| **DATED** | **200****8** |
|-----------|--------------|

|   |  **LOAN                NOTE INSTRUMENT**constituting the                issue of USD 12,000,000 Convertible Loan Notes due 21 February 2015                of                Coda                Octopus Group, Inc. |   |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

----

**CONTENTS**

| 1.                DEFINITIONS AND INTERPRETATION | 1      |
|--------------------------------------------------|--------|
|                                             |   |
| 2.                FORM OF NOTES                  | 9      |
|                                             |   |
| 3.                COVENANTS OF COGI              | 10     |
|                                             |        |
| 4.                CONVERSION                     | 14     |
|                                             |   |
| 5.                REGISTER                       | 14     |
|                                             |   |
| 6.                REPRESENTATIONS                | 15     |
|                                             |   |
| 7.                INCORPORATION OF SCHEDULES     | 18     |
|                                             |   |
| 8.                LAW                            | 19     |
|                                             |   |
| SCHEDULE                1                        | 20     |
|                                             |   |
| FORM                OF INDIVIDUAL CERTIFICATE    | 22     |
|                                             |   |
| SCHEDULE                2                        | 23     |
|                                             |   |
| THE                CONDITIONS                    | 23     |
|                                             |   |
| SCHEDULE                3                        | 34     |
|                                             |   |
| CONVERSION                                       | 34     |
|                                             |   |
| SCHEDULE                4                        | 38     |
|                                             |        |
| THE                LEGEND                        | 38     |
|                                             |   |
| SCHEDULE                5                        | 39     |
|                                             |   |
| NOTICE                OF CONVERSION              | 39     |

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**THIS      LOAN NOTE INSTRUMENT **
2008

**PARTY**

**CODA      OCTOPUS GROUP, Inc.**
**“COGI”**

**BACKGROUND**

**WITNESSES      **

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

|  | 1.1 | In                this Instrument and the schedules the following words and expressions,                unless the context requires otherwise,                mean: |
|--|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**“Affiliate”      **

**“Agreed      Form” **

----

**“Aggregate      Nominal Amount” **

**“Approved      Acquisitions” **

**“Authorised      Signatory” **

**“Board”      **

**“Business      Day”**

**“Certificate”      **

**“Change      of Control” **

**“Collateral”**

**“Colmek”**

**“Common      Stock”**

**“Companies      Act” **

**“Completion”      **

----

**“Completion      Date”**

**“Conditions”**

**“Confidentiality      Agreement”**

**“Debentures”**
**“Debenture”**

**“Debt”**

**“Deed      of Adherence”**

**“Deed      of Guarantee”**

**“EBIT”      **

**“Event      of Default” **

----

**Exchange      Act**

**“Extraordinary      Resolution”**

**“Final      Maturity Date”**

**“FGI”**

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

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

**“Guarantor”**

**“Individual      Certificate” **

**“Intercreditor      Deed” **

**“Legend”      **

**“Lien”**

----

**“Liquidation”**

**“Loan      Note Instrument”**

**“Lock-up      Agreements”**

**“Nominal      Amount” **

**“Noteholder”      **

**“Noteholder      Majority”**

**“Notes”**
**“Note”**

**“Omnitech”      **

**“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; |
|--|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Permitted      Issuance**

**“Permitted      Liens”**

----

**“Person”**

**“Principal      Amount Outstanding” **

**“Principal      Office” **

**“Process      Agent”**

**“Recapitalisation      Event” **

**“Redemption      Amount” **

**“Redemption      Date” **

**“Register”**

**“Registrar”**

----

**“Sale”**

**“SEC”**

**“Securities      Act”**

**“Security      Agreement”**

**“Subscriber”**

**“Subscription      Agreement”**

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

**“Term”      **

**“Transaction      Documents” **

----

**“USD”      **

|  | 1.2 | Words                denoting the singular shall include the plural and vice versa. References                to persons shall include bodies corporate, unincorporated associations                and                partnerships. References to any statute or statutory provision shall                include any statute or statutory provision which amends, consolidates,                extends or replaces the same. |
|--|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 1.3 | Words                and phrases defined in the Companies Act 1985 or in the Companies                Act 2006                shall, save as expressly provided in this Instrument or the schedules                have                the same meanings in this Instrument and the                schedules. |
|--|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 1.4 | References                to clauses and schedules shall be to clauses of and the schedules                to this                Instrument. Headings in this Instrument are inserted for ease of                reference                only and shall not affect its                interpretation. |
|--|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 1.5 | The                word **“redemption”**includes                purchase and repayment and the words **“redeem”**or                **“redeemed”**shall                be construed accordingly. |
|--|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 1.6 | The                words **“this                Instrument”**refer                to the provisions of the Loan Note Instrument and the schedules to                the                Loan Note Instrument (as from time to time modified under the terms                of the                Loan Note Instrument) and any deed expressed to be supplemental to                the                Loan Note Instrument. |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 1.7 | References                to any provisions of any statute shall be deemed also to refer to                any                statutory modification or re-enactment thereof or any statutory                instrument, order or regulation made thereunder or under such                re-enactment. |
|--|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 1.8 | Each                of the provisions of this Instrument is severable and distinct from                the                other and if at any time when one or more of such provisions is invalid,                illegal or unenforceable, the validity, legality and enforceability                of the                remaining provisions of this Instrument will not in any way be affected                or                impaired. |
|--|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **2.** | **FORM                OF****NOTES** |
|--------|-------------------------------------|

----

| **3.** | **COVENANTS                OF****COGI** |
|--------|-----------------------------------------|

|  | 3.1 | The                Subscriber has agreed to pay to COGI the subscription moneys on the                terms                set out in Clauses 3.2 to 3.5 of the Subscription Agreement and COGI                shall                on the date hereof issue to the Subscriber Notes for an amount equal                to                USD 12,000,000. |
|--|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 3.2 | COGI,                for value received, hereby promises to pay to the Noteholders the                Redemption Amount of the Notes together with such other amounts as                may be                payable all subject to and in accordance with the                Conditions. |
|--|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 3.3 | COGI                will comply with the provisions of this Instrument, the Notes and                the                Conditions in all respects and the Notes shall be held subject to                this                Instrument and the Conditions. |
|--|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 3.4 | So                long as any of the Notes remain Outstanding COGI                shall: |
|--|-----|------------------------------------------------------------------------------------------|

|  | 3.4.1 | at                all times perform and comply with its obligations set out in the                Subscription Agreement, this Instrument and the                Conditions; |
|--|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 3.4.2 | not                take any steps or actions which materially impair or adversely affect                or                derogate from, in any manner whatsoever, the enforceability in any                respect                of any of the Transaction Documents; |
|--|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 3.4.3 | keep,                and procure that its Subsidiaries keep, proper books of account and                allow                the Noteholders free access to such books of account at any time                following                an Event of Default, provided that COGI shall not be obliged to disclose                confidential and / or proprietary information in relation to any                of its                customers; |
|--|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 3.4.4 | give                notice to the Noteholders in writing immediately on becoming aware                of an                Event of Default or an event which with the giving of notice or lapse                of                time or both would constitute an Event of                Default; |
|--|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 3.4.5 | give                notice to the Noteholders of any unconditional payment of amounts                due in                respect of the Notes made after the due date for such                payment; |
|--|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 3.4.6 | send                to the Noteholders or procure that the Registrar sends to the Noteholders,                as soon as practicable following a request in writing by a Noteholder                Majority, a certificate of COGI or the Registrar signed by an Authorised                Signatory confirming the total number and Aggregate Nominal Amount                of                Notes outstanding; |
|--|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|  | 3.4.7 | give                notice to the Noteholders immediately on COGI becoming aware that                it or                any Guarantor has become subject generally to the taxing jurisdiction                of                any territory other than (or in addition to) the United States of                America,                Norway and the United Kingdom and enter, as soon as practicable,                into a                supplemental deed to this Instrument giving the Noteholders an undertaking                or covenant (in a form and manner satisfactory to a Noteholder Majority)                in terms corresponding to the terms of Condition 3, with the substitution                for (or addition to) the references to the United States of America,                Norway and the United Kingdom of references to that other (or additional)                territory or authority; |
|--|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 3.4.8 | apportion                the proceeds of the Notes to the following categories: a) working                capital                and b) (in accordance with Clause 9 of the Subscription Agreement)                Approved Acquisitions; |
|--|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 3.4.9 | ensure                that the                ratio of Debt to EBIT shall not exceed 6:1 in the year to 31 October                2008,                1.35:1 in the year to 31 October 2009 and 0:8:1 thereafter. In the                event                that the Approved Acquisitions do not take place and a Noteholder                Majority                does not require partial repayment in accordance with Condition 3.4,                the                ratios will be altered to 3:1 for the year to 31 October 2009 and                1:1                thereafter. In the event that a Noteholder Majority does require                partial                repayment, the ratios will be altered to 3:1 for the year to 31 October                2009 and 2:1 thereafter; |
|--|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 3.4.10 | not                incur, and shall procure that no Group member shall incur, any further                indebtedness (including acquired debt) provided that COGI and any                Group                member may incur additional indebtedness, if in each                case: |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (a) | debt                shall not be created that is senior to the Notes;                and |
|--|-----|------------------------------------------------------------------------------------------|

|  | (b) | the                total aggregate amount outstanding incurred by COGI and all Group                members                at any one time of such further debt does not exceed USD 2,000,000;                and |
|--|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (c) | the                approval of a Noteholder Majority is sought, such approval not to                be                unreasonably withheld and which approval shall be deemed to have                been                given, in the absence of a response from the Noteholders, at the                expiry of                14 days from the date the approval is sought or (if later) 10 days                from                the date COGI is reasonably satisfied that the Noteholders received                the                approval request. |
|--|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|  | 3.5 | During                the Term COGI will not: |
|--|-----|-----------------------------------------------|

|  | 3.5.1 | save                for Permitted Issuances, make any new purchases, redemptions or otherwise                acquire or retire for value, directly or indirectly, any new shares                of                COGI’s capital stock or any options, new warrants or other rights to                acquire such shares of capital stock;                or |
|--|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 3.5.2 | other                than in connection with the repayment of sums due to FGI, or the                payments                due to the Selling Shareholders of Colmek as part of the deferred                consideration due in respect of Colmek, make any principal payment                on, or                repurchase, redeem, defease or otherwise acquire or retire for value,                prior to any scheduled principal payment, sinking fund payment or                stated                maturity, any subordinated debt not otherwise permitted or provided                for in                this Instrument and any associated documentation;                or |
|--|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 3.5.3 | except                for (i) the Approved Acquisitions and (ii) the CODA MENA operations                mentioned in the Confidentiality Agreement and (iii) reasonable                investments under its existing patent programme, make any additional                corporate investments (other than any investment approved in writing                by a                Noteholder Majority or in cash and cash equivalents) in any person;                or |
|--|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 3.5.4 | permit                payment of shareholders’ dividends without the written consent of a                Noteholder Majority except for payment of COGI’s existing 12% Series A                Preferred Stock comprising 6,406.70 units;                or |
|--|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 3.5.5 | permit,                create, or cause to be permitted or created, any Recapitalisation                Event;                or |
|--|-------|----------------------------------------------------------------------------------------------------------------------------------|

|  | 3.5.6 | provide                finance or other funding to Colmek in excess of 5% of the Aggregate                Nominal Amount without the written consent of a Noteholder                Majority. |
|--|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|  | 3.6 | During                the Term COGI will not sell, pledge or otherwise dispose of, directly                or                indirectly, any shares of its capital stock except for Permitted                Issuances                provided for in this Instrument and any associated                documentation. |
|--|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 3.7 | During                the Term COGI will not without the written consent of a Noteholder                Majority, sell, pledge or otherwise dispose of (“disposition”), directly                or indirectly, any assets equating to or more than five percent (5%)                of                COGI’s net asset value (as shown by the latest audited consolidated                accounts of COGI and its Group which are available at the date of                the                disposition). Such consent shall not be unreasonably                withheld. |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 3.8 | During                the Term COGI will not, directly or indirectly, enter into or suffer                to                exist any transaction (including, without limitation, the sale, purchase,                exchange or lease of assets or property or the rendering of any service)                with, or for the benefit of, any Affiliate of COGI unless such transaction                is entered into in good faith and such transaction is on terms, that,                taken as a whole, are not materially less favourable to COGI than                those                that could have been obtained in comparable arm’s-length transactions with                third parties that are not                Affiliates. |
|--|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 3.9 | During                the Term, save for (i) the security interests of FGI, (ii) the Selling                Shareholders’ pledges in respect of the Colmek Shares and (iii) the Bond                and Floating Charge granted by Coda Octopus Products Limited in favour                of                The Governor and Company of the Bank of Scotland, COGI will not take                or                omit to take any action that might or would have the result of materially                impairing the first ranking security interests securing the Notes.                COGI                will not grant to any person other than the Lender any interest whatsoever                in the Collateral. |
|--|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 3.10 | During                the Term COGI will not, directly or indirectly, create, incur, assume                or                suffer to exist any Lien of any kind on or with respect to any of                COGI’s                property or assets, including any shares or stock or debt, whether                owned                at or acquired after the date of this Instrument, or any income,                profits                or proceeds therefrom with the exception of the Permitted                Liens. |
|--|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 3.11 | During                the Term, except for the Permitted Liens, COGI will not further pledge                its                assets as security or otherwise without the prior written consent                of a                Noteholder Majority. |
|--|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|  | 3.12 | So                long as any Notes are Outstanding, COGI will furnish to the Noteholders                quarterly reports to a standard (in terms of detail and disclosure)                no                less than required by the SEC. All and any obligations of COGI to                comply                with applicable SEC regulations including regulations concerning                disclosure of non-public information shall take precedence over any                obligations to provide information under this Clause 4.12 and COGI                shall                not be considered to be in breach of this condition where it cannot                comply                with the requirements to provide information to the Noteholders set                out in                this clause 3.12 due to its SEC obligations. Additionally COGI will                provide a monthly report to include summary of cash balances, new/pending                orders, order backlog and noteworthy events and until the FGI security                interest is discharged provide information of the amounts financed                by FGI                in the relevant quarter. |
|--|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 3.13 | At                all times during the Term COGI shall procure that either (i) any                assets                which Omnitech may acquire shall, within 30 days of becoming assets                of                Omnitech, be transferred to another Group member or (ii) the approval                of a                Noteholder Majority is obtained to Omnitech holding such assets (such                approval to include, if the Noteholder Majority so directs, a requirement                that Omnitech enters into a Deed of Adherence and grants any required                security over its assets). |
|--|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 3.14 | During                the Term COGI shall indemnify and keep indemnified the Noteholders                against                any loss incurred by the Noteholders if COGI makes a payment to the                Noteholders in a currency other than the Specified Currency that,                when                exchanged into the Specified Currency on the day it is received by                the                Noteholders, is less than the amount due to the                Noteholders. |
|--|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **4.** | **CON****VERSION** |
|--------|--------------------|

| **5.** | **REGISTER** |
|--------|--------------|

|  | 5.1 | COGI                undertakes to immediately appoint the Registrar to maintain the Register                at all times. There shall be entered in the Register by the                Registrar: |
|--|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 5.1.1 | the                names and addresses of the Noteholders and, where required by law,                beneficial owner where different; |
|--|-------|----------------------------------------------------------------------------------------------------------------------------------------|

----

|  | 5.1.2 | the                amount of the Notes held by each registered holder (including the                Issue                Date (as shown on each Individual Certificate), the Principal Amount                Outstanding of the Notes represented in such Individual Certificate                and                the Nominal Amount specified in the Individual Certificate relating                to                such registered holder); |
|--|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 5.1.3 | the                date at which the name of every such registered holder is entered                in                respect of the Notes standing in its                name; |
|--|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 5.1.4 | the                serial number of each Note and Individual Certificate issued and                its date                of issue; and |
|--|-------|------------------------------------------------------------------------------------------------------------------------------------------|

|  | 5.1.5 | particulars                of any partial redemption, transfer and other changes of ownership                of the                Notes, subject to the same being duly                stamped. |
|--|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 5.2 | Subject                to notifying COGI and the Noteholders of the identity of the new                Registrar, the Registrar may, at any time, transfer the role of Registrar                to any party to whom any of the Notes are transferred in accordance                with                the Conditions. If the Registrar for the time being wishes to appoint                a                party as Registrar who is not a Noteholder then the prior written                consent                of COGI will be required, which consent shall not be unreasonably                withheld                provided the whole costs of the proposed new Registrar, both for                accepting                the role of Registrar and for maintaining the Register, are met by                the                outgoing Registrar or by the Noteholders. |
|--|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 5.3 | If                at any time the Registrar is not the Subscriber or a Noteholder,                COGI                shall procure that the Registrar shall not amend the Register otherwise                than in accordance with the provisions for amendment contained in                this                Instrument and the Conditions. |
|--|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 5.4 | A                Noteholder and any person authorised in writing by any such persons                shall                be entitled without charge at all reasonable times during office                hours in                London to inspect the Register and take copies of and extracts from                the                Register or any part thereof free of charge insofar as it refers                to that                specific Noteholder. |
|--|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **6.** | **REPRESENTATIONS** |
|--------|---------------------|

|  | 6.1 | it                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 and their properties                and assets and to carry on its and their businesses as currently                conducted. COGI is not, nor are any of the Subsidiaries, in violation                or                default of any of the provisions of its or their certificate or articles                of incorporation, bylaws or other organisational or charter                documents; |
|--|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|  | 6.2 | 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; |
|--|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 6.3 | 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; |
|--|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 6.4 | 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; |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 6.5 | 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; |
|--|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 6.6 | 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; |
|--|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|  | 6.7 | 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; |
|--|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 6.8 | 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; |
|--|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 6.9 | 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; |
|--|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|  | 6.10 | 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; |
|--|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 6.11 | it                has full power to issue and perform its obligations under the Notes                to                borrow and repay up to the Aggregate Nominal Amount and has obtained                and                will maintain in effect all consents necessary for the foregoing                purposes; |
|--|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 6.12 | the                execution of this Instrument and the issue of the Notes does not                and will                not constitute a breach of any existing law or regulation or its                charter                or by-laws or exceed any limitation on the powers of its directors                or                breach the terms of any contract, charge or restriction binding upon                it                and this Instrument and each Note constitutes (or will when executed                constitute) its valid and binding obligations;                and |
|--|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 6.13 | no                event has occurred which constitutes (or with the giving of notice                or                lapse of time or both would constitute) an Event of                Default. |
|--|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **7.** | **INCORPORATION                OF SCHEDULE****S** |
|--------|---------------------------------------------------|

----

| **8.** | **LAW** |
|--------|---------|

|  | 8.1 | This                Instrument, the schedules and the Notes shall be governed by and                construed                in accordance with the laws of England and                Wales. |
|--|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 8.2 | Each                of the parties agrees that the courts of England are to have non-exclusive                jurisdiction to settle any dispute (including claims for set-off                and                counter claims) which may arise in connection with the creation,                validity,                effect, interpretation, or performance of, or of legal relationships                established by, this Instrument or otherwise arising in connection                with                this Instrument, the schedules and the Notes and for such purposes                irrevocably submit to the jurisdiction of the English                courts. |
|--|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 8.3 | 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                8.2. |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**IN      WITNESS **

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**SCHEDULE      1 A**

**Form      of Individual Certificate**

**CODA      OCTOPUS GROUP, Inc.**

**“Notes”**

**“Instrument”**
**“Issue      Date”**

| **EXECUTED**                and delivered as a deed by Coda Octopus Group, Inc acting by two                directors: |   | ))))   |
|------------------------------------------------------------------------------------------------------------------------|--------|--------|
|                                                                                                                   |   |   |
|                                                                                                                   |   |   |
| Director                                                                                                               |   |   |
|                                                                                                                   |   |   |
|                                                                                                                   |   |   |
| Director                                                                                                               |   |   |

----

| 1. | This                Individual Certificate must be surrendered to the Registrar before                any                transfer whether of the whole or any part of the Notes comprised                in it can                be registered or any new Individual Certificate can be issued in                exchange. |
|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2. | The                Notes are transferable in the amount or multiples of USD 100,000 only                in accordance with the Conditions endorsed hereon. No transfer, whether                of                the whole or any part of the Notes comprised in this Individual                Certificate, will be accepted for registration unless accompanied                by this                Individual Certificate and lodged at the offices of the                Registrar. |
|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3. | The                Notes are repayable in accordance with the Conditions endorsed                hereon. |
|----|----------------------------------------------------------------------------------------------------------|

| 4. | A                copy of the Instrument and Register of Noteholders is available for                inspection at the offices of the Registrar at all reasonable times                during                office hours in London. |
|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**SCHEDULE      1 B**

**Form      of Instrument of Transfer**

**CODA      OCTOPUS GROUP, Inc.**

**“Notes”**

**“Instrument”**

| **EXECUTED**                and delivered as a deed by [ ] acting by two directors or one director                and                the company secretary |   | ))))   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
|                                                                                                                                                       |   |   |
|                                                                                                                                                       |   |   |
| Director                                                                                                                                                   |   |   |
|                                                                                                                                                       |   |   |
|                                                                                                                                                       |   |   |
| Director                / Secretary                                                                                                                        |   |   |

----

----

**SCHEDULE      2**

**The      Conditions**

| **1.** | **AMOUNT                AND STATUS OF THE NOTES** |
|--------|---------------------------------------------------|

|  | 1.1 | **Status** |
|--|-----|------------|

*pari      passu*

|  | 1.2 | **Denomination                and Nominal Amount** |
|--|-----|----------------------------------------------------|

| **2.** | **FORM                OF NOTES** |
|--------|----------------------------------|

|  | 2.1 | The                Notes will be represented by Certificates in the form or substantially                in                the form set out in Schedule 1 of the Instrument, each signed by                the duly                authorised officers of COGI. The Notes shall be issued in registered                form. |
|--|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 2.2 | Any                Certificates and any certificates for Common Stock issued as a result                of                any conversion of the Notes in accordance with Clause 4 of the Instrument                shall all be imprinted with the                Legend. |
|--|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **3.** | **REDEMPTION** |
|--------|----------------|

|   | 3.1 | **Final                Redemption**.                Unless previously redeemed in full, or purchased or converted or                cancelled, COGI will redeem the Notes on the earliest of the following                (**“Maturity                Date”**): |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3.1.1 | 21                February 2015, or if such date is not a Business Day on the immediately                preceding Business Day (**“Final                Maturity Date”**);                and |
|--------|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3.1.2 | the                date upon which a Liquidation takes                place; |
|--------|-------|------------------------------------------------------------------------------|

----

|   | 3.2 | **Full                or partial redemption prior to the Maturity Date at the option of                COGI**.                COGI may, by giving not less than five Business Days prior written                notice                to the Noteholders, redeem all or any of the Notes. Upon the day                specified                in the relevant notice (**“Redemption                Date”**)                COGI shall be bound to redeem the Notes specified in the relevant                notice,                each at the Redemption Amount (as calculated in accordance with Condition                1.4) and the Noteholders shall be bound to deliver the Individual                Certificates representing the Notes to                COGI. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3.3 | **Full                redemption prior to the Maturity Date at the option of the                Noteholders**.                If there is a Change of Control at any time prior to the Maturity                Date                then a Noteholder Majority or Noteholders (acting under Extraordinary                Resolution of the Noteholders) may by giving not less than five Business                Days prior written notice to COGI specifying a date for redemption                of the                Notes (**“Redemption                Date”**),                require the redemption of all the Notes represented by each of the                Individual Certificates and COGI shall be bound to redeem the Notes                accordingly each at the Redemption Amount (as calculated in accordance                with Condition 3.5) and the Noteholders shall be bound to deliver                the                Individual Certificates representing the Notes to the Registrar,                with a                copy to COGI at the same time. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3.4 | **Redemption                if no acquisitions.**                Should the acquisitions of those of the Approved Acquisitions specifically                named in the Confidentiality Agreement not be completed with 12 months                of                the date of the Instrument, COGI will, no later than 30 days before                the                first anniversary of the date of this Instrument, submit alternative                investment plans to the Noteholders for approval by a Noteholder                Majority.                If such approval is not forthcoming within 30 days of it being sought,                COGI will, within 14 days of the written request of a Noteholder                Majority,                repay, without penalty, but including any interest accrued up to                the date                of repayment, the sum of USD 6,000,000. Any such repayment shall                be                treated as a redemption of sixty (60) of the Notes and the remainder                of                the Notes shall continue in existence in accordance with the terms                of this                Instrument.** **For                the avoidance of doubt, no premium or other payment over and above                the                Nominal Amount of the sixty (60) Notes shall be due in the event                of                partial repayment under this Condition                3.4; |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | 3.5 | **Redemption                Amount**.** ** |
|--------|-----|-------------------------------------------------|

|  | 3.5.1 | For                the purposes of a redemption taking place on the Maturity Date in                accordance with Condition 3.1 the Redemption Amount shall be 130%                of the                Nominal Amount. |
|--|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 3.5.2 | For                the purposes of Condition 3.2 and Condition 3.3, the Redemption Amount                on                the relevant Redemption Date shall be an amount equal to whichever                is the                greater of (1) 130% of NA or (2) NA +                P |
|--|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| NA     | =      | The                Nominal Amount                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| P      | =      | The                amount which, when added to the Nominal Amount on the Redemption                Date,                will result in the Noteholders receiving an IRR of not less than                30%                                                                                                                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| IRR    | =      | The                internal rate of return for each Note such that the net present value                of                all cashflows associated with the Notes (including all interest paid                on                the Notes to the Redemption Date and including the original subscription                amount and the Redemption Amount for the Notes) when discounted back                to                the date of issue of the Notes equals                zero. |

|  | 3.5.3 | If                a partial redemption is effected under the provisions of Condition                3.4                (Redemption if no acquisition) then the Redemption Amount shall be                100% of                the Nominal Amount of each Note                redeemed. |
|--|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 3.5.4 | If                the Notes become due and payable following an Event of Default in                accordance with Condition 9.3 then the Redemption Amount shall be                the                amount calculated in accordance with the provisions of Condition                3.5.2. |
|--|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3.6 | All                Notes redeemed by COGI shall be cancelled and shall not be available                for                reissue. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------|

----

|   | 3.7 | Where                some, but not all, of the Notes are redeemed under Condition 3.2                or                Condition 3.4, those of the Notes to be redeemed shall be randomly                selected from all of the Notes then in issue by means of drawing                lots from                the serial numbers of all the Notes remaining in issue at the relevant                time. Such drawing of lots shall be conducted by COGI which shall                certify                to the Noteholders the serial numbers of the Notes to be redeemed. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **4.** | **INTEREST** |
|--------|--------------|

|  | 4.1 | The                Notes will bear interest at a rate of 8.5% (eight and one-half percent)                per annum payable half-yearly in arrears on 21 February and 21 August.                The                first payment shall be due on 21 February 2009 for the period from                the                date of issue of the Notes to and including 21 February 2009. Interest                shall be calculated on the basis of a standard 30 days per month                and 360                days per annum, regardless of the actual number of days in any month                or                year. |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 4.2 | If                COGI fails at any time to make any payment on the due date, COGI                shall pay                to the Noteholders interest on such sum for the period between the                due                date and the date on which such unpaid sum is paid in full (as well                after                as before judgement), such interest accruing daily on the basis of                a year                of 365 days and the number of days elapsed at the rate of 2% per                annum                above the base rate quoted by The Royal Bank of Scotland plc from                time to                time. |
|--|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **5.** | **SET                OFF** |
|--------|----------------------------|

|   | 5.1 | All                payments in respect of the Notes shall be without set-off or counterclaim                and free and clear of all claims liens charges encumbrances and any                equity                set-off or cross-claim on the part of COGI against any Noteholder                and                (except where required by law) without deduction or withholding or                payment                for or on account of any taxes which may be imposed in the United                States                of America, Norway, the United Kingdom or any other jurisdiction                from                which payment may be made by COGI. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 5.2 | If                a payment due in respect of the Notes is subject to taxation by way                of                withholding at its source, the Noteholders shall be entitled to receive                from COGI such amounts as shall ensure that the net receipt, after                taxation, to the Noteholders in respect of the payment is the same                as it                would have been were the payment not subject to                taxation. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| **6.** | **TITLE                TO****NOTES** |
|--------|--------------------------------------|

| **7.** | **TRANSFER** |
|--------|--------------|

|   | 7.1 | The                Notes shall be freely transferrable (in integral multiples of USD                100,000)                by execution of an instrument of transfer in the form set out in                Schedule                1 B to the Instrument. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 7.2 | Every                instrument of transfer shall be signed as a deed by or on behalf                of the                transferor and the transferor shall be deemed to remain the owner                of the                Notes until the name of the transferee is entered in the Register                in                respect of the Notes. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 7.3 | Every                instrument of transfer must be left, duly stamped, at the offices                of the                Registrar from time to time for registration accompanied by the Individual                Certificate of the Notes to be transferred and such other evidence                (if                any) as the Registrar may reasonably require to prove the title of                the                transferor or its right to transfer the Notes (and if the instrument                of                transfer is executed by some other person on his behalf the authority                of                that person to do so), whereupon COGI shall procure that such transfers                shall be so registered. No fee will be charged by the Registrar or                COGI                for the registration of any                transfer. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 7.4 | In                the case of any transfer of Notes, the transferee shall be entitled                to an                Individual Certificate in respect of such Notes so transferred. If                the                Individual Certificate related to Notes of a higher Nominal Amount                than                the Notes transferred then the transferor shall be entitled to an                Individual Certificate for the balance of Notes held by it after                the                completion of the relevant transfer of                Notes. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 7.5 | No                application has been or is intended to be made to any stock exchange                for                any of the Notes to be listed or otherwise traded. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 7.6 |   |
|--------|-----|--------|

----

|   | 7.7 | All                instruments of transfer which shall be registered and all Individual                Certificates which are surrendered to the Registrar or COGI will                be                retained by the Registrar or COGI for a period of three (3) years                following the Final Maturity Date. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 7.8 | Any                person becoming entitled to a Note in consequence of the insolvency                or                bankruptcy of any Noteholder or of any other event giving rise to                the                transmission of such Note by operation of law may upon producing                such                evidence of its title and the relevant Individual Certificate be                registered itself as the holder of the Note or may transfer the                Note. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 7.9 | Upon                surrender to the Registrar of the relevant Certificate or Certificates,                any Noteholder shall be entitled to a replacement Certificate or                Certificates in respect of any Certificate or Certificates which                have been                mutilated or defaced. If any Certificate or Certificates are destroyed                or                lost, then upon the Noteholder indemnifying the Registrar and COGI,                in                terms reasonably acceptable to the Registrar and COGI, the Noteholder                shall be entitled to a replacement Certificate or Certificates. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **8.** | **PAYMENT                OF MONEYS** |
|--------|--------------------------------------|

| **9.** | **EVENTS                OF DEFAULT** |
|--------|--------------------------------------|

|   | (a) | COGI                fails to pay any sums due hereunder upon the relevant interest payment                date, Redemption Date or the Maturity Date of the Notes (as the case                may                be); or |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | COGI                fails to procure the issue by its transfer agents and delivery within                ten                (10) Business Days, to the parties entitled to the same, of certificates                or other appropriate evidence of title to the Common Stock arising                from                any conversion of the Notes (evidence that irrevocable instructions                for                the issuance of the shares of Common Stock were given to its transfer                agents by COGI shall be sufficient and in such circumstances shall                not                constitute an Event of Default); or |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | (c) | COGI                fails to comply to a material extent with the covenants contained                in                Clause 3 of the Loan Note Instrument;                or |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (d) | COGI                fails to comply to a material extent with any of the Conditions;                or |
|--------|-----|--------------------------------------------------------------------------------------------------------|

|   | (e) | COGI                fails to advise the Noteholders of any material circumstances which                would,                in all probability, constitute an Event of Default;                or |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (f) | COGI                or any member of the Group ceases or threatens to cease to carry                on its                business or a substantial part of its business without first obtaining                the                prior written consent of a Noteholder Majority;                or |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (g) | any                Guarantor failing to pay when due any sum due under the Subscription                Agreement (or any other agreement whereby such Guarantor guarantees                the                obligations of COGI under the Transaction Documents) of not less                than USD                100,000; or |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (h) | if                any order is made by any competent court or any resolution is passed                by                COGI for the winding up or dissolution or for the appointment of                a                liquidator of COGI (except in the case of a voluntary amalgamation                or                reconstruction of COGI on a solvent basis);                or |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (i) | if                a liquidator, administrator, receiver, receiver and manager or                administrative receiver or similar officer is appointed in relation                to the                whole or any part of its assets, rights or undertaking;                or |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (j) | if                proceedings are commenced under any law, regulation or procedure                relating                to the reconstruction or adjustment of debts;                or |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (k) | if                any order is made by any competent court for the appointment of an                administrator in relation to COGI;                or |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (l) | if                COGI becomes prevented by law or court order from performing its                obligations under the Instrument;                or |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (m) | if                any security or security documentation granted pursuant to the                Subscription Agreement is terminated (without the prior written consent                of                a Noteholder Majority) or becomes unenforceable;                or |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | (n) | if                there is a breach of any of the restrictions contained in the Lock-up                Agreements by any party to it; |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------|

|   | (o) | if                there is any breach by COGI of any material warranty or material                representation contained in the Loan Note Instrument or the Subscription                Agreement. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 9.2 | Save                in respect of any Event of Default falling under Condition 9.1(e)                above,                if there are any matters, facts or circumstances which, but for this                Condition 9.2, would constitute an Event of Default but such Event                of                Default is capable of being remedied (a “Possible Breach”) then COGI shall                have a period of 30 days (or such longer period as is reasonable                in the                circumstances and which is agreed between COGI and a Noteholder Majority,                all parties acting reasonably) from the earlier of (i) the date COGI                becomes aware, or ought reasonably to be aware, of such matters,                facts or                circumstances and (ii) the date COGI is given notice by a Noteholder                Majority in which to remedy any matters, facts or circumstances giving                rise to the Possible Breach. If COGI remedies the matters, facts                or                circumstances in accordance with this Condition 9.2 then any Event of                Default which would have arisen, but for the remediation, shall be                deemed                not to have occurred. |
|--|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 9.3 | If                an Event of Default occurs and it is not remedied in accordance with                Condition 9.2 then, on the expiry of the period allowed in Condition                9.2                to remedy the Event of Default, and upon written notice by a Noteholder                Majority, the Notes shall become immediately due and payable at the                Redemption Amount and the Noteholders shall be entitled to take such                enforcement action as they see fit in accordance with the Transaction                Documents or as may otherwise be available at law. In the event that                either (i) the Noteholders do not take such action within six months                of                becoming aware of the occurrence of the Event of Default or (ii)                the Event                of Default is remedied by action or passage of time before the Noteholders                take any enforcement action then (without prejudice to the rights                of the                Noteholders in respect of any other Event of Default which has or                may                subsequently occur) the rights of the Noteholders to take such action                in                respect of that Event of Default shall terminate and the Event of                Default                will be deemed to have been waived. |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| **10.** | **MEETINGS                OF NOTEHOLDER****S** |
|---------|------------------------------------------------|

|   | 10.1 | COGI                may (and shall at the written request of a Noteholder Majority) at                any                time convene a meeting of the Noteholders by not less than 7 (or                such                shorter period as a Noteholder Majority may agree) days' notice to                the                Noteholders, specifying the place, day and hour of the meeting and                the                terms of any resolution (an “Extraordinary Resolution”) to be proposed at                the meeting and which is to be passed by a Noteholder Majority. The                meeting shall have power by an Extraordinary Resolution to approve                (subject to the consent of COGI in writing) any modification, abrogation                or compromise or any arrangement in respect of the rights of the                Noteholders against COGI and to assent to any modification of the                Instrument to the extent that it affects the Notes. No variation                or                modification of the rights of the Noteholders or of any provision                of the                Instrument or such Notes shall be made without the prior approval                of an                Extraordinary Resolution by the Noteholders in accordance with this                Condition 10.1. A poll may be demanded either by the chairman of                the                meeting or by a Noteholder Majority. On a poll, a Noteholder shall                have                one vote for every USD 1 in Nominal Amount of Notes registered in                its                name. The non-receipt by any Noteholder of or the accidental omission                to                give any Noteholder notice of any such meeting shall not invalidate                the                proceedings at that meeting. An Extraordinary Resolution passed at                a                meeting of the Noteholders duly convened and held in accordance with                this                Condition 10.1 shall be binding on each of the Noteholders whether                present                or not present at such meeting. A resolution signed by a Noteholder                Majority shall be as valid and effectual as if it had been passed                at a                meeting of the Noteholders duly convened and held and such resolution                in                writing may be contained in one document or in several documents                in like                form each signed by or on behalf of one or more of the Noteholders. |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.2 | The                quorum at any meeting shall be Noteholders holding or representing                by                proxy seventy-five per cent (75%) of the Aggregate Nominal Amount                outstanding of the Notes. If within a quarter of an hour from the                time                appointed for any meeting, a quorum is not present the meeting shall                stand                adjourned to such day (not being less than 5 or more than 21 days                after                the date of the meeting from which such adjournment takes place)                and to                such time and place as the chairman of the meeting may determine.                At the                adjourned meeting the quorum shall comprise of Noteholders holding                or                representing by proxy a minimum of seventy-five per cent (75%) of                the                Aggregate Nominal Amount outstanding of the Notes. Notice of an                adjournment shall be given in like manner as for the original                meeting. |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | 10.4 | Any                Noteholder being a body corporate may appoint a representative to                attend                and vote on such Noteholder’s behalf at meetings of Noteholders. Any                Noteholder being an individual may appoint an attorney or proxy to                attend                and vote on such Noteholder’s behalf at meetings of Noteholders. The                authority of any such representative, attorney or proxy to attend                and vote                shall be determined by the chairman of the relevant meeting of                Noteholders, acting reasonably. |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **11.** | **ALTERATION                OF THE INSTRUMENT** |
|---------|-------------------------------------------------|

| **12.** | **NOTICES** |
|---------|-------------|

|   | 12.1 | must                be in writing; |
|--------|------|------------------------------------|

|   | 12.2 | may                be given to COGI at its Principal Office for the time                being; |
|--------|------|------------------------------------------------------------------------------------------------|

|   | 12.3 | may                be given to each Noteholder at its address as shown in the Register                or                such other address as it may notify to COGI for such purpose;                and |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 12.4 | shall                be deemed to have been served: |
|--------|------|-----------------------------------------------------|

|   | 12.4.1 | if                delivered by hand, at the time of delivery;                or |
|--------|--------|---------------------------------------------------------------------------------|

|   | 12.4.2 | if                posted, at 10.00 a.m. on the second (or, in the case of air mail,                fourth)                Business Day after it was put into the post;                or |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 12.4.3 | if                sent by facsimile on receipt of a successful transmission report,                or if                despatched after 5.00 p.m. on any Business Day at 10.00am on the                Business                Day following the date of receipt of a successful transmission                report. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| **13.** | **INSTRUMENT** |
|---------|----------------|

| **14.** | **EXPENSES** |
|---------|--------------|

| **15.** | **THIRD                PARTIES** |
|---------|----------------------------------|

| **16.** | **LAW** |
|---------|---------|

|   | 16.1 | The                Instrument, the Schedules and the Notes shall be governed by and                construed                in accordance with the laws of England and                Wales. |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 16.2 | Each                of the parties agrees that the courts of England are to have non-exclusive                jurisdiction to settle any dispute (including claims for set-off                and                counter claims) which may arise in connection with the creation,                validity,                effect, interpretation, or performance of, or of legal relationships                established by, the Instrument or otherwise arising in connection                with the                Instrument, the Schedules and the Notes and for such purposes irrevocably                submit to the jurisdiction of the English                courts. |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 16.3 | 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                Condition                16.2. |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**SCHEDULE      3**

**Conversion**

| **1** | **Definitions** |
|-------|-----------------|

**Company**

**Conversion      Price**

**Converted      Stock**

**Convertible      Balance**

**Final      Company Conversion Period**

**First      Company Conversion Period**

**Listing**

----

**Minimum      Stock Price**

| (1) | During                the First Company Conversion Period, USD                2.50; |
|-----|-------------------------------------------------------------------------------------|

| (2) | During                the Second Company Conversion Period, USD 2.90;                and |
|-----|------------------------------------------------------------------------------------------|

| (3) | During                the Final Company Conversion Period, USD                3.50. |
|-----|-------------------------------------------------------------------------------------|

**OTCBB**

**Second      Company Conversion Period**

| **2** | **Noteholders’                right to convert** |
|-------|--------------------------------------------------------|

| 2.1 | At                any time whilst any of the Notes remains due and outstanding, a Noteholder                Majority or the Noteholders (acting under an Extraordinary Resolution                of                the Noteholders in terms of the Conditions) may serve notice on COGI                (in                the form set out in Schedule 5 to the Loan Note Instrument) requiring                that                the Convertible Balance is converted into Common                Stock. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.2 | Any                such notice shall specify the date upon which the conversion is to                take                place (being not earlier than 14 days after the date such notice                is                served) and full details of the person(s) to whom the certificate(s)                representing the Common Stock arising from the conversion is to be                issued. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.3 | The                number of units of Common Stock to be issued upon any conversion                in terms                of this Paragraph 2 (the “Noteholder Conversion Shares”) shall be the                Convertible Balance divided by the Conversion Price, rounded up or                down to                the nearest whole unit of Common Stock. As between the Noteholders                the                Conversion Shares shall be allocated, as closely as possible, pro                rata in                accordance with the Nominal Amount of Notes held by each Noteholder,                rounded up or down to the nearest whole unit of Common                Stock. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 2.4 | If                any Certificates are not delivered to COGI with the notice referred                to in                Paragraph 2.1, then the relevant Noteholders will be required to                indemnify                COGI and the Registrar (in terms reasonably acceptable to COGI and                the                Registrar) in relation to those certificates not so delivered, which                Certificates will be deemed to have been automatically cancelled                immediately upon the issue of the certificates for the Common Stock                arising from the Conversion. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **3** | **Company’s                right to convert** |
|-------|-----------------------------------------------------|

| 3.1 | Subject                to Paragraph 3.4, at any time during the period commencing on the                first                day of the First Company Conversion Period and ending on the last                day of                the Final Company Conversion Period COGI may serve notice on the                Noteholders requiring that the Convertible Balance is converted into                Common Stock. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.2 | Any                such notice, in the case of a conversion due to the circumstances                detailed                in Paragraph 3.4(a), shall state that the conversion shall take place                forthwith upon the conditions in Paragraph 3.5 being fulfilled and                shall                require the Noteholders to provide, no later than 3 Business Days                before                the date of conversion, the relevant Certificates and full details                of the                person(s) to whom the certificate(s) representing the Common Stock                arising                from the conversion is to be issued. Any such notice, in the case                of a                conversion due to the circumstances detailed in Paragraph 3.4 (b),                shall                specify the date upon which the conversion is to take place (being                not                earlier than 14 days after the date such notice is served) and shall                require the Noteholders to provide, no later than 3 business days                before                the date of conversion, the relevant Certificates and full details                of the                person(s) to whom the certificate(s) representing the Common Stock                arising                from the conversion is to be                issued. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.3 | The                number of units of Common Stock to be issued upon any conversion                in terms                of this Paragraph 3 (the “Company Conversion Shares”) shall be the                Convertible Balance divided by the Conversion Price, rounded up or                down to                the nearest whole unit of Common Stock. As between the Noteholders                COGI                Conversion Shares shall be allocated, as closely as possible, pro                rata in                accordance with the Nominal Amount of Notes held by each Noteholder,                rounded up or down to the nearest whole unit of Common                Stock. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 3.4 | COGI                may only serve notice under Paragraph 3.1 if                either: |
|-----|-----------------------------------------------------------------------------------------|

|  | (a) | at                the time of service of the notice a Listing is proposed and the price                at                which the units of Common Stock are to be listed is at least the                Minimum                Stock Price applicable to the date upon which the notice is served;                or |
|--|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (b) | the                daily volume weighted average price of the Common Stock as quoted                on OTCBB                or any other US National Exchange which COGI’s securities are then listed                has, for at least 40 consecutive trading days ending on the date                of                service of the notice, closed at no less than the Minimum Stock Price                applicable to the date upon which the notice is                served. |
|--|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.5 | Any                conversion notice served in the case of a proposed Listing (as referred                to                in Paragraph 3.4 (a)) shall be conditional upon (1) the Listing being                completed and (2) the relevant Minimum Stock Price being achieved                in the                Listing. If both these conditions are not met then, without prejudice                to                the right of COGI to serve a conversion notice at any later date,                the                notice shall be deemed to have been withdrawn and the Notes shall                not be                converted at such time unless the majority of Noteholders agree to                waive                the Minimum Stock Price criterion. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.6 | If                any Certificates are not delivered to COGI in accordance with Paragraph                3.2, then the relevant Noteholders will be required to indemnify                COGI and                the Registrar (in terms reasonably acceptable to COGI and the Registrar)                in relation to those certificates not so delivered and which will                be                deemed to have been automatically cancelled immediately upon the                issue of                the certificates for the Common Stock arising from the                Conversion. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **4** | **Interest** |
|-------|--------------|

| **5** | **Termination                of Rights** |
|-------|------------------------------------------|

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**SCHEDULE      4**

**The      Legend**

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**SCHEDULE      5**

**Form      of Notice of Conversion**

**Instrument**

***Alt      1***

***Alt      2***

| Serial                Number | Nominee                for Noteholder |
|------------------------------|---------------------------------------|

| Authorised                  Signatory for [ |   | ]      |
|---------------------------------------------|--------|--------|
|                                        |   |   |
| Authorised                  Signatory for [ |   | ]      |
|                                        |   |   |
| Authorised                  Signatory for [ |   | ]      |

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**In      Witness**

| **EXECUTED**(but                not delivered until the date hereof) as a deed by **CODA                OCTOPUS GROUP, Inc.**acting                by any two directors: |   | )))))  |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
|                                                                                                                                                                     |   |   |
|                                                                                                                                                                     |   |   |
| Director                                                                                                                                                                 |   |   |
|                                                                                                                                                                     |   |   |
|                                                                                                                                                                     |   |   |
| Director                                                                                                                                                                 |   |   |

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