PROMISSORY NOTE


 


	Up TO US$100,000.00  (Principal Amount)	November 21, 2012


 


FOR VALUE RECEIVED, the undersigned, Innolog
Holdings Corporation (“IHC”) and Innovative Logistics Techniques, Inc. (“Innolog”) (together the “Maker”),
and Ian Reynolds as Guarantor (“Guarantor”), each 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 up to ONE HUNDRED THOUSAND US DOLLARS ($100,000.00) (“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, are collectively referred to as the “Obligations.”


 


Maker represents, warrants and covenants
that the net proceeds of this loan shall be used solely and exclusively 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 and
for any draw hereunder is due and payable on the earlier of (a) 1:00 PM EST on the business day following the receipt of any account
receivables or milestone payment received or to be received by Maker in connection with contracts described in Section 6 hereof
and (b) with respect to any draw hereunder 3:00 pm EST December 11, 2012 (“Maturity Date”). Furthermore, this Note
shall be repaid as a first priority from any and all amounts received by Maker from ANY accounts receivable or milestone payments
received by Maker 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.


 


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.


 


		2.	Additional Draws



 


Additional draws (“Draws”) under
this Note may be made while it is outstanding as long as each of the following conditions are met and satisfied:


 


		a.	There is no default hereunder.



 


		b.	Maker shall pay any outstanding interest.



 


		c.	Any amounts to paid under the Stock Purchase Agreement in connection with previous advances or draws hereunder are paid in
full.



 


		d.	The stock required to be issued or transferred hereunder and any stock or warrants required to awarded to Holder shall have
been delivered to Holder.



 




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		e.	Each of the representations and warranties are true and accurate in all respects as of the date of the Draw.



 


		f.	Holder agrees in his discretion to allow such Draw.



 


Interest/Fee/Additional Compensation


 


(a)  Maker shall pay to Holder interest at
the rate of 2 1⁄2% per annum, due and payable on the Maturity Date.


 


(b)  In addition, Maker shall reimburse Holder
for expenses incurred in connection with this Note and prior notes.


 


(c)  In addition, in connection with this
transaction, Guarantor, shall purchase shares of equity securities (“Shares”) from Holder or any of its affiliated
or related parties for a total purchase price of ten percent (10%) of the principal amount hereunder (the “Purchase Price”)
in accordance with the term of a stock purchase agreement between Guarantor and Holder of even date herewith (“Stock Purchase
Agreement”).


 


		3.	Late Fee and Default Interest



 


As noted above, time is of the essence
on the repayment of this Note. If this Note or any draw hereunder is not paid in full on or before the Maturity Date, there
shall be a late fee of ten percent (10%) of the then outstanding principal amount, interest, fee hereunder. There
shall accrue additional Late Fees of ten percent (10%) of the total outstanding amounts owed hereunder (principal, plus interest,
plus late fees) every ten (10) calendar days until repaid in full. In addition to the Late Fee(s), 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
or accrued hereunder and the Late Fee(s).


 


		4.	Additional Representations, Warranties and Understandings



 


The Board of Directors of Maker and of IHC
and Dr. Harry Jacobson are aware of and have affirmatively approved this Note. They recognize and agree that:


 


i.
     The timely repayment of this Loan will be made come hell or high water as a first priority for the
Company.


 


ii.
    The proceeds of the Collateral will immediately be used to repay the Note, plus the Interest/Fees under
this Note.


 


iii.
   If there is a default under this Note, recovery under the Dr. Reynolds guaranty including the filing of the Confession
of Judgment and pursuit of all of the Accounts Receivable of the Company will be initiated immediately.


 


   iv.
    If there is a default under this Note, any other amounts owed by Maker or its affiliates to Holder or any
of its affiliates shall be immediately due and payable.


 




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v.      It is further
affirmed and acknowledged that: if confessions of judgments are filed and recovery actions taken such actions shall be deemed to
be the affirmative action and decision of the Board and the officers of the Company - i.e, it is not the decision of the Holder,
any of its trustees or its attorney.  It is the conscious decision of the Board and the Officers.


 


vi.     Innolog and IHC each, jointly and
severally hereby guarantee the full and complete performance of the Stock Purchase Agreement and the payments thereunder.


 


vii.Maker has the ability to perform
its obligations hereunder and it is not aware of any situation that exists that could prevent its ability to satisfy its obligations
hereunder.


 


		5.	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 (there is no requirement for any notice and there is no right to cure any
failure of payment when due); and


 


(b)          If Maker or Guarantor defaults in
the payment or any other obligation or agreement owed or due to Holder hereunder or under any other agreement between Maker or
Guarantor and Holder, including any assignments.


 


(c)          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, other governmental
agencies, Department of Labor or other account related to 401k obligations due), normal operating expenses before all amounts due
under this Note are repaid in full; and


 


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


 


(e)           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


 


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


 


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


 


(h)          Any default under the Stock Purchase
Agreement.


 




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(i)          If any representation or warranty
of Maker is untrue or any covenant of Maker is breached.


 


6. 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, and any other note or guaranty to Holder.


 


(d)          Holder may immediately file and send
to the appropriate authorities the Letter from Maker and any other documents or instruments 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. Maker shall immediately (within 2 business days) execute
and deliver to Holder such letters and documents requested by Holder to effectuate the above.


 


		7.	Security



 


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


 


1.            N00173-11-F-0438 NRL-EWS Contract Name: Navy; (November
and December Billings, each amount approximately $70,000), and if this Note is not repaid in full with such proceeds any and all
future billings thereunder, referred to by Maker as the “Little Navy” A/R, and


 


2.            N00173-08-C-20423 3018 ODCSLOG Contract Name: Navy; (November
and December Billing Amounts, each for approximately $200,000), 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, and


 


3. DFAS-IN/BVD/IN, Prime # W91WAW-09-C-0173 Contract Name: ODCSLOG;
Account Number 5030-116 referred to by Maker as the “Army Receivable” (each approximately $110K+ November and December
billings) or any bridge arrangement in connection therewith; and


 


4.            Any “milestone” payments in connection with
any of the above-referenced contracts.


 


each, as may be more fully described in an Attachment A if any,
and the proceeds therefrom from time to time (the “Collateral”). If for any reason such Collateral is compromised or
becomes unavailable to Holder, then future accounts receivable under such above-referenced contracts shall immediately and automatically
be assigned to Holder and such additional accounts receivable shall be deemed part of the Collateral.


 




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Maker shall execute and immediately deliver
(a) such documents and instruments as Holder may request from time to time to secure, evidence and perfect Holder's security interest
and priority in the Collateral; and (b) such documents and instruments as Holder 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.


 


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 and the direct payment of existing or future accounts receivables to Holder.


 


		8.	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.


 


		9.	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.


 




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(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.


 


(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.


 




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(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
upon request 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 and perfect 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.


 


(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, 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 acknowledges that Fred Gumbinner’s role, business representation and
legal representation in this transaction is for and on behalf of Holder and 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 ANY OTHER OBLIGATIONS OWED TO HOLDER; AND THAT THERE
ARE SIGNIFICANT LATE FEES HEREUNDER.


 


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 TWENTY-FIVE THOUSAND DOLLARS AND ZERO
CENTS ($125,000.00), plus any additional Late Fee(s), plus interest on the entire outstanding Obligations 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:


 




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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 $125,000.00, 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 daily, or such lesser amount of principal plus interest as the creditor may be willing to accept.


 


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:	 
	 	 	Richard Stewart
	 	 	President
	 	 	& Authorized Representative


 


	 	 
	WITNESSED	 
	 	 
	 	 


 


	Name:	 	 


 


	THIS NOTE IS ENDORSED BY GUARANTOR AS IF
	GUARANTOR WAS THE MAKER HEROF


 


	 	 
	Dr. Ian Reynolds	 




 




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