**DATED**

**2008**

|   | CODA                OCTOPUS (UK) HOLDINGS LIMITED | (1)    |
|--------|---------------------------------------------------|--------|
|   | And                                               |   |
|   | THE                ROYAL BANK OF SCOTLAND PLC     | (2)    |

**____________________________________**

**DEBENTURE**

**____________________________________**

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| **DATE OF DEBENTURE** |  **2008** |
|-----------------------|----------------|

**BETWEEN:-**

| (1) | CODA                    OCTOPUS (UK) HOLDINGS LIMITED (Company Number 5834897) whose                    registered                    office is at 14 Albany Road, Granby Industrial Estate, Weymouth,                    Dorset                    DT4 9TH (the “**Company**”);                    and |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |
|--------|--------|
| (2) | THE                ROYAL BANK OF SCOTLAND PLC (Registered Number 90312) acting through                its                London offices located at 135 Bishopsgate, London EC2M 3UR (the                “**Subscriber**”); |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**IT      IS AGREED THAT:**

| **1.** | **DEFINITIONS** |
|--------|-----------------|

| 1.1 | Unless                the context otherwise requires the following expressions shall have                the                following meanings wherever used in this agreement and its                introduction: |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **"Act"**                                                  | means                the Insolvency Act 1986.                                                                                                                                                                                                     |
|--------|------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                       |                                                                                                                                                                                                                                              |
|   | **“Agreed                Form”**               | in                relation to any document means the form agreed and for the purposes                of                identification only initialled by or on behalf of COGI and the                Subscriber.                                  |
|   |                                                       |                                                                                                                                                                                                                                              |
|   | **“Business                Day”**              | means                a day (excluding Saturdays, Sundays and any public holiday) on which                banks                are open for business in London for the transaction of normal banking                business.                      |
|   |                                                       |                                                                                                                                                                                                                                              |
|   | **“Charged                Property”**          | means                all of the undertaking, assets, rights, revenues and property (present                and                future) of the Company charged to the Subscriber under paragraph                4 of this                Debenture. |
|   |                                                       |                                                                                                                                                                                                                                              |
|   | **“COGI”**                                     | Coda                Octopus Group, Inc. incorporated in the State of Delaware, whose                principal                place of business is at 164 West 25th                Street, New York, New York 10001.                               |
|   |                                                       |                                                                                                                                                                                                                                              |
|   | **“Completion”**                               | means                the carrying out by the parties of their obligations under Clauses                3.1 to                3.3 of the Subscription Agreement.                                                                                   |
|   |                                                       |                                                                                                                                                                                                                                              |
|   | **“Completion                Date”**           | means                the date hereof.                                                                                                                                                                                                             |
|   |                                                       |                                                                                                                                                                                                                                              |
|   | **“Confidentiality                Agreement”** | means                the agreement dated on or around the Completion Date between COGI                and the                Subscriber whereby the Subscriber agrees, inter alia, to keep certain                information confidential.       |

----

|   |                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--------|--------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | **“Debts”**                                | means                all present and future book and other debts and any other monies                of any                nature whatsoever due to the Company (and whether or not yet due                and                payable) now or at any time during the continuance of the security                interest created under this Debenture.                                                                                                                                                                                                                                                                                                                                                             |
|   |                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | **“Deed                of Guarantee”**     | means                a deed in the Agreed Form to be entered into at Completion whereby                those                Subsidiaries which are registered in the United Kingdom agree to                guarantee                the obligations of COGI under the Transaction Documents                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | **“Equipment**                                   | means                all plant, machinery, jigs, moulds, fixtures, fittings (not being                landlord’s fixtures) furniture, equipment and tools now or at any time                during the continuance of this security belonging to the                Company.                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | **“Floating                Charges”**      | means                the two floating charges to be granted on the date hereof in favour                of the                Subscriber, one floating charge to be granted by Coda Octopus Products                Ltd                and the other by Coda Octopus R & D Ltd and “Floating Charge” shall                mean whichever of the Floating Charges as the context                admits                                                                                                                                                                                                                                                                                              |
|   |                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | **“Goodwill”**                             | means                the goodwill of the Company’s business as carried on by the Company after                the date of this Debenture;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | **“Intellectual                Property”** | means                all customer information, patterns, drawings, product names, intellectual                property and design rights including (without limitation) trade marks                or                trade names (whether registered or not), all patents, patent applications,                registered designs, copyright, letters patent, service marks, business                names, inventions, trade secrets, confidential information and know-how                (together with the benefit but subject to the burden of any licences                consents or permissions relating to them) of or used by the Company                in the                Company’s business. |
|   |                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | **“Intercreditor                Deed”**    | means                a deed entered into on or around the Completion Date among COGI,                the                Subscriber and FGI regulating the priorities of the various charges                and                security interests held by the Subscriber and FGI.                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | **“Loan                Note Instrument”**  | means                the loan note instrument executed by COGI on the Completion Date                pursuant                to which the Notes are constituted.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

----

|   |                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|--------|---------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | **“Lock-up                Agreements”**     | means                certain agreements entered into on or around the date hereof between                the                directors and board members of COGI and the Subscriber undertaking                (with                certain exceptions) not to sell or transfer or otherwise dispose                of any of                their shares in COGI.                                                                                                                                     |
|   |                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | **“Noteholder”**                            | means                the person for the time being entered in the Register as a holder                of any                part of the Notes.                                                                                                                                                                                                                                                                                                                                                        |
|   |                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | **“Notes”**                                 | means                USD 12,000,000 Convertible Loan Notes due 21 February 2015 constituted                by                the Loan Note Instrument, or, as the case may be the Principal Amount                Outstanding (as defined in the Loan Note Instrument) represented                by them,                and each “Note” shall be for a nominal amount of USD 100,000.                                                                                                   |
|   |                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | **“Permitted                Encumbrance”**  | A                debenture dated 30 October 2006 and registered on 7 November 2006                granted                by the Company in favour of Faunus Group International, Inc (**“FGI”**)                a                Delaware corporation whose principal place of business is 80 Pine                Street,                32nd                Floor, New York, New York 10005.                                                                                             |
|   |                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | **“Securities”**                            | means                all stocks, shares, debentures, debenture stock, loan stock, bonds                and                securities issued by any company or person (other than the Company)                and                all other investments (as listed in Part II of Schedule 2 to the                Financial                Services and Markets Act 2000).                                                                                                                              |
|   |                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | **“Security                Agreement”**     | means                an agreement in the Agreed Form to be entered into at Completion                whereby                COGI and those of its Subsidiaries incorporated in the United States                of                America grant a continuing and first security interest in and over                the                assets of COGI and those of its Subsidiaries incorporated in the                United                States of America                                        |
|   |                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | **"Stock"**                                             | means                all stock in trade and raw materials now or at any time during the                continuance of this security belonging to the Company.                                                                                                                                                                                                                                                                                                                                         |
|   |                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | **“Subscription                Agreement”** | means                the subscription agreement dated the Completion Date between the                Subscriber and COGI.                                                                                                                                                                                                                                                                                                                                                                             |
|   |                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | **“Transaction                Documents”**  | means                the Subscription Agreement, the Loan Note Instrument, the Deed of                Guarantee, this Debenture and the debenture to be granted on the                Completion Date by Martech Systems (Weymouth) Ltd, the Floating Charges,                the Lock-up Agreements, the Security Agreement, the Confidentiality                Agreement, the Intercreditor Deed and all other documents entered                into in                connection with any of them. |

----

|   |                                  |                                                                                                                                                                                                                                        |
|--------|---------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | **"VAT"**                             | means                Value Added Tax.                                                                                                                                                                                                       |
|   |                                  |                                                                                                                                                                                                                                        |
|   | **"Vehicles"**                        | means                all vehicles now or at any time during the continuance of this security                owned by the Company.                                                                                                           |
|   |                                  |                                                                                                                                                                                                                                        |
|   | **"Work                in Progress"** | means                all partly completed goods or services allocated by the Company from                time                to time to its contracts with its customers for the supply of goods                or                services. |
|   |                                  |                                                                                                                                                                                                                                        |
|   | **"1925                Act"**         | means                the Law of Property Act 1925                                                                                                                                                                                           |

| 1.2 | In                interpreting this agreement: |
|-----|------------------------------------------------|

|   | 1.2.1 | references                to clauses and schedules are, unless otherwise stated, references                to                clauses, sub-clauses and schedules in or annexed to this                agreement; |
|--------|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 1.2.2 | the                headings used in this agreement are for convenience only and shall                not                affect its interpretation; |
|--------|-------|----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 1.2.3 | where                any agreement, obligation, covenant, warranty, undertaking or                representation is expressed to be made, undertaken or given by two                or more                persons they shall be jointly and severally responsible in respect                of such                matter; |
|--------|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 1.2.4 | reference                to "a person" shall be construed so as to include any individual,                firm,                company or partnership (whether or not having a separate legal personality                and whether incorporated or not); |
|--------|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 1.2.5 | references                to any enactment shall be deemed to include references to such enactment                as re-enacted, amended or extended. |
|--------|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| **2.** | **COVENANT                TO PAY** |
|--------|------------------------------------|

| **3.** | **LIABILITIES                SECURED BY THE DEBENTURE** |
|--------|---------------------------------------------------------|

----

|   | 3.1 | all                present and future indebtedness of the Company to the Subscriber                and the                Noteholders arising under the terms of the Transaction Documents;                and |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3.2 | all                costs, charges, expenses, claims and liabilities of any kind whatsoever                and howsoever arising owed to or incurred directly or indirectly                by the                Subscriber and the Noteholders in relation to the enforcement of                this                security, |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **4.** | **PROPERTY                CHARGED BY THE DEBENTURE** |
|--------|------------------------------------------------------|

|   | 4.1 | charges                by way of fixed charge all right, title and interest in any freehold                or                leasehold property now or at any time during the continuance of this                security belonging to the Company, including all present future rights,                licences, guarantees, rents, deposits and                contracts; |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4.2 | charges                by way of fixed charge all right, title and interest in any stocks,                shares                or other securities and monies standing to the credit of any bank                account                now or at any time during the continuance of this security belonging                to                the Company; |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4.3 | assigns                by way of first fixed mortgage its rights in any policies of insurances,                assurances present or future; |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4.4 | charges                by way of fixed charge its Goodwill and Intellectual                Property; |
|--------|-----|------------------------------------------------------------------------------------------------------|

|   | 4.5 | charges                by fixed charge all its Equipment and Vehicles;                and |
|--------|-----|-------------------------------------------------------------------------------------------|

|   | 4.6 | charges                by floating charge all of the Company’s undertaking and all Debts, stock                and work in progress, and all other property, assets and rights now                or at                any time during the continuance of this security belonging to the                Company                not otherwise charged by the charges set out in paragraphs 4.1 to                4.5                inclusive. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| **5.** | **ACKNOWLEDGEMENT                  OF PRIOR CHARGE** |
|--------|------------------------------------------------------|

| **6.** | **COMPANY’S                COVENANTS** |
|--------|----------------------------------------------|

|   | 6.1 | in                accordance with the terms of the Permitted Encumbrance the Company                shall                take all steps required by contract and law to satisfy its indebtedness                to                FGI secured by the Permitted Encumbrance no later than 31 January                2009 and                to secure the discharge of the registered charges no later than 28                February 2009. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 6.2 | to                register the Debenture with the Registrar of Companies for England                and                Wales no later than 21 days after the date of execution of this                Debenture. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 6.3 | upon                discharge of the Permitted Encumbrance the Company shall take all                steps                required under the laws of England and Wales to ensure that the Subscriber                has a first ranking security interest in the Charged                Property. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 6.4 | if                required by the Subscriber to forthwith deposit with the Subscriber                all or                any documents, deeds, or other papers whatsoever relating to the                Charged                Property as the Subscriber may                require; |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 6.5 | to                make timely payment of all lawful amounts in respect of the Charged                Property when due including all rents, periodic charges and outgoings                of                any nature. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 6.6 | to                keep all of the Charged Property in a good state of repair and in                proper                and good working order and condition and to permit the Subscriber                and such                other persons as the Subscriber may from time to time appoint for                the                purpose to enter and view the Charged Property’s state and condition on                reasonable notice; |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 6.7 | to                insure and keep insured all of the Charged Property which are of                an                insurable nature against loss or damage by fire and all other usual                risks                as the Subscriber may require in the full amount of their reinstatement                value in such name and in such offices as the Subscriber shall approve                in                terms not permitting the insurers to cancel the policy of insurance                without giving at least 14 days’ notice to the Company and to pay when due                all premiums and any other charges necessary for effecting and maintaining                such insurance and, if requested by the Subscriber, to have the interest                of the Subscriber noted on any policy or policies and if required                to                deliver to the Subscriber such policy or policies and the receipt                for                every premium payable in respect of such policy or                policies; |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | 6.8 | to                hold all money received on any insurance whatsoever in respect of                loss,                damage or destruction of the Charged Property whether under the covenant                in paragraph 6.7 or otherwise on trust for the Subscriber to be applied                in                making good the loss or damage in respect of which the money is received                or in or towards discharge of the sums for the time being owing to                the                Subscriber under this Debenture as the Subscriber may in its absolute                discretion require; |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 6.9 | not                without the previous written consent of the Subscriber to create                or                attempt to create any mortgage, pledge, fixed or floating charge                or other                encumbrance or security interest on or over any of the Charged                Property; |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 6.10 | except                for the Permitted Encumbrance, not to take or omit to take any action                that                might or would have the result of materially impairing the security                interests created by this Debenture. The Company will not grant to                any                person other than the Subscriber and the Noteholders any interest                whatsoever in the Charged Property; |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 6.11 | to                inform the Subscriber immediately on becoming bound to complete the                purchase of any estate or interest in any freehold or leasehold property                after the date of this Debenture and to deposit with the Subscriber                the                deeds and documents of title relating to such property                ; |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 6.12 | to                execute at any time upon request over all or any of the property                referred                to in paragraph 6.11, charge by way of legal mortgage in favour of                the                Subscriber in such form as the Subscriber shall                require; |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 6.13 | to                execute and do all such assurances and things including (without                prejudice                to the generality of the foregoing) legal mortgages, charges and                assignments as the Subscriber may require for perfecting the security                constituted by this Debenture and for facilitating the realisation                of the                Charged Property and for exercising all powers, authorities and                discretions conferred by this Debenture upon the Subscriber or any                receiver appointed by the Subscriber and to give notice of any such                assurance or other thing to any person the Subscriber may                require; |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 6.14 | to                comply with any and all covenants and undertakings which the Company                has                entered into in the other Transaction                Documents. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **7.** | **DEFAULT** |
|--------|-------------|

----

|   | 7.1 | if                there is an Event of Default (as detailed in Condition 9.1 of the                Loan                Note Instrument) which has not been remedied as provided for in Condition                9.2 of the Loan Note Instrument; |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 7.2 | if                the** **Company                fails to observe or commits any breach of any of the covenants,                undertakings, conditions or provisions of this Debenture provided                always                that (save for a breach of Paragraphs 6.1 or 6.2 of this Debenture                or a                breach of Condition 9.1 (e) of the Loan Note Instrument) before this                security becomes enforceable the Company shall have a period of 30                days                (or such longer period as is reasonable in the circumstances and                which is                agreed between the Company and the Subscriber, both parties acting                reasonably) from the earlier of (i) the date the Company becomes                aware, or                ought reasonably to be aware, of the failure to observe or commission                of                the breach and (ii) the date the Company is given notice by either                the                Subscriber or a majority (by value) of the Noteholders in which to                remedy                any failure to observe or breach. If the Company remedies the failure                to                observe or breach in accordance with this Paragraph 7.2 then this                security                shall not become immediately enforceable as a result of the failure                to                observe or breach which has been                remedied; |
|--|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 7.3 | if                an order is made for the winding up of the Company by the court or                if an                effective resolution is passed for the members' or creditors' voluntary                winding up of the Company; |
|--|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 7.4 | if                a petition is presented for an administration order to be made in                relation                to the Company pursuant to the Act;                or |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 7.5 | if                a receiver is appointed of all or any part of the property and assets                of                the Company. |
|--|-----|---------------------------------------------------------------------------------------------------------------------------------------|

| **8.** | **APPOINTMENT                OF A RECEIVER, ADMINISTRATOR, LIQUIDATOR OR PROVISIONAL                LIQUIDATOR** |
|--------|------------------------------------------------------------------------------------------------------------------|

| 8.1 | Paragraph                14 of Schedule B1 to the Act (the power by the holder of a floating                charge                to appoint an administrator of the Company) shall apply to this Debenture.                At any time after the Subscriber has demanded payment of any of the                liabilities secured by Paragraph 3, or any step or proceeding has                been                taken for the appointment of a receiver, administrator, liquidator                or                provisional liquidator, or with a view to seeking a moratorium or                a                voluntary arrangement, in respect of the Company, or if requested                by the                Company, the Subscriber may appoint by writing, insofar as permitted                by                law, any person or persons to be a receiver and manager of all or                any of                the Charged Property or an administrator or administrators; and this                Debenture shall in any of such events become immediately                enforceable. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 8.2 | Where                the Subscriber appoints more than one person as receiver, liquidator                or                provisional liquidator or administrator, they shall have power to                act                separately unless the Subscriber specifies to the contrary in the                appointment. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 8.3 | The                Subscriber may from time to time determine the remuneration of the                receiver, administrator, liquidator or provisional                liquidator. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 8.4 | Once                a receiver, administrator, liquidator or provisional liquidator is                appointed, the Subscriber will not be precluded from making any subsequent                appointment of a receiver, administrator, liquidator or provisional                liquidator over any Charged Property, whether or not any receiver,                administrator, liquidator or provisional liquidator previously appointed                continues to act. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 8.5 | The                receiver, administrator, liquidator or provisional liquidator will                be the                agent of the Company and the Company will be solely liable for his                acts,                defaults and remuneration unless the Company goes into liquidation,                after                which he shall act as principal and not become the agent of the                Subscriber. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 8.6 | The                receiver, administrator, liquidator or provisional liquidator will                be                entitled to exercise all the powers set out in Schedules 1 and 2                to the                Act. In addition, but without limiting these powers and without prejudice                to the Subscriber’s powers (including the power of the Subscriber to sell                or otherwise dispose of all or any part of the Charged Property (at                the                times, in the manner and on the terms it thinks fit) and to apply                the                proceeds of such sale or other disposal in paying the costs of that                sale                or disposal and in or towards the discharge of the Secured Liabilities).                Such power of sale or other disposal shall operate as a variation                and                extension of the statutory power of sale under section 101 of the                1925 Act                and the receiver, administrator liquidator or provisional liquidator                will                have power with or without the concurrence of others and subject                always to                the rights under the Permitted                Encumbrance: |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 8.6.1 | to                sell, let, lease or grant licences of, or vary the terms or terminate                or                accept surrenders of leases, tenancies or licences of, all or any                of the                Charged Property, or grant options over them, on any terms the Receiver                thinks fit in his absolute discretion and any sale or disposition                may be                for cash, payable in a lump sum or by instalments, or other valuable                consideration; |
|--------|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 8.6.2 | to                sever any fixtures from land and/or sell them                separately; |
|--|-------|--------------------------------------------------------------------------------------------|

|  | 8.6.3 | to                promote a company to purchase all or any Charged Property or any                interest                in them; |
|--|-------|------------------------------------------------------------------------------------------------------------------------------------|

----

|  | 8.6.4 | to                make and effect all repairs, renewals and improvements to the Charged                Property and effect, renew or increase insurances on the terms and                against                the risks that he thinks fit; |
|--|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 8.6.5 | to                exercise all voting and other rights attaching to Securities and                investments generally; |
|--------|-------|--------------------------------------------------------------------------------------------------------------------------|

|   | 8.6.6 | to                redeem any prior encumbrance and settle and pass the accounts of                the                encumbrancer so that all accounts so settled and passed will (except                for                any manifest error) be conclusive and binding on the Company and                the money                so paid will be deemed to be an expense properly incurred by the                receiver,                administrator, liquidator or provisional                liquidator; |
|--------|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 8.6.7 | to                pay the Subscriber’s proper charges for time spent by the Subscriber’s                employees and agents in dealing with matters raised by the administrator,                liquidator or provisional liquidator or relating to the administration;                and |
|--|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 8.6.8 | to                do all other acts and things which he may consider incidental or                conducive                to any of the above matters or powers or to the preservation, improvement                or realisation of the Charged                Property. |
|--------|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 8.7 | Subject                to section 45 of the Act, the Subscriber may at any time remove a                receiver, administrator, liquidator or provisional liquidator from                all or                any of the Charged Property of which he is the receiver, administrator,                liquidator or provisional                liquidator. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **9.** | **APPOINTMENT                OF ATTORNEY** |
|--------|--------------------------------------------|

| **10.** | **INDEMNITY** |
|---------|---------------|

| 10.1 | The                Company shall indemnify the Subscriber and any receiver, administrator,                liquidator, provisional liquidator, attorney manager, agent or other                person appointed by the Subscriber under this Debenture out of the                Charged                Property in respect of all actions, proceedings, costs, claims,                liabilities and demands (“Liabilities”) incurred or suffered directly or                indirectly by any of them in the execution or purported execution                of any                of their powers, duties or functions under this Debenture or otherwise                and                against all actions, proceedings, costs, claims, liabilities and                demands                of any nature in respect of any thing done or omitted to be done                in any                way relating to their powers duties and                functions. |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 10.2 | Any                receiver, administrator, liquidator or provisional liquidator appointed                under this Debenture may retain and pay all sums in respect of any                of the                liabilities and expenses referred to in paragraph out of any money                received by him under the powers conferred by this                Debenture. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.3 | The                Company shall ratify and confirm all transactions entered into by                the                Subscriber or any receiver, administrator, liquidator or provisional                liquidator in the exercise or purported exercise of the Subscriber’s or                the receiver’s powers and all documents entered into or things done by the                Subscriber or the receiver or other person acting under the Power                of                Attorney in paragraph 9. |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **11.** | **DEMANDS                AND NOTICES** |
|---------|----------------------------------------|

| **12.** | **COMPLIANCE                WITH CONSTITUTIONAL DOCUMENTS** |
|---------|-------------------------------------------------------------|

|   | 12.1 | it                is duly incorporated and validly existing in the United Kingdom and                has                full authority to enter into this Debenture and to perform its obligations                hereunder; |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 12.2 | this                Debenture constitutes its legal, valid and binding obligation and                is an                effective security over the Charged                Property; |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 12.3 | that                neither the execution of this Debenture nor the creation of any security                under or pursuant to it contravenes or will contravene the provisions                of                the memorandum or articles of association of the Company or any equivalent                constitutional documents governing the Company; |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 12.4 | the                Company is the sole legal and beneficial owner of the Charged Property                subject to the Permitted Encumbrance or any other security interests                disclosed in the Disclosure Letter; |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 12.5 | the                Company has not stopped payment on any debts and is not insolvent                or                unable to pay its debts for the purpose of Section 123 of the                Act; |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | 12.6 | all                approvals required to be obtained whether under the provisions of                the                Companies Act 1985 or any other enactment have been duly obtained                and that                it is in a position to enter into this                Debenture; |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **13.** | **FOREIGN                CURRENCY** |
|---------|-------------------------------------|

**Contractual      Currency**

| **14.** | **CONTINUING                SECURITY** |
|---------|----------------------------------------|

| **15.** | **ASSIGNMENT** |
|---------|----------------|

| **16.** | **SUBSCRIBER’S                AND RECEIVER’S LIABILITY** |
|---------|----------------------------------------------------------------------|

| **17.** | **PROTECTION                OF THIRD PARTIES** |
|---------|------------------------------------------------|

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|  | 17.1 | No                person paying or handing over monies to the Subscriber or a receiver                and                obtaining a discharge shall have any responsibility or liability                to see to                their correct application. |
|--|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 17.2 | No                person dealing with the Subscriber or a receiver need                enquire: |
|--|------|-------------------------------------------------------------------------------------------------|

|  | 17.2.1 | whether                any event has happened giving either the Subscriber or the receiver                the                right to exercise any of his                powers; |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 17.2.2 | as                to the propriety or regularity of any act purporting or intending                to be an                exercise of such powers; |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 17.2.3 | as                to the validity or regularity of the appointment of any receiver                purporting to act or to have been appointed as such;                or |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 17.2.4 | whether                any money remains owing upon this                security. |
|--|--------|-----------------------------------------------------------------------------------|

|  | 17.3 | All                the protection to purchasers contained in Sections 104 and 107 of                the Law                of Property Act 1925 shall apply to any person purchasing from or                dealing                with the receiver or the Subscriber as if the liabilities secured                by this                Debenture had become due and the statutory power of sale and appointing                a                receiver in relation to the Charged Property had arisen on the date                of                this Deed. |
|--|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 17.4 | No                person dealing with the Subscriber or the receiver shall be affected                by                express notice that any act is unnecessary or                improper. |
|--|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **18.** | **THIRD                PARTIES** |
|---------|----------------------------------|

| **19.** | **GENERAL                LAW AND CONSTRUCTION** |
|---------|-------------------------------------------------|

| 19.1 | This                Debenture shall be construed and governed in all respects in accordance                with English law and shall be subject to the non-exclusive jurisdiction                of                the English courts. |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 19.2 | The                Company agrees that if any of the provisions in this Debenture is                held to                be invalid but would be valid if part of the wording were deleted                or                modified then such provision shall apply with such modification as                may be                necessary to make it enforceable. |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 19.3 | No                failure to exercise nor any delay in exercising, on the part of the                Subscriber, any right or remedy under the terms of this Debenture                shall                operate as a waiver, nor shall any single or partial exercise of                any right                or remedy prevent its further exercise or the exercise of any other                right                or remedy. The rights and remedies provided in this Debenture are                cumulative and not exclusive of any rights or remedies provided by                law and                nothing in this agreement shall operate to restrict or affect in                any way                any right of the Subscriber to be indemnified or to exercise a lien                howsoever. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**AS      WITNESS**

| **EXECUTED AS A DEED**                by                `Coda Octopus (UK) Holdings Limitedacting                  by:- | ))                ) |   |
|-------------------------------------------------------------------------------------------------------------------------|---------------------|--------|

|   |                                                                |
|--------|---------------------------------------------------------------------|
|   | .........................................  Director  |
|   |                                                                |
|   |                                                                |
|   | ......................................... Director/Secretary   |

|                                                                                                                                                        |                |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------|--------|
| **EXECUTED              AS A DEED**              by              ` THE                ROYAL BANK OF SCOTLAND PLC acting                by:-  | ))                ) |   |

|   | ......................................... |
|--------|-------------------------------------------|

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