PROMISSORY NOTE

 

 

US$50,000.00 (Principal Amount) June 20, 2012

 

FOR VALUE RECEIVED, the undersigned, Innolog Holdings Corporation (“IHC”) and
Innovative Logistics Techniques, Inc. (“Innolog”) (together the “Maker”),
jointly and severally promise to pay to the Kay M. Gumbinner Trust (the
“Holder”), at such place as the Holder may later designate in writing, in lawful
money of the United States, the principal sum of FIFTY THOUSAND US DOLLARS
($50,00.00) (“Principal Amount”) in accordance with this promissory note (the
“Note”) under the terms set forth herein. All of the obligations directly or
indirectly due to Holder hereunder and in connection with the transactions
contemplated hereby, including without limitation principal, interest, fees,
past due fees, settlement amounts, purchase prices, costs and expenses, and the
amounts owed to BDR Avanti Finance, LLC by Maker are collectively referred to as
the “Obligations.”

 

Maker represents, warrants and covenants that the net proceeds of this loan
shall be used solely to pay the payroll, including payroll taxes for the
employees of Maker which are currently due and payable.

 

1.Repayments & Special Terms

 

Principal and interest under this Note is due and payable on the earlier of (a)
1:00 PM EST on the business day following the receipt of the account receivable
described in Section 6 hereof and (b) 2:00 PM EDST Friday, July 5, 2012
(“Maturity Date”). Furthermore, this Note shall be repaid as a first priority
(other than to Atlas Advisors for repayment of its existing note) from any and
all amounts received by Maker from ANY accounts receivable received by any of
Maker subject only to normal operating expenses and regular current operating
accounts payables until this Note is repaid in full. No payments are to be made
to any other notes (other than to Atlas Advisors for repayment of its existing
note) or government agencies prior to the repayment of this Note.

 

Maker shall have the right to prepay at any time and from time to time, in
advance of maturity, all or part of the principal amount of this Note, along
with the interest and Fee and other amounts described hereunder. Each payment
shall be applied first to the principal balance due.

 

In addition, on or before the Maturity Date, Maker shall pay all amounts owed to
BDR Avanti Finance, LLC ($21,866 as of June 1, 2012). Such amounts owed shall be
secured by the security interest provided herein and are part of the Obligations
herein. Maker acknowledges and agrees that BDR Avanti Finance, LLC is a third
party beneficiary of this Note.

 

Maker represents and warrants that the statements in the email dated September
24, 2011 1:30AM from Robert Gumbinner as confirmed and agreed by Mr. Danielczyk
in an email dated September 24, 2011 10:52AM are true and accurate and the terms
of such email are incorporated herein by reference and made a part hereof as
representations, warranties and covenants with respect to this Note.

 

TIME IS OF THE ESSENCE on the repayment of this Note. There is no grace period
on the repayment and payment of the amounts due hereunder.

 

 

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2.Interest/Fee/Additional Compensation

 

(a) Maker shall pay to Payee a flat fee (“Fee”) of Five Thousand Dollars
($5,000), due and payable on the Maturity Date, which Fee shall be deemed earned
at the time of the initial funding of the loan.

 

(b) In addition, Maker shall issue to Payee or Payee’s designee 50,000 Warrants,
convertible into common stock of Innolog Holdings Corporation, a Nevada
corporation, at an exercise price of $0.01 per share for five years from the
date hereof, with such other terms that are substantially the same as other
similar warrants.

 

3.Late Fee and Default Interest

 

As noted above, time is of the essence on the repayment of this Note. If this
Note is not paid in full on or before the Maturity Date, there shall be a late
fee of ten percent (10%) or ($5,500). There shall accrue additional Late Fees of
10% of the outstanding amounts owed hereunder (principal, plus interest, plus
late fees) every ten (10) calendar days until repaid in full. In addition, after
the Maturity Date, this Note shall accrue interest from the Maturity Date at the
rate of eighteen percent (18%) per annum, compounded daily until paid in full
(“Default Interest”). Such Default Interest shall be on the outstanding
principal amount, the interest due under the Note and the Late Fee(s).

 

4.Events of Default

 

The following shall constitute Events of Default hereunder:

 

(a) If Maker or Guarantor defaults in the payment of any amount due on this Note
when due, including the payment of the settlement amount under the Forbearance
Agreement and the payment of amounts owed to BDR Avanti Finance, LLC (there is
no requirement for any notice and there is no right to cure any failure of
payment when due); and

 

(b) If Maker uses any accounts receivables or other moneys that come into the
company other than for payment of amounts due to governmental agencies (e.g.,
IRS, Department of Labor or other account related to 401k obligations due),
normal operating expenses and regular current accounts payables before all
amounts due under this Note are repaid in full;

 

(c) If Maker directly or indirectly redirects any of the Collateral or proceeds
of the Collateral without first paying all of the amounts due hereunder;

 

(d) If Maker or Guarantor shall (i) make a general assignment for the benefit of
creditors, or (ii) apply for or consent to the appointment of a receiver,
trustee or liquidator for itself or all or a substantial part of its assets, or
(iii) be adjudicated a bankrupt or insolvent, or (iv) file a voluntary petition
in bankruptcy or file a petition or an answer seeking reorganization or an
arrangement with creditors or seeking to take advantage of any other law
(whether Federal or state) relating to relief of debtors, or admit (by answer,
by default or otherwise) the material allegations of a petition filed against it
in any bankruptcy, reorganization, insolvency or other proceeding (whether
Federal or state) relating to relief of debtors, or (v) suffer or permit to
continue unstayed and in effect for sixty (60) consecutive days any judgment,
decree or order entered by a court of competent jurisdiction, that approves an
involuntary petition seeking reorganization of Maker, or appoints, pursuant to
such a petition, a receiver, trustee or liquidator for it or all or a
substantial part of its assets; and

 

(e) If any confession of judgment is filed or threatened to be filed against
IHC, Innolog or Guarantor;

 

 

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(f) If any lien or levy is imposed on IHC, Innolog or Guarantor; and

 

(g) If any representation or warranty of Maker is untrue or any covenant of
Maker is breached, including the September 24, 2011 email.

 

5.Remedies

 

(a) Upon the occurrence of an Event of Default, Holder may, in Holder's sole and
absolute discretion and without notice or demand to Maker or to Guarantor,
accelerate the due date of any amounts owed hereunder and declare the entire
amount of principal and interest thereon remaining outstanding hereunder
immediately due and payable, whereupon, the same shall forthwith become and be
due and payable without any presentment, demand or notice of any kind, all of
which are expressly waived by Maker and Guarantor.

 

(b) If an Event of Default shall occur, the Maker and Guarantor shall jointly
and severally immediately pay the Holder, on demand by the Holder, all costs and
expenses incurred by the Holder in connection with the collection and
enforcement of this Note, including attorneys' fees, accountants and tax
advisor’s fees and the amounts described above.

 

(c) Maker and Guarantor understand, acknowledge and agree, that upon an Event of
Default, Holder shall immediately file the confession of Judgments against each
of IHC, Innolog and Guarantor under this Note, the Guaranty, the Forbearance
Agreement and the Forbearance Guaranty.

 

(d) Holder may immediately file and send to the appropriate authorities the
Letter form Maker directing that all payments under the two Navy Contracts
listed below be sent directly to the account designated by Holder until such
time as Holder states in writing that all of the Obligations and all amounts
owed hereunder are paid in full.

 

6.Security

 

Maker hereby grants to Payee a security interest in the following accounts
receivable of Maker or Innolog as listed below:

 

1. N0017-08-C-20423 3018 ODCSLOG Contract Name: Navy; (June Billing Amount
submitted on or about June 4, 2012, for approximately $212,257), and if this
Note is not repaid in full with such proceeds any and all future billings
thereunder, referred to by Maker as the “Big Navy” A/R each, as may be more
fully described in an Attachment A if so attached, and the proceeds therefrom
from time to time (the “Collateral”).

 

Maker shall execute and immediately deliver (a) such documents and instruments
as Payee may request from time to time to secure, evidence and perfect Payee's
security interest and priority in the Collateral; and (b) such documents and
instruments as Payee may request from time to time to mandate that the US Navy
direct and make any and all future payments to the Holder at such account as
designated by Holder, until such time as this Note, all of the Obligations
hereunder, and all other payment obligations herein are paid in full; and (c)
such powers of attorney as may be requested by Holder in order for Holder to act
upon and receive direct payment of the Collateral from the US Navy or any
governmental agency related thereto.

 

 

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In addition, this Note and the Obligations, including the full and prompt
payment of and the performance of this Note and the commitments hereunder and a
backstop of any clawback, preference or alleged preference of the payments made
hereunder to Holder by any court, trustee or governmental body of any kind are
directly, unconditionally and irrevocably guaranteed by Dr. Ian Reynolds, an
individual (“Guarantor”) pursuant to a Guaranty and Indemnity Agreement with
Guarantor of even date herewith (the “Guaranty”). In addition to the Guaranty,
all of the Obligations are secured by the accounts receivable of Maker;
provided, however that the holder may not file any instruments perfecting such
security interest until after the Maturity Date. Upon request by the Holder,
Maker shall immediately execute and deliver such security interests, UCC-I and
other filing statements or other documents or interests requested by Holder in
order to perfect the above-referenced security interests.

 

7.Priority of Repayment.

 

This Note shall be repaid by Maker prior to the repayment of any other debt of
Maker other than normal operating expenses and the repayment of the existing
outstanding loan to Atlas Advisors.

 

8.Miscellaneous

 

(a) This Note shall be deemed to be made and entered into under the laws of the
Commonwealth of Virginia and for all purposes shall be construed and enforced in
accordance with the laws of the Commonwealth of Virginia, without giving effect
to any of the conflicts of law principles which would result in the application
of the substantive law of another jurisdiction. Maker and Guarantor (i) hereby
irrevocably submit to the exclusive jurisdiction of the United States District
Court sitting in the Northern District of Virginia and the courts of the
Commonwealth of Virginia located in Fairfax County for the purposes of any suit,
action or proceeding arising out of or relating to this Note and (ii) hereby
waive, and agree not to assert in any such suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of such court, that the
suit, action or proceeding is brought in an inconvenient forum or that the venue
of the suit, action or proceeding is improper.

 

(b) This Note shall be binding upon Maker and Maker's successors and assigns and
shall inure to the benefit of Holder and Holder's successors and assigns; and
each reference herein to Maker or to Holder shall, except where the context
shall otherwise require, be deemed to include its respective successors and
assigns. This Note shall be binding upon Guarantor and Guarantor's heirs,
successors and assigns and shall inure to the benefit of Holder and Holder's
successors and assigns; and each reference herein to Guarantor, except where the
context shall otherwise require, be deemed to include its heirs, successors and
assigns. Notwithstanding the foregoing, neither Maker nor Guarantor shall have
any right to assign his obligations hereunder without Holder's prior written
consent.

 

(c) Any failure by Holder to exercise any right or remedy hereunder shall not
constitute a waiver of the right to exercise the same or any other right or
remedy at any subsequent time, and no single or partial exercise of any right or
remedy shall preclude other or further exercise of the same or any other right
or remedy.

 

(d) Maker and Guarantor, and all others that may become liable for all or any
part of the obligations evidenced by this Note, hereby waive presentment,
demand, notice of nonpayment, protest and all other demands’ and notices in
connection with the delivery, acceptance, performance and enforcement of this
Note, and do hereby consent to any number of renewals of extensions of the time
or payment hereof and agree that any such renewals or extensions may be made
without notice to any such persons and without affecting their liability herein
and do further consent to the release of any person liable hereon, all without
affecting the liability of the other persons, firms or Maker or Guarantor liable
for the payment of this Note, AND DO HEREBY WAIVE TRIAL BY JURY.

 

 

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(i) No delay or omission on the part of the Holder in exercising its rights
under this Note, or course of conduct relating hereto, shall operate as a waiver
of such rights or any other right of the Holder, nor shall any waiver by the
Holder of any such right or rights on any one occasion be deemed a waiver of the
same right or rights on any future occasion.

 

(ii) THE MAKER AND GUARANTOR ACKNOWLEDGE THAT THE TRANSACTION OF WHICH THIS NOTE
IS A PART IS A COMMERCIAL TRANSACTION, AND TO THE EXTENT ALLOWED BY APPLICABLE
LAW, HEREBY WAIVE ITS RESPECIVE RIGHT TO NOTICE AND HEARING WITH RESPECT TO ANY
PREJUDGMENT REMEDY WHICH THE HOLDER OR ITS SUCCESSORS OR ASSIGNS MAY DESIRE TO
USE.

 

(e) The remedies provided in this Note shall be cumulative and in addition to
all other remedies available under this Note, at law or in equity (including,
without limitation, a decree of specific performance and/or other injunctive
relief), no remedy contained herein shall be deemed a waiver of compliance with
the provisions giving rise to such remedy and nothing herein shall limit a
Holder’s right to pursue actual damages for any failure by the Maker or
Guarantor to comply with the terms of this Note. Amounts set forth or provided
for herein with respect to payments, the warrants and the like (and the
computation thereof) shall be the amounts to be received by the Holder thereof
and shall not, except as expressly provided herein, be subject to any other
obligation of the Maker or Guarantor (or the performance thereof). The Maker and
the Guarantor acknowl-edge that a breach by it of its obligations hereunder will
cause irreparable and material harm to the Holder and that the remedy at law for
any such breach may be inadequate. Therefore the Maker and Guarantor each agree
that, in the event of any such breach or threatened breach, the Holder shall be
entitled, in addition to all other available rights and remedies, at law or in
equity, to seek and obtain such equitable relief, including but not limited to
an injunction restraining any such breach or threatened breach, without the
necessity of showing economic loss and without any bond or other security being
required.

 

(f) Maker and Guarantor shall pay all costs and expenses associated with this
Note, the loan and the transactions contemplated hereby and hereunder.

 

(g) Maker and Guarantor agree to pay immediately upon request and without any
need of any approvals or determinations of any kind all costs and expenses of
enforcement of this Note, including, without limitation, attorneys’ fees and
expenses.

 

(h) Maker and Guarantor shall immediately execute and deliver such other
documents, agreements and instruments as requested by Holder to carry out the
intent of this Note and related documents and to protect Holder’s interests in
any collateral or otherwise.

 

(i) None of the terms and provisions hereof may be waived, altered, modified, or
amended except by an agreement in writing signed by Maker and Holder.

 

 

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(j) Maker acknowledges the position of Fred Gumbinner as a trustee and
beneficiary of Holder and as the son of Robert Gumbinner, the primary trustee
and beneficiary of Maker, as a Manager and beneficiary of BDR Avanti Finance,
LLC and as a consultant and legal counsel for Maker. Maker also acknowledges
that Maker has repeatedly requested the assistance and involvement of Fred
Gumbinner in procuring loans from Holder and in negotiating and drafting
promissory notes, forbearance agreements and other documents related thereto.
Maker specifically now and forever with full and complete knowledge, corporate
authority and consent, waives any conflict of interest by or potential conflict
of interest of Fred Gumbinner and hereby indemnifies and holds him harmless
against any losses, claims or other actions of any kind.

 

(j) Maker and Guarantor understand, acknowledge and agree that the occurrence of
an Event of Default hereunder shall cause acceleration of not only this Note and
the Obligations hereunder, but also acceleration of the Forbearance Agreement
and additional late fees and obligations thereunder.

 

CONFESSED JUDGMENT

 

THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH CONSTITUTES A
WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR OR GUARANTOR AND ALLOWS THE
HOLDER TO OBTAIN A JUDGMENT AGAINST YOU WITHOUT ANY FURTHER NOTICE.

 

Maker, Innolog Holdings Corporation and Innovative Logistics Techniques, Inc.,
and Guarantor, jointly and severally (all three collectively hereinafter
referred to as “Debtor”), promise to pay to the order of Holder the sum of ONE
HUNDRED THOUSAND DOLLARS AND ZERO CENTS ($100,000.00), plus any additional Late
Fee(s), plus interest at 18% per annum, compounded daily, from the Maturity Date
until paid, including and after the recording of this confession of judgment,
plus all costs of collection, including all attorneys’ fees, and accounting fees
less credit for any payments made.

 

Debtor hereby appoints the following persons, or any one of them, as the
undersigned’s attorney-in-fact for the purpose of confessing judgment in favor
of KAY M. GUMBINNER TRUST and Robert Gumbinner and Fred Gumbinner, trustees
under a trust agreement dated January 9, 2008 (known as the Kay M. Gumbinner
Trust), to wit:

 

Richard A. Golden, of 10627 Jones Street, #101B, Fairfax, Virginia 22030

Randall Borden, of 10627 Jones Street, #201A, Fairfax, Virginia 22030.

 

The undersigned’s said attorneys in fact are explicitly authorized, whether a
suit, motion or action be pending for the indebtedness or not, to confess
judgment in favor of the KAY M. GUMBINNER TRUST and Robert Gumbinner and Fred
Gumbinner, trustees under a trust agreement dated January 9, 2008 (known as the
Kay M. Gumbinner Trust), in the amount of $100,000.00, plus all costs and
expenses of collection (including attorneys’ fees), plus additional late fees,
plus interest from the date of judgment so confessed at the rate of 18% per
annum, compounded monthly, or such lesser amount of principal plus interest as
the creditor may be willing to accept.

 

 

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Such confession of judgment may be made in the clerk’s office of the circuit
court in the Commonwealth of Virginia, located at Fairfax, Virginia.

 

Furthermore, Maker and Guarantor, jointly and severally acknowledge the Holders
right to pursue the guarantee, the Collateral, the security and the accounts
receivable securing this debt and the Confessed Judgment. Debtor hereby
expressly waives the benefit of any homestead exemption as to this debt and
waives demand, protest, notice of presentment, notice of protest, and notice of
non-payment and dishonor of this note. Debtor agrees this confessed judgment
note is provided not in payment of, but as additional security for and evidence
of obligations due to the Holder under the Note.

 

 

 

 

[Signature Page on Following Page]

 

 

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IN WITNESS WHEREOF, the undersigned, intending to be legally bound, each
represent and warrant that he is duly authorized and empowered to enter into
this agreement and Maker has caused this Note to be executed as of the day and
year first above written by its duly authorized and empowered officer(s) or
representative(s).

 

 

    MAKER           Innolog Holdings Corporation                 By:         
William P. Danielczyk
Executive Chairman, Chairman & Authorized Representative                    
Innovative Logistics Techniques, Inc.                     By:         Eric
Wagner       Officer & Authorized Representative                 WITNESSED      
                                Name:                       THIS NOTE IS
ENDORSED BY GUARANTOR AS IF GUARANTOR WAS THE MAKER HEROF                      
        Dr. Ian Reynolds      

 

 

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