereby fully and unconditionally releases and discharges all claims and causes of action which he or his heirs, successors (if applicable), or assigns ever had, now have, or hereafter may have against the Company and its officers, directors, employees, counsel, agents, and stockholders, in each case past, present, or as they may exist at any time after this date, and each person, if any, who controls, controlled, or will control any of them within the meaning of Section 15 of the Securities Act of 1933, as amended, or Section 20(a) of the Securities Exchange Act of 1934, as amended (collectively, the "COMPANY PARTIES"), provided, however, that Brukman expressly does not release the Company Parties with respect to (i) indemnification and contribution hereunder, under or pursuant to the certificate of incorporation or by-laws of the Company, or pursuant to the General Corporation Law of the State of New York, or (ii) this Agreement; provided, however, that Brukman expressly does not release the Company for violations by the Company of, and actions of the Company (and its officers, directors, employees, and agents) in contravention of Federal, state, and other laws, rules, and regulations. SECTION 4.02 INDEMNIFICATION. (a) The Company agrees to indemnify and hold harmless Brukman from any and all losses, liabilities, damages, and expenses whatsoever (which shall include for all purposes of this Section 4.02, but not be limited to, reasonable counsel fees and any and all reasonable expenses whatsoever incurred in investigating, preparing, or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation) as and when incurred arising out of, based upon, or in connection with this Agreement, to the maximum extent permitted by the New York General Corporation Law. The foregoing agreement to indemnify shall be in addition to any liability the Company may otherwise have, including liabilities arising under this Agreement. (b) Brukman agrees to indemnify and hold harmless the Company from any and all losses, liabilities, damages, and expenses whatsoever (which shall include for all purposes of this Section 4.02, but not be limited to, reasonable counsel fees and any and all reasonable expenses whatsoever incurred in investigating, preparing, or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation) as and when incurred arising out of, based upon, or in connection with this Agreement, and violations by Brukman of, and actions of Brukman in contravention of, Federal, state, and other laws, rules, and regulations, whether in his capacity as an officer or director of the Company or otherwise, in each case to the maximum extent permitted by the New York General Corporation Law. The foregoing agreement to indemnify shall be in addition to any liability Brukman may otherwise have, including liabilities arising under this Agreement 3 SECTION 4.03 NON-DISPARAGEMENT. Each party hereto hereby agrees that it or he will not make, and that it or he will use its or his best efforts to prevent its affiliates from making, any written or oral statements that are damaging or disparaging to to the activities, image or reputation of the other party hereto. Each party hereto hereby agrees that any breach by it or him of the provisions of this paragraph will cause the other party hereto irreparable harm and loss and a breach of this clause will be considered a material breach of this Agreement and, without limiting any other remedies that any party hereto may have, each party hereto hereby consents to the issuance of an injunction to prohibit any actual or threatened such breach by it, its agents, or its affiliates. The right of each party hereto to obtain such injunction shall not preclude any other remedy available thereto, including the right to obtain damages. Notwithstanding the foregoing, nothing shall prevent either party to make any disclosures which, in the opinion of counsel, are legally required to be made by such party. V. REPRESENTATIONS AND WARRANTIES SECTION 5.01 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. (a) Brukman has all necessary right and power to enter into this Agreement and to carry out the obligations hereunder and to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by Brukman, and constitutes a valid and binding obligation of Brukman, and is enforceable against Brukman in accordance with its terms. (b) Brukman is an individual who has reached the age majority in his state of residence and has all necessary requisite power and authority, and all necessary consents, authorizations, approvals, orders, licenses, certificates, and permits of and from, and declarations and filings with, all federal, state, local, and other governmental authorities and all courts and other tribunals, to own, lease, license, and use his properties and assets and to carry on the business in which he is now engage and the businesses in which she contemplates engaging. (c) The Disputed Securities are owned of record and beneficially solely by Brukman free and clear of any security interest, pledge, mortgage, lien (including, without limitation, environmental and tax liens), charge, encumbrance, adverse claim, preferential arrangement or restriction of any kind, including, without limitation, any restriction on the use, voting, transfer (except as otherwise provided herein), receipt of income or other exercise of any attributes of ownership. The Disputed Securities are not subject to any options, warrants, convertible securities or other rights, agreements, arrangements or commitments of any character relating to interests therein. There are no voting trusts, member agreements, proxies, or other agreements or understandings in effect with respect to the voting or transfer of any of the Disputed Securities. SECTION 5.02 REPRESENTATIONS AND WARRANTIES OF BRUKMAN. The Company has all requisite power and authority to execute, deliver, and perform each of this Agreement and the Note. All necessary corporate proceedings of the Company have been duly taken to authorize the execution, delivery, and performance thereby of each of this Agreement and the Note. Each of this Agreement and the Note has been duly authorized, executed, and delivered by the Company, constitutes the legal, valid, and binding obligation of the Company, and is enforceable as to the Company in accordance with its respective terms. 4 VI. MISCELLANEOUS SECTION 6.01 FURTHER ACTIONS. At any time and from time to time, each party agrees, at its or his expense, to take such actions and to execute and deliver such documents as may be reasonably necessary to effectuate the purposes of this Agreement. SECTION 6.02 AVAILABILITY OF EQUITABLE REMEDIES. Since a breach of the provisions of this Agreement could not adequately be compensated by money damages, any party shall be entitled, in addition to any other right or remedy available to it, to an injunction restraining such breach or a threatened breach and to specific performance of any such provision of this Agreement, and in either case no bond or other security shall be required in connection therewith, and the parties hereby consent to the issuance of such an injunction and to the ordering of specific performance. SECTION 6.03 SURVIVAL. The covenants, agreements, representations, and warranties contained in or made pursuant to this Agreement shall survive any delivery of the consideration described herein, irrespective of any investigation made by or on behalf of any party. SECTION 6.04 MODIFICATION. This Agreement sets forth the entire understanding of the parties with respect to the subject matter hereof, supersedes all existing agreements between them concerning such subject matter, and may be modified only by a written instrument duly executed by each party. SECTION 6.05 NOTICES. Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be mailed by certified mail, return receipt requested (or by the most nearly comparable method if mailed from or to a location outside of the United States) or by Federal Express, Express Mail, or similar overnight delivery or courier service or delivered (in person or by telecopy, telex, or similar telecommunications equipment) against receipt to the party to whom it is to be given at the address of such party set forth in the preamble to this Agreement (or to such other address as the party shall have furnished in writing in accordance with the provisions of this Section 6.05) with a copy to each of the other party hereto. Any notice given to any corporate party shall be addressed to the attention of the Corporate Secretary. Notice to the estate of any party shall be sufficient if addressed to the party as provided in this Section 6.05. Any notice or other communication given by certified mail (or by such comparable method) shall be deemed given at the time of certification thereof (or comparable act), except for a notice changing a party's address which will be deemed given at the time of receipt thereof. Any notice given by other means permitted by this Section 6.05 shall be deemed given at the time of receipt thereof. 5 SECTION 6.06 WAIVER. Any waiver by any party of a breach of any term of this Agreement shall not operate as or be construed to be a waiver of any other breach of that term or of any breach of any other term of this Agreement. The failure of a party to insist upon strict adherence to any term of this Agreement on one or more occasions will not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. Any waiver must be in writing and, in the case of a corporate party, be authorized by a resolution of the Board of Directors or by an officer of the waiving party. SECTION 6.07 BINDING EFFECT. The provisions of this Agreement shall be binding upon and inure to the benefit of the the Company, Brukman, and their respective successors and and assigns (if not a natural person) and his assigns, heirs, and personal representatives (if a natural person). SECTION 6.08 NO THIRD PARTY BENEFICIARIES. This Agreement does not create, and shall not be construed as creating, any rights enforceable by any person not a party to this Agreement (except as provided in Section 6.07). SECTION 6.09 SEPARABILITY. If any provision of this Agreement is invalid, illegal, or unenforceable, the balance of this Agreement shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances. SECTION 6.10 HEADINGS. The headings in this Agreement are solely for convenience of reference and shall be given no effect in the construction or interpretation of this Agreement. SECTION 6.11 COUNTERPARTS; GOVERNING LAW. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. It shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to conflict of laws. Any action, suit, or proceeding arising out of, based on, or in connection with this Agreement or the transactions contemplated hereby may be brought in the United States District Court for the Southern District of New York and each party covenants and agrees not to assert, by way of motion, as a defense, or otherwise, in any such action, suit, or proceeding, any claim that it or he is not subject personally to the jurisdiction of such court, that its or his property is exempt or immune from attachment or execution, that the action, suit, or proceeding is brought in an inconvenient forum, that the venue of the action, suit, or proceeding is improper, or that this Agreement or the subject matter hereof may not be enforced in or by such court. 6 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 7 IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first written above. MILITARY RESALE GROUP, INC. BY:--------------------------------- NAME: TITLE: ------------------------------------ LEE BRUKMAN 8 EX-10.2 3 c35227_ex10-2.txt THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER THIS NOTE NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF THIS NOTE, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT THIS NOTE MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS. MILITARY RESALE GROUP, INC. 10% PROMISSORY NOTE $120,000 JANUARY 11, 2005 NEW YORK, NEW YORK MILITARY RESALE GROUP, INC., a New York corporation with offices located at 2180 Executive Circle Colorado Springs, Colorado 80906 (the "COMPANY"), for value received, hereby promises to pay to LEE BRUKMAN, an individual residing at c/o Data Recovery Continuum, Inc., P.O. Box 105, La Jolla, California 92038 or registered assigns (the "HOLDER"), the principal amount of ONE TWENTY THOUSAND UNITED STATES DOLLARS ($120,000) on the Maturity Date (as defined below), and to pay interest on the unpaid principal balance hereof at the rate (calculated on the basis of a 360-day year consisting of twelve 30-day months) of 10% per annum from the date hereof until the Maturity Date. Accrued interest on the unpaid principal balance hereof shall be payable on the Maturity Date or upon the earlier repayment of this Note. In no event shall any interest to be paid hereunder exceed the maximum rate permitted by law. In any such event, this Note shall automatically be deemed amended to permit interest charges at an amount equal to, but no greater than, the maximum rate permitted by law. All capitalized terms used, but not otherwise defined, herein shall have the respective definitions assigned thereto in the Agreement (as hereinafter defined). 1. NOTE. This Note is the "Note" described in the Agreement, dated as of January 11, 2005, between the Company and Lee Brukman. 2. PAYMENTS. (a) Of the principal amount of this Note, (i) $6,000 shall be payable on February 1, 2005, (ii) $6,000 shall be payable on February 22, 2005; (iii) $6,000 shall be payable on March 8, 2005; and (iv) $6,000 shall be payable on March 29, 2005. Such payments are hereinafter referred to as the "PERIODIC PAYMENTS". The remainder of the principal of this Note shall be due and payable in full on the Maturity Date. The "MATURITY Date" shall be July 8, 2005. (b) Interest on this Note shall accrue from the date of issuance hereof through the Maturity Date. (c) If the Maturity Date falls on a day that is not a Business Day (as defined below), the payment due on the Maturity Date will be made on the next succeeding Business Day with the same force and effect as if made on the Maturity Date. "BUSINESS DAY" means any day which is not a Saturday or Sunday and is not a day on which banking institutions are generally authorized or obligated to close in the City of New York, New York. (d) (i) The Company may, without the prior written consent of the Holder, prepay all or any part of the principal of this Note, without payment of any premium or penalty. All payments on this Note shall be applied first to accrued interest hereon and the balance to the payment of principal hereof. (ii) Commencing on the date of first Periodic Payment, this Note shall be mandatorily prepaid by the Company to the extent of the excess of (A) over (B), where (A) equals twenty-five (25%) percent of any capital raised by the Company, whether in the form of equity, derivative securities (e.g., warrants, options, convertible securities, exchangeable securities, or otherwise), or indebtedness (other than trade indebtedness), and (B) equals the Periodic Payments made through the date of the prepayment. (e) Payments of principal of, and interest on, this Note shall be made by check sent to the Holder's address set forth above or to such other address as the Holder may designate for such purpose from time to time by written notice to the Company, 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. Alternatively, principal of, and interest on, this Note with respect to the Maturity Date may be paid by electronic wire transfer in accordance with instructions provided by the Holder to the Company at least 10 Business Days prior to the Maturity Date. (f) The obligations to make the payments provided for in this Note are absolute and unconditional and not subject to any defense, set-off, counterclaim, rescission, recoupment, or adjustment whatsoever. The Company hereby expressly waives demand and presentment for payment, notice of non-payment, notice of dishonor, protest, notice of protest, bringing of suit, and diligence in taking any action to collect any amount called for hereunder, and shall be directly and primarily liable for the payment of all sums owing and to be owing hereon, regardless of and without any notice, diligence, act, or omission with respect to the collection of any amount called for hereunder. 3. RANKING OF NOTE. This Note constitutes senior unsecured indebtedness of the Company. 4. COVENANTS. The Company covenants and agrees with the Holder that, so long as any amount remains unpaid on the Note, unless the consent of the majority in interest of all of the Holders is obtained or except as otherwise provided herein, the Company: (a) Shall not pay any dividend or make any distribution on, or purchase, redeem, or retire, any shares of its capital stock or any warrants, options, or other rights to reacquire any such shares, except that the Company may pay dividends payable solely in shares of its capital stock. (b) Shall deliver to each Holder: (i) Quarterly Reports on Form 10-QSB promptly upon filing with the Securities and Exchange Commission; (ii) Annual Reports on Form 10-KSB promptly upon filing with the Securities and Exchange Commission; (iii) promptly after the Company shall obtain knowledge of such, written notice of all legal or arbitral proceedings, and of all proceedings by or before any governmental or regulatory authority or agency, and each material development in respect of such legal or other proceedings, affecting the Company and its subsidiaries, except proceedings which, if adversely determined, would not have a material adverse effect on the Company and its subsidiaries taken as a whole; and (iv) promptly after the Company shall obtain knowledge of the occurrence of any Event of Default (as hereinafter defined) or any event which with notice or lapse of time or both would become an Event of Default (an Event of Default or such other event being a "DEFAULT"), a notice specifying that such notice is a "NOTICE OF DEFAULT" and describing such Default in reasonable detail, and, in such Notice of Default or as soon thereafter as practicable, a description of the action the Company has taken or proposes to take with respect thereto. 5. EVENTS OF DEFAULT. The occurrence of any of the following events shall constitute an event of default (an "EVENT OF DEFAULT"): (a) A default in the payment of the principal on any Note, when and as the same shall become due and payable. - 3 - (b) A default in the payment of any interest on any Note, when and as the same shall become due and payable, which default shall continue for five business days after the date fixed for the making of such interest payment. (c) A default in the performance, or a breach, of any of the covenants of the Company contained in Sections 2 or 4 of this Note or contained in the Agreement. (d) A default in the performance, or a breach, of any other covenant or agreement of the Company in (i) this Note and continuance of such default or breach for a period of 10 days after receipt of notice from the Holder as to such breach or after the Company had or should have had knowledge of such breach (ii) the Agreement. (e) Any representation, warranty, or certification made by the Company pursuant to this Note or the Agreement shall prove to have been false or misleading as of the date made in any material respect. (f) A final judgment or judgments for the payment of money in excess of $100,000 in the aggregate shall be rendered by one or more courts, administrative or arbitral tribunals or other bodies having jurisdiction against the Company and the same shall not be discharged (or provision shall not be made for such discharge), or a stay of execution thereof shall not be procured, within 60 days from the date of entry thereof and the Company shall not, within such 60-day period, or such longer period during which execution of the same shall have been stayed, appeal therefrom and cause the execution thereof to be stayed during such appeal. (g) The entry of a decree or order by a court having jurisdiction adjudging the Company bankrupt or insolvent, or approving a petition seeking reorganization, arrangement, adjustment, or composition of or in respect of the Company, under federal bankruptcy law, as now or hereafter constituted, or any other applicable federal or state bankruptcy, insolvency, or other similar law, and the continuance of any such decree or order unstayed and in effect for a period of 60 days; or the commencement by the Company of a voluntary case under federal bankruptcy law, as now or hereafter constituted, or any other applicable federal or state bankruptcy, insolvency, or other similar law, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under federal bankruptcy law or any other applicable federal or state law, or the consent by it to the filing of such petition or to the appointment of a receiver, liquidator, assignee, trustee, sequestrator, or similar official of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action. - 4 - 6. REMEDIES UPON DEFAULT. (a) Upon the occurrence of an Event of Default referred to in Section 5(g), the principal amount then outstanding of, and the accrued interest on, this Note shall automatically become immediately due and payable without presentment, demand, protest, or other formalities of any kind, all of which are hereby expressly waived by the Company. Upon the occurrence of an Event of Default referred to in Section 5(a) or (b), the Holder, by notice in writing given to the Company, may declare the entire principal amount then outstanding of, and the accrued interest on, this Note to be due and payable immediately, and upon any such declaration the same shall become and be due and payable immediately, without presentation, demand, protest, or other formalities of any kind, all of which are expressly waived by the Company. Upon the occurrence of an Event of Default other than one referred to in Sections 5(a), (b) or (g), the Holders of not less than 50% in principal amount of then outstanding Notes (excluding any Notes held by or for the account of the Company or any affiliate of the Company) may declare the principal amount then outstanding of, and the accrued interest on, the Notes to be due and payable immediately, and upon such declaration the same shall become due and payable immediately, without presentation, demand, protest, or other formalities of any kind, all of which are expressly waived by the Company. (b) The Holder may institute such actions or proceedings in law or equity as it shall deem expedient for the protection of its rights and may prosecute and enforce its claims against all assets of the Company, and in connection with any such action or proceeding shall be entitled to receive from the Company payment of the principal amount of this Note plus accrued interest to the date of payment plus reasonable expenses of collection, including, without limitation, attorneys' fees and expenses. 7. TRANSFER. (a) Any Notes issued upon the transfer or exchange of this Note shall be numbered and shall be registered in a Note Register as they are issued. The Company shall be entitled to treat the registered holder of any Note on the Note Register as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Note on the part of any other person, and shall not be liable for any registration or transfer of Notes which are registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with the actual knowledge that a fiduciary or nominee is committing a breach of trust in requesting such registration or transfer, or with the knowledge of such facts that its participation therein amounts to bad faith. This Note shall be transferable only on the books of the Company upon delivery thereof duly endorsed by the Holder or by his duly authorized attorney or representative, or accompanied by proper evidence of succession, assignment, or authority to transfer. In all cases of transfer by an attorney, executor, administrator, guardian, or other legal representative, duly authenticated evidence of his or its authority shall be produced. Upon any registration of transfer, the Company shall deliver a new Note or Notes to the person entitled thereto. This Note may be exchanged, at the option of the Holder thereof, for another Note, or other Notes of different denominations, of like tenor and representing in the aggregate a like principal amount, upon surrender to the Company or its duly authorized agent. Notwithstanding the foregoing, the Company shall have no obligation to cause Notes to be transferred on its books to any person if, in the opinion of counsel to the Company, such transfer does not comply with the provisions of the Securities Act and the rules and regulations thereunder. - 5 - (b) The Holder acknowledges that he has been advised by the Company that this Note has not been registered under the Securities Act, that this Note is being issued on the basis of the statutory exemption provided by Section 4(2) of the Act or Regulation D promulgated thereunder, or both, relating to transactions by an issuer not involving any public offering. The Holder acknowledges that he has been informed by the Company of, or is otherwise familiar with, the nature of the limitations imposed by the Securities Act and the rules and regulations thereunder on the transfer of securities. In particular, the Holder agrees that no sale, assignment or transfer of this Note shall be valid or effective, and the Company shall not be required to give any effect to any such sale, assignment or transfer, unless (i) the sale, assignment, or transfer of this Note is registered under the Securities Act, it being understood that this Note is not currently registered for sale and that the Company has no obligation or intention to so register the Notes, or (ii) this Note is sold, assigned, or transferred in accordance with all the requirements and limitations of Rule 144 under the Act, it being understood that Rule 144 is not available at the time of the original issuance of this Note for the sale of this Note and that there can be no assurance that Rule 144 sales will be available at any subsequent time, or (iii) such sale, assignment, or transfer is otherwise exempt from registration under the Securities Act. 8. MISCELLANEOUS. (a) Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be mailed by certified mail, return receipt requested, or by Federal Express, Express Mail or similar overnight delivery or courier service or delivered (in person or by telecopy, telex or similar telecommunications equipment) against receipt to the party to whom it is to be given, (i) if to the Company, at its address, 2180 Executive Circle Colorado Springs, Colorado 80906 Attention: President, (ii) if to the Holder, at its address set forth on the first page hereof, or (iii) in either case, to such other address as the party shall have furnished in writing in accordance with the provisions of this Section 8(a). Notice to the estate of any party shall be sufficient if addressed to the party as provided in this Section 8(a). Any notice or other communication given by certified mail shall be deemed given at the time of certification thereof, except for a notice changing a party's address which shall be deemed given at the time of receipt thereof. Any notice given by other means permitted by this Section 8(a) shall be deemed given at the time of receipt thereof. (b) Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction, or mutilation of this Note (and upon surrender of this Note if mutilated), the Company shall execute and deliver to the Holder a new Note of like date, tenor, and denomination. (c) No course of dealing and no delay or omission on the part of the Holder in exercising any right or remedy shall operate as a waiver thereof or otherwise prejudice the Holder's rights, powers or remedies. No right, power, or remedy conferred by this Note upon the Holder shall be exclusive of any other right, power, or remedy referred to herein or now or hereafter available at law, in equity, by statute or otherwise, and all such remedies may be exercised singly or concurrently. - 6 - (d) This Note may be amended only by a written instrument executed by the Company and the Holder hereof. Any amendment shall be endorsed upon this Note, and all future Holders shall be bound thereby. (e) This Note has been negotiated and consummated in the State of New York and shall be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to principles governing conflicts of law. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] - 7 - IN WITNESS WHEREOF, the Company has caused this Note to be executed and dated the day and year first above written. MILITARY RESALE GROUP, INC. BY: ------------------------------- NAME: TITLE: - 8 - EX-99.1 4 c35227_ex99-1.txt EXHIBIT 99.1 MILITARY RESALE GROUP CHANGES MANAGEMENT, TERMINATES PREVIOUSLY ANNOUNCED TRANSACTIONS Colorado Springs, Colorado. January 24, 2005. Military Resale Group, Inc. (OTCBB: MYRG) today announced that it has entered into an agreement with Lee Brukman, its former Chief Executive Officer and a Director. The agreement, which is intended to settle certain outstanding issues between MYRG and Mr., Brukman, provides, among other things, that, effective January 11, 2005: o Mr. Brukman's association with MYGR, whether as an officer or director, has terminated; o the previously announced real estate-based transactions orchestrated by Mr. Brukman have been terminated and rescinded, as a result of which Mr. Brukman has returned the approximately 2,880,000 shares of common stock of MYRG held thereby to MYRG for cancellation; o the amounts owed by MYRG to Mr. Brukman have been settled at $120,000, payable over the period ending on July 8, 2005; and o MYRG and Mr. Brukman granted to one another general releases, subject to the carve-outs specified in such agreement. Ethan Hokit, the President of MYRG commented, "We are pleased to put these matters behind us. By entering into this agreement, we are providing certainty for MYRG, permitting it to concentrate its efforts on achieving its business objectives rather than on these ongoing disputes. Further, by providing a mutually agreeable schedule in accordance with which MYRG intends to satisfy its monetary obligations to Mr. Brukman, MYRG has the ability to attempt to better manage its working capital requirements and sources of capital to ensure timely payment. In the near term, MYRG intends to call a stockholders meeting in order to elect a new board of directors and handle other necessary business. I, as the sole remaining director of MYRG, have appointed Edward T. Whelan, MYRG's former Chairman and Chief Executive Officer, to return in such roles to provide interim leadership to MYRG pending such stockholders meeting." Mr. Whelan added, "It is a pleasure to return to MYRG. I look forward to assisting the company in achieving its business objectives." ABOUT MILITARY RESALE GROUP, INC. Military Resale Group, Inc. ("MYRG") is a regional distributor of grocery and household items specializing in distribution to the military market. MYRG distributes a wide variety of items, including fresh and frozen meat and poultry, seafood, frozen foods, canned and dry goods, beverages, dairy products, paper goods and cleaning and other supplies. MYRG's -8- operations are currently directed to servicing the commissary at each of six military installations located in Colorado, Wyoming, and South Dakota, including the Air Force Academy located in Colorado Springs, Colorado. We are approved by the Department of Defense to contract with military commissaries and exchanges. FORWARD-LOOKING STATEMENTS AND COMMENTS IN THIS PRESS RELEASE ARE MADE PURSUANT TO SAFE HARBOR PROVISIONS OF THE SECURITIES EXCHANGE ACT OF 1934. CERTAIN STATEMENTS, WHICH DESCRIBE MILITARY RESALE GROUP, INC.'S INTENTIONS, EXPECTATIONS OR PREDICTIONS, ARE FORWARD-LOOKING AND ARE SUBJECT TO IMPORTANT RISKS AND UNCERTAINTIES. THE RESULTS OR EVENTS PREDICTED IN THESE STATEMENTS MAY DIFFER MATERIALLY FROM ACTUAL RESULTS OR EVENTS. NUMEROUS FACTORS, KNOWN AND UNKNOWN TO MILITARY RESALE GROUP, INC., COULD CAUSE RESULTS OR EVENTS TO DIFFER FROM CURRENT EXPECTATIONS. -9- -----END PRIVACY-ENHANCED MESSAGE-----