| **DATED** |   | **2008** |
|-----------|--------|----------|

**Coda      Octopus Group, Inc. (1)**

**-      and -**

**THE      ROYAL BANK OF SCOTLAND PLC (2)**

**SUBSCRIPTION      AGREEMENT**

**Stuart      Hodge Corporate Lawyers**

**3      Temple Row West**

**Birmingham**

**B2      5NY**

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| **THIS AGREEMENT is              made ** | **2008** |
|-----------------------------------------------|----------|

**BETWEEN:**

| **(1)** | **Coda                Octopus Group, Inc. Incorporated in the State of Delaware whose principal                place of business is at 164 West 25****th****Street, New York, New York 10001                (“COGI”)** |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **(2)** | **The                Royal Bank of Scotland plc, incorporated in Scotland, (registered                number                90312) acting through its London offices at 135 Bishopsgate, London                EC2M                3UR (“the Subscriber”)** |
|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**WHEREAS:      -**

| (A) | COGI                is a corporation incorporated in the State of Delaware. COGI proposes                to                issue USD 12,000,000 medium term loan notes (the “**Note**s”)                on the Completion Date. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (B) | The                Subscriber has agreed to subscribe for the Notes issued by COGI pursuant                to the Loan Note Instrument (as defined                below). |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (C) | Payment                of principal and interest in respect of the Notes will be irrevocably                guaranteed by the Guarantors (as defined below) on a joint and several                basis in accordance with the Deed of Guarantee and the Security Agreement                (both as defined below). |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**IT      IS HEREBY AGREED: -**

| 1. | **DEFINITIONS                AND INTERPRETATION** |
|----|---------------------------------------------------|

|   | 1.1. | Capitalised                terms used and not otherwise defined herein that are defined in any                of the                Transaction Documents shall, except where the context does not so                permit,                have the meanings given to such terms in the relevant Transaction                Documents.** **In                this Agreement the following words and expressions shall (except                where the                context otherwise requires) have the following                meanings: |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**“Affiliate”      **

**“Agreed      Form” **

**“Approved      Acquisitions” **

**“Board”      **

**“Business      Day”**

**“Certificate”      **

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**“Colmek”**

**“Common      Stock”**

**“Companies      Act” **

**“Completion”      **

**“Completion      Date”**

**“Conditions”**

**“Confidentiality      Agreement”**

**“Debentures”**
**“Debenture”**

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**“Deed      of Adherence”**

**“Deed      of Guarantee”**

**“Disclosed”**

**“Disclosure      Bundle”**

**“Disclosure      Letter”**

**“Event      of Default” **

**“Exchange      Act” **

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**“FGI”**

**“Floating      Charges”**
**“Floating      Charge”**

**“Group”      **
**“Holding      Company”**

**“Guarantor”**

**“Intercreditor      Deed” **

**“Legend”      **

**“Lien”**

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**“Loan      Note Instrument”**

**“Lock-up      Agreements”**

**“Noteholder”      **

**“Noteholder      Majority”**

**“Notes”**
**“Note”**

**“Outstanding”      **

|  | (a) | those                Notes which have been redeemed or converted;                and |
|--|-----|--------------------------------------------------------------------------------------|

|  | (b) | those                Notes in respect of which the Redemption Date in accordance with                the                relevant Conditions has occurred and the redemption monies (including                all                interest payable in respect of the redemption monies and any interest                payable under the relevant Conditions after such date) have been                duly paid                to the relevant Noteholders in the manner provided in the                Conditions; |
|--|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**“Person”**

**“Principal      Amount Outstanding“ **

**“Process      Agent”**

**“Redemption      Date” **

**“Register”**

**“Registrar”**

**“SEC”**

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**“Securities”**

**“Securities      Act”**

**“Security      Agreement”**

**“Subsidiary”      **
**“Subsidiaries”**

**“Term”      **

**“Transaction      Documents” **

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**“USD”      **

**“Warranties”**

**Laws**

|   | 1.2. | Unless                otherwise stated references to Clauses, subclauses and the Schedules                are                references to Clauses, subclauses and the Schedules to this Agreement.                The                Schedules form part of this                Agreement. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 1.3. | Clause                headings are for ease of reference only and do not affect the construction                or interpretation of this                Agreement. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 1.4. | References                to persons shall include bodies corporate, unincorporated associations                and                partnerships. |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 1.5. | References                to the parties hereto include their respective successors in title,                permitted assigns, estates and legal personal                representatives. |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 1.6. | Words                and expressions defined in or for the purposes of the Companies Act                and                the Taxes Act 1988 shall where the context permits bear the same                meanings                in this Agreement. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 1.7. | References                to writing shall include typewriting, printing, lithography, photography,                telex and fax messages, printed out versions of communications by                email                and other modes of reproducing words in a legible and non-transitory                form. |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| **2.** | **CONDITIONS                PRECEDENT** |
|--------|-----------------------------------------|

|   | 2.1. | Save                as provided in Clause 2.2, this Agreement is conditional upon each                of the                following matters (the “Conditions Precedent”) being fulfilled to the                satisfaction of the Subscriber: |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2.1.1. | all                Transaction Documents being executed and delivered by the parties                thereto; |
|--------|--------|--------------------------------------------------------------------------------------------------------------|

|   | 2.1.2. | legal                opinions, substantially in the form agreed between COGI and the                Subscriber; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------|

|   | 2.1.3. | a                scanned or faxed copy (with a duplicate original to follow within                7 days)                of the resolution of the board of directors of COGI authorising the                issuance of the Notes and the execution and delivery of the Transaction                Documents and confirming the authority of the signatories of the                Transaction Documents to bind COGI being                provided; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2.1.4. | scanned                or faxed copies (with duplicate originals to follow within 7 days)                of the                resolutions of the boards of directors of each Subsidiary which is                entering into any of the Transaction Documents authorising the execution                of the relevant Transaction Documents and confirming the authority                of the                signatories of such Transaction Documents to bind such subsidiary                being                provided; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2.2. | The                Subscriber may waive all or any of the Conditions Precedent (subject                to                such terms and conditions as it deems fit) by notice in writing to                COGI. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| **3.** | **COMPLETION                AND DEPOSIT** |
|--------|-------------------------------------------|

|   | 3.1. | Completion                shall take place on the Completion Date                when: |
|--------|------|----------------------------------------------------------------------------------------|

|   | 3.1.1. | COGI                shall deliver to the Subscriber such evidence as the Subscriber may                require to satisfy itself that the Conditions Precedent have been                fulfilled; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3.1.2. | subject                to compliance with clause 3.1.1 the Subscriber shall pay the subscription                monies as set out in Clause 3.2 for the Notes and COGI will procure                that a                meeting of the Board is held at which Certificates representing the                Notes                are issued and delivered to the Subscriber or as the Subscriber may                direct                (such delivery being conditional upon payment being made by the Subscriber                in accordance with Clause 3.2); |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3.1.3. | COGI                shall enter into all other documentation of or relating to the issue                of                the Notes, all as agreed with the                Subscriber; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3.1.4. | COGI                shall instruct the Registrar to enter full details of the Notes and                Noteholders in the Register as is required by the Loan Note                Instrument. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3.2. | The                total subscription monies due in respect of the Notes are USD 12,000,000                (subject to deduction of the costs and expenses referred to in Clause                6).                Subject to Clause 3.3, the Subscriber shall make payment to COGI                of the                sum of USD 10,598,907 being USD 12,000,000 of the subscription monies                in                respect of the Notes after deduction of USD 401,091.74 USD, being                the                agreed costs and expenses referred to in Clause 6 and deduction of                the                Retention Amount in accordance with Clause                3.3. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3.3. | The                balance of USD 1,000,000 of the subscription monies (the “Retention                Amount”) shall be immediately placed on deposit by the Subscriber in an                account held with and in the name of the Subscriber (such account                paying                interest at the Subscriber’s internal overnight funds rate), to be paid                over to COGI in accordance with the provisions of Clause 3.4. |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | 3.4. | The                Retention Amount (together with all interest accrued on the Retention                Amount) will be released to COGI immediately upon COGI having confirmed                in                writing to the Subscriber that it has (i) settled all indebtedness                to FGI                under the FGI Encumbrances (as defined in the Security Agreement)                in                accordance with Clause 4.1 of the Security Agreement and (ii) settled                all                indebtedness to FGI secured by the Permitted Encumbrance (as defined                in                the Debentures and Floating Charges) in accordance with paragraph                6.10 of                the Debentures and Clause 4.3 of the Floating                Charges. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3.5. | If                the Notes become due and payable following an Event of Default in                accordance with Condition 9.3 and the Retention Amount has not been                released to COGI in accordance with Clause 3.4 then all rights of                COGI to                receive payment of the Retention Amount in accordance with Clause                3.4                shall cease and the Subscriber shall apply, in its sole and absolute                discretion, the Retention Amount either towards satisfaction of the                Redemption Amount payable in respect of the Notes or towards any                other                liabilities of COGI, whether due to the Subscriber or any third                party. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4. | **WARRANTIES** |
|----|----------------|

|   | 4.1. | In                consideration of the Subscriber entering into this Agreement and                subscribing for the Notes COGI hereby warrants to the Subscriber,                in the                terms of Schedule 1. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4.2. | Each                of the Warranties shall be construed as a separate and independent                warranty and (save where expressly provided to the contrary) shall                not be                limited or restricted by reference to or inference from any other                term of                this Agreement or any other Warranty. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4.3. | The                rights and remedies of the Subscriber in respect of any breach of                any of                the Warranties shall continue to subsist notwithstanding Completion                or any                termination of this Agreement. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | 4.4. | COGI                shall have no liability under the Warranties unless notice in writing                (giving the amount and details of the claim) is given on behalf of                the                Subscriber of any claim on or before the date falling six months                after the                date of final redemption or conversion of all of the                Notes. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4.5. | Any                claims notified under clause 4.4 shall be deemed to have been waived                unless court proceedings in respect thereof have been issued and                served on                COGI within 6 months of such                notice. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4.6. | The                maximum aggregate liability of COGI under this Agreement shall not                exceed                an amount equal to the amount that would have been paid on redemption                of                the Notes in accordance with Condition 3.5.2 with the Subscriber’s costs                and expenses in addition. |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 4.7. | Any                payment made by COGI for a breach of the Warranties shall be treated                as a                partial redemption of the Notes on a $ for $                basis. |
|--|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 4.8. | The                Warranties shall be qualified by matters Disclosed in the Disclosure                Letter and the Disclosure Bundle. |
|--|------|------------------------------------------------------------------------------------------------------------------------------------------|

|  | 4.9. | COGI                undertakes to the Subscriber that if the Subscriber or its directors,                officers or employees (each a “Relevant Party”) incurs any liability,                damages, cost, loss or expense (including, without limitation, legal                fees,                costs and expenses) (a “Loss”) arising out of, in connection with or based                on any (actual or alleged (which subsequently proves to be actual))                breach                of, or any failure to perform, any of the Warranties given by COGI                in                accordance with this Clause 4, COGI shall, subject to Clause 4.6,                pay to                the Subscriber on demand an amount equal to such Loss. The Subscriber                shall not have any duty or obligation, whether as fiduciary for any                Relevant Person or otherwise, to recover any such payment or to account                to                any other person for any amounts paid to it under this Clause 4.9. |
|--|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| **5.** | **COVENANTS** |
|--------|---------------|

|  | 5.1 | COGI                undertakes to and covenants with the Subscriber in accordance with                the                provisions of Clause 4 of the Loan Note                Instrument. |
|--|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 5.2 | COGI                undertakes to and covenants with the Subscriber that it will procure                that                any New Subsidiary enters into a Deed of Adherence and (where relevant)                grants any security interest to the Subscriber within 30 days of                the New                Subsidiary becoming a Subsidiary. |
|--|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 5.3 | COGI                undertakes and covenants to pay to the                Subscriber: |
|--|-----|---------------------------------------------------------------------------------------|

|  | (A) | any                stamp, issue, registration, documentary or other taxes and duties,                including interest and penalties, payable on or in connection with                the                creation, issue and offering of the Notes or payable on the execution,                delivery or performance of the Transaction Documents to which it                is party                (but excluding, for the avoidance of doubt, any taxes levied on the                Noteholders in relation to the income from the Notes or any capital                gain                made on the Notes) or the enforcement of this Agreement against COGI                or                any transactions carried out pursuant to the Transaction Documents                to                which it is party, and |
|--|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (B) | in                addition to any amount payable by it under this Agreement, any value                added, turnover or similar tax payable in respect of that                amount. |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **6.** | **FEES                AND EXPENSES** |
|--------|--------------------------------------|

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| **7.** | **NO                PARTNERSHIP** |
|--------|-----------------------------------|

| **8.** | **SUBSCRIBER’S                UNDERTAKINGS, REPRESENTATIONS AND                WARRANTIES** |
|--------|---------------------------------------------------------------------------------------------------|

|  | 8.1 | confirms                and undertakes to COGI that it shall not market, offer to sell or                sell or                otherwise transfer any of the Securities within the United Kingdom                except                to those parties falling within the exempt communication provisions                of                Articles 19 and 49 of The Financial Services and Markets Act 2000                (Financial Promotion) Order 2005. |
|--|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 8.2 | confirms                and undertakes to COGI that it shall not market, offer to sell or                sell or                otherwise transfer any of the Securities within the United States                of                America or to any United States citizen or resident except under                any                applicable exemption to the registration requirements of the Securities                Act. |
|--|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 8.3 | confirms                and undertakes to COGI that it agrees that the Loan Note Instrument,                any                Certificates issued under the Loan Note Instrument and any certificates                for Common Stock issued as a result of any conversion of the Notes                shall                all be endorsed with a legend in the terms of the                Legend. |
|--|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|  | 8.4 | represents                and warrants to COGI that it understands that the Securities are                “restricted securities” for the purposes of United States securities laws                and regulations and have not been registered under the Securities                Act or                any applicable state securities law and that it is not acquiring                the                Securities with a view to or for distributing or reselling the Securities                or part thereof in violation of the Securities Act or any applicable                state                securities law, has no present intention of distributing any of such                Securities in violation of the Securities Act or any applicable state                securities law and has no direct or indirect arrangement or understandings                with any other persons to distribute or regarding the distribution                of such                Securities (this representation and warranty not limiting the Subscriber’s                right to sell the Securities in compliance with applicable federal                and                state securities laws) in violation of the Securities Act or any                applicable state securities law. The Subscriber is acquiring the                Securities hereunder in the ordinary course of its                business. |
|--|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 8.5 | represents                and warrants to COGI (1) that at the time it was offered the Securities,                it was, and at the date hereof it is, and on each date on which it                exercises any conversion right, it will be either: (i) an “accredited                investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8)                under the Securities Act or (ii) a “qualified institutional buyer” as                defined in Rule 144A(a) under the Securities Act and (2) that it                is not                required to be registered as a broker-dealer under Section 15 of                the                Exchange Act. |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 8.6 | represents                and warrants to COGI (1) that it, either alone or together with its                representatives, has such knowledge, sophistication and experience                in                business and financial matters so as to be capable of evaluating                the                merits and risks of the prospective investment in the Securities,                and has                so evaluated the merits and risks of such investment and (2) that                it is                able to bear the economic risk of an investment in the Securities                and, at                the present time, is able to afford a complete loss of such                investment. |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 8.7 | represents                and warrants to COGI that it is not purchasing the Securities as                a result                of any advertisement, article, notice or other communication regarding                the                Securities published in any newspaper, magazine or similar media                or                broadcast over television or radio or presented at any seminar or                any                other general solicitation or general                advertisement. |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| **9.** | **APPROVED                ACQUISITION LOAN** |
|--------|----------------------------------------------|

| **10.** | **SUCCESSORS                IN TITLE AND ASSIGNMENT** |
|---------|-------------------------------------------------------|

| **11.** | **ENTIRE                AGREEMENT** |
|---------|-------------------------------------|

|   | 11.1. | This                Agreement including the Schedules hereto and the documents in the                Agreed                Form constitute the entire agreement and understanding between the                parties                with respect to the subject matter of this Agreement and supersedes                and                extinguishes any representations and warranties previously given                or                made. |
|--------|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 11.2. | Each                party acknowledges to the other (to the intent that the other shall                execute this Agreement and any documents in the Agreed Form in reliance                upon such acknowledgement) that it has not been induced to enter                into this                Agreement and such other documents nor relied upon any representation                or                warranty other than the representations and/or warranties expressly                set                out in this Agreement or in any such                document. |
|--------|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | 11.3. | Each                party hereby irrevocably and unconditionally waives any right it                may have                to claim damages or to rescind this Agreement and such other documents                as                aforesaid by reason of any misinterpretation and/or warranty not                set out                in this Agreement or in any such document PROVIDED THAT nothing in                this                Clause shall operate to limit or exclude any liability for                fraud. |
|--------|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **12.** | **VARIATIONS** |
|---------|----------------|

| **13.** | **WAIVER** |
|---------|------------|

| **14.** | **AGREEMENT                CONTINUES IN FORCE** |
|---------|-------------------------------------------------|

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| **15.** | **NOTICES** |
|---------|-------------|

|   | 15.1. | Any                notice to be given pursuant to the terms of this Agreement must be                given                in writing to the party due to receive such notice at the addresses                detailed in Clause 15.2 and Clause 15.3 or such other addresses as                the                relevant party may have notified to the other party for the purposes                of                this clause. Notice must be delivered personally or sent by first                class                pre-paid recorded delivery or registered post (air mail if overseas)                or by                facsimile transmission and shall be deemed to be given in the case                of                delivery on delivery and in the case of posting (in the absence of                evidence of earlier receipt) within forty eight hours after posting                (6                days if sent by air mail) and in the case of facsimile transmission                on                completion of the transmission. |
|--------|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 15.2. | All                notices to be served upon COGI hereunder shall be sent to |
|--------|-------|------------------------------------------------------------------------------|

|   | 15.3. | All                notices to be served upon the Subscriber hereunder shall be sent                to it at                The Royal Bank of Scotland plc |
|--------|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

| **16.** | **COUNTERPARTS** |
|---------|------------------|

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| **17.** | **THIRD                PARTIES** |
|---------|----------------------------------|

| **18.** | **GOVERNING                LAW** |
|---------|----------------------------------|

|  | 18.1 | This                Agreement shall be governed by and construed in accordance with English                Law and the parties hereby submit for all purposes in connection                with this                Agreement to the non-exclusive jurisdiction of the English                courts. |
|--|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 18.2 | COGI                hereby appoints the Process Agent as its agent for the purposes of                receiving service of any process, proceedings or documents in connection                with proceedings raised in the English courts in accordance with                Clause                18.1. |
|--|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**IN      WITNESS**

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**SCHEDULE      1**

**The      Warranties**

| 1 | No                order has been made or petition presented or resolution passed for                the                winding up of COGI or any Group member and no distress, execution                or other                process has been levied on any of its or their                assets. |
|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2 | Neither                COGI nor any Group member has stopped payment on any debts and neither                COGI nor any Group member is insolvent or unable to pay its or their                debts                for the purpose of Section 123 of the Insolvency Act                1986. |
|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3 | No                administrative receiver, receiver and manager or the equivalent in                any                other applicable jurisdiction has been appointed to the business                or assets                or any part thereof of COGI or of any Group                member. |
|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4 | All                of the direct and indirect subsidiaries of COGI are set forth in                the                Disclosure Letter. Except as is set forth in the Disclosure Letter,                COGI                owns, directly or indirectly, all of the capital stock or other equity                interests of each Subsidiary free and clear of any Liens, and all                of the                issued and outstanding shares of capital stock of each Subsidiary                are                validly issued and are fully paid, non-assessable and free of pre-emptive                and similar rights to subscribe for or purchase                securities. |
|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 5 | COGI                and each of the Subsidiaries is an entity duly incorporated or otherwise                organised, validly existing and in good standing under the laws of                the                jurisdiction of its incorporation or organisation (as applicable),                with                the requisite power and authority to own and use its properties and                assets                and to carry on its business as currently conducted. Neither COGI                nor any                Subsidiary is in violation or default of any of the provisions of                its                respective certificate or articles of incorporation, bylaws or other                organisational or charter documents. Each of COGI and the Subsidiaries                is                duly qualified to conduct business and is in good standing as a foreign                corporation or other entity in each jurisdiction in which the nature                of                the business conducted or property owned by it makes such qualification                necessary, and no proceeding has been instituted in any such jurisdiction                revoking, limiting or curtailing or seeking to revoke, limit or curtail                such power and authority or                qualification. |
|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 6 | COGI                has the requisite corporate power and authority to enter into and                to                consummate the transactions contemplated by each of the Transaction                Documents and otherwise to carry out its obligations hereunder and                thereunder. The execution and delivery of each of the Transaction                Documents by COGI and the consummation by it of the transactions                contemplated hereby and thereby have been duly authorised by all                necessary                action on the part of COGI and no further action is required by COGI,                its                board of directors or its stockholders in connection therewith. Each                Transaction Document has been (or upon delivery will have been) duly                executed by COGI and, when delivered in accordance with the terms                hereof                and thereof, will constitute the valid and binding obligation of                COGI                enforceable against COGI in accordance with its terms except (i)                as                limited by general equitable principles and applicable bankruptcy,                insolvency, reorganisation, moratorium and other laws of general                application affecting enforcement of creditors’ rights generally, (ii) as                limited by laws relating to the availability of specific performance,                injunctive relief or other equitable remedies and (iii) insofar as                indemnification and contribution provisions may be limited by applicable                law. |
|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 7 | The                execution, delivery and performance of the Transaction Documents                by COGI,                the issuance and sale of the Notes and the consummation by COGI of                the                other transactions contemplated hereby and thereby do not and will                not (i)                conflict with or violate any provision of COGI’s or any Subsidiary’s                certificate or articles of incorporation, bylaws or other organisational                or charter documents, or (ii) conflict with, or constitute a default                (or                an event that with notice or lapse of time or both would become a                default)                under, result in the creation of any Lien upon any of the properties                or                assets of COGI or any Subsidiary, or give to others any rights of                termination, amendment, acceleration or cancellation (with or without                notice, lapse of time or both) of, any agreement, credit facility,                debt or                other instrument (evidencing a COGI or Subsidiary debt or otherwise)                or                other understanding to which COGI or any Subsidiary is a party or                by which                any property or asset of COGI or any Subsidiary is bound or affected,                or                (iii) conflict with or result in a violation of any law, rule, regulation,                order, judgment, injunction, decree or other restriction of any court                or                governmental authority to which COGI or a Subsidiary is subject (including                federal and state securities laws and regulations), or by which any                property or asset of COGI or a Subsidiary is bound or                affected. |
|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 8 | The                Notes are duly authorised and, when issued and paid for in accordance                with                the applicable Transaction Documents, will be duly and validly issued,                fully paid and non-assessable, free and clear of all Liens imposed                by COGI                other than restrictions on transfer provided for in the Transaction                Documents. COGI has reserved from its duly authorised capital stock                the                maximum number of shares of Common Stock issuable upon conversion                pursuant                to the Transaction Documents. |
|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 9 | The                capitalisation of COGI is as set forth in the Disclosure Letter which                also                includes the number of shares of Common Stock owned beneficially,                and of                record, by Affiliates of COGI as of the date hereof. COGI has not                issued                any capital stock since May 5, 2007, other than pursuant to the exercise                of employee stock options under COGI’s stock option plans, the issuance of                shares of Common Stock to employees pursuant to COGI’s employee stock                purchase plans and pursuant to the conversion or exercise of other                securities outstanding as of 1 January                2008. |
|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10 | The                issue of the Notes does not and will not constitute a breach of any                existing law or regulation or of COGI’s charter or by-laws or exceed any                limitation on the powers of COGI’s directors or breach the terms of any                contract, charge or restriction binding upon it and the Loan Note                Instrument and each Note constitutes (or will when executed constitute)                COGI’s valid and binding                obligations. |
|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 11 | As                of the Completion Date, no event has occurred which constitutes (or                with                the giving of notice or lapse of time or both would constitute) an                Event                of Default. |
|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 12 | Payments                under the Notes will be made by COGI without withholding or deducting                for                any taxes, duties or other charges of whatever nature of the jurisdiction                of incorporation of COGI or any political subdivision or authority                thereof                or therein having power to tax. |
|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 13 | Since                the date of the latest audited financial statements of COGI, (i)                there has                been no event, occurrence or development that has had or that could                reasonably be expected to result in an event which is materially                adverse                to the condition (financial or otherwise), prospects, results of                operations or general affairs of COGI or the Group (a “Material Adverse                Effect”), (ii) COGI has not incurred any liabilities (contingent or                otherwise) other than (A) trade payables and accrued expenses incurred                in                the ordinary course of business consistent with past practice and                (B)                liabilities not required to be reflected in COGI’s financial statements                pursuant to US GAAP, (iii) COGI has not altered its method of accounting,                (iv) COGI has not declared or made any dividend or distribution of                cash or                other property to its stockholders or purchased, redeemed or made                any                agreements to purchase or redeem any shares of its capital stock                and (v)                COGI has not issued any equity securities to any officer, director                or                Affiliate, except pursuant to existing COGI stock option                plans. |
|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 14 | There                is no action, suit, inquiry, notice of violation, proceeding or                investigation pending or, to the knowledge of COGI, threatened against                or                affecting COGI, any Subsidiary or any of their respective properties                before or by any court, arbitrator, governmental or administrative                agency                or regulatory authority (federal, state, county, local or foreign)                (collectively, an “Action”) which (i) adversely affects or challenges the                legality, validity or enforceability of any of the Transaction Documents                or the Securities or (ii) could, if there were an unfavourable decision,                have or reasonably be expected to result in a Material Adverse Effect.                Neither COGI nor any Subsidiary, nor any director or officer thereof,                is                or has been the subject of any Action involving a claim of violation                of or                liability under federal or state securities laws or a claim of breach                of                fiduciary duty. There has not been, and to the knowledge of COGI,                there is                not pending or contemplated, any investigation by the SEC involving                COGI                or any current or former director or officer of COGI. The SEC has                not                issued any stop order or other order suspending the effectiveness                of any                registration statement filed by COGI or any Subsidiary under the                Exchange                Act or the Securities Act. |
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| 15 | Neither                COGI nor any Subsidiary has engaged in, and each of them hereby covenants                not to engage in, any directed selling efforts, general solicitiation                or                general advertising in relation to the Securities. |
|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 16 | COGI                and the Subsidiaries have good and marketable title in fee simple                to all                real property owned by them and good and marketable title in all                personal                property owned by them that is material to the business of COGI and                the                Subsidiaries, in each case free and clear of all Liens, except for                Liens                as do not materially affect the value of such property and do not                materially interfere with the use made and proposed to be made of                such                property by COGI and the Subsidiaries and Liens for the payment of                federal, state or other taxes, the payment of which is neither delinquent                nor subject to penalties. Any real property and facilities held under                lease by COGI and the Subsidiaries are held by them under valid,                subsisting and enforceable leases with which COGI and the Subsidiaries                are                in compliance. |
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| 17 | COGI                and the Subsidiaries have, or have rights to use, all patents, patent                applications, trademarks, trademark applications, service marks,                trade                names, trade secrets, inventions, copyrights, licenses and other                intellectual property rights and similar rights necessary or material                for                use in connection with their respective businesses and which the                failure                to so have could have a Material Adverse Effect (collectively, the                “Intellectual Property Rights”). Neither COGI nor any Subsidiary has                received a notice (written or otherwise) that any of the Intellectual                Property Rights used by COGI or any Subsidiary violates or infringes                upon                the rights of any Person. To the knowledge of COGI, all such Intellectual                Property Rights are enforceable and there is no existing infringement                by                another Person of any of the Intellectual Property Rights. COGI and                its                Subsidiaries have taken reasonable security measures to protect the                secrecy, confidentiality and value of all of their intellectual                properties, except where failure to do so could not, individually                or in                the aggregate, reasonably be expected to have a Material Adverse                Effect. |
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**SCHEDULE      2**

**The      Legend**

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**IN      WITNESS**

|                                                       |   |   |
|------------------------------------------------------------|--------|--------|
| **EXECUTED                  AS A DEED AND DELIVERED by**   |   | **)**  |
| **Coda                  Octopus Group, Inc. acting by: -** |   | **)**  |

| Jason                  Lee Reid | **Director** |
|---------------------------------|--------------|
| Rodney                  Peacock | **Director** |

| **EXECUTED                  AS A DEED AND DELIVERED by** |   | **)**  |
|----------------------------------------------------------|--------|--------|
|                                                     |   |   |
| **THE                  ROYAL BANK OF SCOTLAND PLC**      |   | **)**  |

|   | **By:** |
|--------|---------|

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