Exhibit 10.3
 
[octuslogo.gif]                                          
Repower. Renew. Results.™
 
 
Orchid Island Capital, L.L.C.
Attn: Ronald Davis
3211 Ocean Drive
Vero Beach, Florida 32963
 
Dear Mr. Davis,
 
This letter is to confirm our understanding that the Term Sheet signed 3/29/11
and Promissory Note signed 3/30/11 between Octus Inc and Orchid Island Capital
(the ''Term Sheet Agreement" and "Promissory Note") are hereby modified as
follows:
 
Term Sheet:
 
1)  
The section titled "Bridge Loan" is hereby modified to reflect a fixed floor of
one cent for conversion thereby removing the requirement for Octus to initiate
$600,000 in new contracts within 90 days from the first tranche of financing.

 
2)  
The section titled "Commitment Fee" is hereby modified to read as follows:

 
Commitment Fee: The Company shall be required to issue to the Purchaser eighty
three thousand dollars ($83,000) worth of restricted common shares as a
Commitment Fee upon the signing of this Equity Line of Credit Agreement and
receipt by the Company of the first tranche of $32,000. The number of shares
will be determined based on the division of the dollar value of the Commitment
Fee by the Formula Price. The commitment fee shares shall have piggyback
registration rights.
 
It is agreed that all obligations under this section have been met in their
entirety.
 
Promissory Note:
 
1) 
 The Sections titled "1 Interest Payments" and "5(a) Conversion" will reflect a
conversion to be calculated by the greater of one cent ($0.01) per share or at
seventy percent (70%) of the average closing price of the Common Stock on the
OTC Bulletin Board.

 
All other terms and conditions of the Term Sheet Agreement and Promissory Note
will remain as stipulated.
 
Please acknowledge this below and return at your earliest convenience.
 
With best regards,
 
George M. Ecker
CFO, Octus Inc.
 
 
Acknowledged this 29th day of September, 2011
 
/s/ Ronald A. Davis               
Ronald A. Davis, Managing Member
Orchid Island LLC
 
 
 
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THIS CONVERTIBLE PROMISSORY NOTE AND THE SECURITIES ISSUABLE UPON THE CONVERSION
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER ANY
SECURITIES LAWS OF ANY STATE.  THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SUCH
ACT OR ANY SUCH LAW.
 
CONVERTIBLE PROMISSORY NOTE
(Due: March 31, 2013)
 

$32,000.00   March 30, 2011  
Davis, California

 
FOR VALUE RECEIVED, the undersigned, Octus, Inc., a Nevada corporation (the
“Company”) promises to pay to the order of Orchid Island Capital LLC, or
permitted assigns (hereinafter, with any subsequent holder, the “Holder”) the
principal sum of $32,000.00, with interest on the unpaid principal from the date
hereof at a rate of ten percent (10.0%) simple interest per annum.  Interest
shall be calculated on the basis of the actual number of days elapsed over a
365-day year, shall commence to accrue on the date hereof and shall continue on
the outstanding principal until paid in full.
 
1. Interest Payments.  Accrued unpaid interest shall be paid semi-annually, and
upon the Maturity Date, with the first payment due six months after the date on
which the Note is issued.  At the Company’s option, the Company may make any
interest payment either in cash or by delivery of a number of shares of the
Company’s Common Stock (“Common Stock”) with a value equal to the amount of
interest due and payable, calculated by the greater of two cents ($0.02) per
share or at seventy percent (70%) of the average closing price of the Common
Stock on the OTC Bulletin Board (or whatever exchange, market or quotation
system the Common Stock is then traded), for the ten (10) trading days ending
three days before the date that such payment is due.
 
2. Application of Payments.  All payments of principal and interest shall be in
lawful money of the United States of America, except as set forth below in
connection with conversion of this Note.  All payments on account of the
indebtedness evidenced by this Note shall be applied first to any and all costs,
expenses and other charges then owed the Holder by the Company, second, to
accrued and unpaid interest, and thereafter to the unpaid principal balance
hereof.   All payments so received after demand or acceleration shall be applied
in such manner as the Holder may determine in its sole and absolute discretion.
 
 
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3. Maturity Date. Unless this Note has been converted pursuant to the terms of
this Note or unless earlier accelerated by the terms of this Note, the principal
amount hereof, together with all unpaid accrued interest hereon and all other
fees, costs and charges, if any, shall be due and payable on the date which is
twenty-four (24) months from the original date of this Note (the “Maturity
Date”).  No payments of principal or interest are required hereunder until the
Maturity Date, except as otherwise provided herein.
 
4. Prepayment. Before the Maturity Date, the Company may prepay this Note, in
whole or in part, at any time without penalty, upon five (5) days advance notice
to the Holder.  If the Company delivers such a notice to the Holder, then the
Holder may elect, within such five-day period, to convert the Note into the
Underlying Securities based on the provisions of Section 5(b).
 
5. Conversion The principal amount of this Note and all unpaid interest accrued
on this Note (together, sometimes referred to as the “Note Balance”) may be
converted, as follows:
 
(a) Upon a Qualified Financing.  If the Company sells its equity securities in a
transaction after the date on which this Note is issued, for aggregate gross
proceeds to the Company (excluding cancellation of indebtedness under this Note
and any additional notes or existing convertible debt of the Company) of at
least One Million Dollars ($1,000,000) (a “Qualified Financing” and the
securities sold in such financing referred to as “Financing Securities”), then
all outstanding indebtedness under this Note shall automatically be converted
(regardless of whether the Note is surrendered to Company) into shares of the
Financing Securities at a conversion price per share equal to the greater of Two
Cents ($0.02) or Seventy Percent (70.0%) of the price per share paid for the
Financing Securities in the Qualified Financing (“Financing Securities
Price”).  At the closing of the Qualified Financing, the Holder shall become a
party to, and be entitled to the same rights under, all agreements to which all
other investors in the Qualified Financing become a party, and shall receive the
same benefits bestowed upon such other investors.
 
i. Notice.  In connection with automatic conversion of this Note, the Company
shall deliver notice to the Holder of any conversion to be effected hereunder,
specifying the applicable conversion price and the amount of principal and
interest of the Note to be converted.
 
ii. Execution of Investor Agreements.  As a condition precedent to the issuance
of Financing Securities to Holder upon such conversion, the Company may require
that Holder execute and deliver such agreements, instruments and other documents
as are executed and delivered by the other investors in connection with their
purchase of the Financing Securities.
 
(b) Conversion at the Option of the Holder.  At any time commencing ninety (90)
days after the date of issuance of this Note and before the Maturity Date or
earlier conversion of this Note, the Holder, at Holder’s option and upon five
(5) days prior written notice to the Company, may convert in whole or in part
the outstanding principal and accrued but unpaid interest of this Note (the
amount to be converted referred to as the “Note Amount”) into a number of shares
of Common Stock (sometimes referred to as the “Underlying Securities”)
determined by the greater of two cents ($0.02) per share or at seventy percent
(70%) of the average closing price of the Common Stock on the OTC Bulletin Board
(or whatever exchange, market or quotation system the Common Stock is then
traded), for the ten (10) trading days ending five (5) days before the
conversion date.
 
 
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6. Mechanics of Conversion.  As promptly as practicable after the conversion of
this Note, this Note shall be cancelled, and the Company will issue and deliver
to the Holder a certificate or certificates representing the full number of
securities issuable upon such conversion (and the issuance of such certificate
or certificates shall be made without charge to the Holder of the Note for any
issuance tax in respect thereof or other cost incurred by Company in connection
with such conversion and the related issuance of shares).
 
7. Merger, Sale of Assets, etc.  In the event that Company sells or otherwise
disposes of all or substantially all of its assets or is acquired by way of a
merger, consolidation, reorganization or other similar transaction or series of
transactions (but excluding any equity financing transaction by Company
involving issuance of its equity securities to investors primarily for purposes
of financing Company’s business) pursuant to which stockholders of Company prior
to such acquisition own less than fifty percent (50%) of the surviving or
resulting entity, then, the Note shall, immediately before the closing of any
such transaction, convert into Underlying Securities in the same manner as if
the Holder had elected to convert the Note into Underlying Securities upon the
closing of the transaction.
 
8. Default.  The Company will be in default if any of the following occurs (each
an “Event of Default”): (a) the Company fails to make payment of the principal
amount or an interest payment when due and fails to cure the default within ten
(10) days of the date of delivery of notice from Holder to the Company of the
default; (b) the Company fails in any material respect to comply with or to
perform when due any other material term, obligation, covenant, or condition
contained in this Note, and fails to cure the default within ten (10) days of
the date of delivery of notice from Holder to the Company of the default; (c)
any material breach of any warranty or any material inaccuracy of any
representation made by the Company in the Security Agreement, in each case which
breach or inaccuracy has a material adverse effect on the Company and which is
not cured within ten (10) days of the date of delivery of notice from Holder to
the Company of the breach or default; (d) the Company shall make an assignment
for the benefit of creditors, or apply for or consent to the appointment of a
receiver or trustee for it or for a substantial part of its property or
business; or such a receiver or trustee shall otherwise be appointed; and/or (e)
bankruptcy, insolvency, reorganization or liquidation proceedings or other
proceedings or relief under any bankruptcy law or any law for the relief of
debtors shall be instituted by or against the Company and shall not have been
dismissed within 60 days of filing.  Upon an Event of Default, Holder may
declare the entire unpaid principal and accrued interest amount immediately due
and payable, all without further demand, presentment or notice, or grace period,
all of which hereby are expressly waived. If Holder prevails in a lawsuit to
collect on this Note, the Company will pay Holder's costs and attorneys’ fees in
an amount the court finds to be reasonable. Further, the Company will accrue a
penalty fee of 1.5% per month on any payment that is in default as defined
herein.
 
 
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9. Miscellaneous
 
(a) Reservation of Shares.  The Company shall at all times reserve and keep
available out of its authorized but unissued shares sufficient shares to effect
the conversion of the Note.
 
(b) Successors and Assigns.  Subject to the restrictions on transfer set forth
in this Note, the rights and obligations of the Company and the Holder of this
Note shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties.
 
(c) Assignment.  This Note shall not be assignable by the Holder without prior
written consent of the Company.
 
(d) Waivers.  The terms of this Note shall be construed in accordance with the
laws of the State of California applicable to contracts entered into in
California by California residents and wholly to be performed within California.
 
(e) Amendment or Waiver.    Any term of this Note may be amended or waived with
the written consent of the Company and Holder.  Any amendment or waiver effected
in accordance with this Section shall be binding upon Holder at the time
outstanding, each future Holder of any Note and the Company.
 
(f) Notices. Any notice required or permitted under this Note shall be given in
writing and shall be deemed effectively given (i) at the time of personal
delivery, if delivery is in person; (ii) one (1) business day after deposit with
an express overnight courier for United States deliveries, or two (2) business
days after such deposit for deliveries outside of the United States, with proof
of delivery from the courier requested; (iii) three (3) business days after
deposit in the United States mail by certified mail (return receipt requested)
for United States deliveries when addressed to the party to be notified; or
(iv) one (1) business day after transmission by telecopier with confirmation of
successful transmission.  Notices shall be delivered (i) if to the Holder, to
the address and contact information for Holder set forth in the Company’s books
and records, and (ii) if to the Company, to 803 Second Street, Suite 303, Davis,
CA 95616, attention: Chief Executive Officer, or at such other address as any
party may designate by giving written notice to the other party.
 
(g) Severability.  In the event any one or more of the provisions contained in
this Note shall, for any reason, be held to be invalid, illegal, or
unenforceable in whole or in part or in any respect, or in the event any one or
more of the provisions of this Note operate or would prospectively operate to
invalidate this Note, such invalidity, illegality, or unenforceability shall not
affect any other provision of this Note.  In such instance, this Note shall be
construed as if such invalid, illegal, or unenforceable provision had never been
contained herein and the remaining provisions of this Note shall remain
operative and in full force and effect and in no way shall be affected,
prejudiced or disturbed thereby.
 
(h) Delays or Omissions.  No delay or omission on the part of the Holder in
exercising any right under this Note shall operate as a waiver of such right or
of any other right of the Holder, nor shall any delay, omission or waiver on any
one occasion be deemed a bar to or waiver of the same or any other right on any
future occasion. All rights and remedies existing hereunder are cumulative to,
and not exclusive of, any rights or remedies otherwise available.
 
 
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(i) Headings.  The headings in this Note are for convenience of reference only
and shall not define or limit any terms or provisions hereof.
 
(j) Entire Agreement. This Note constitutes the entire agreement between the
parties, and no party shall be liable or bound to any other party in any manner
by any warranties, representations, or covenants except as specifically set
forth herein or therein.
 
(k) Adjustment for Stock Splits, Stock Dividends, Recapitalizations, etc.  The
number of shares of stock issuable upon conversion of this Note shall be
proportionally adjusted to reflect any stock dividend, stock split, reverse
stock split, reclassification, recapitalization or other similar event affecting
the number of outstanding shares of common stock.
 

 
IN WITNESS WHEREOF, Company has caused this Convertible Promissory Note to be
signed in its name as of the date first above written.
 
Octus, Inc.

By:                                                                            
Name: Chris Soderquist
Title: Chief Executive Officer

Agreed and Accepted:

Orchid Island Capital LLC, HOLDER

By:Ronald A. Davis

Its: Managing Member
 
 
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