Document:

Unassociated Document

    
      
        Execution
Copy

         

         

        
          

          

        

      

       

      

    

    CASH
CONTROL FRAMEWORK AGREEMENT

     

    by
and between

     

    CODA
OCTOPUS GROUP, INC. and its wholly owned Companies listed in Schedule 3
hereto

     

    The
Royal Bank of Scotland plc

     

    Greenhouse
Investments Limited

     

    

     

      
        

      

    

    
      Dated:
16 March 2009

      
        
 

      

    

    
      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      THIS
AGREEMENT is made the 16 March 2009

    

     

    Parties

     

    
      	
              (1)

            	
              Coda Octopus Group
      Inc, a
      Delaware corporation, whose office is at 164 West 25th
      Street, New York, New York 10001 (COGI) and those of its
      wholly-owned subsidiaries that are identified in Schedule 3
      hereto;

            

    

     

    
      	
              (2)

            	
              The Royal Bank of Scotland
      plc, (RBS)
      incorporated in Scotland, (registered number 90312) acting through its
      London offices at 135 Bishopsgate, London EC2M 3UR;
  and

            

    

     

    
      	
              (3)

            	
              Greenhouse Investments Limited
      (GIL), a company incorporated under the laws of Jersey, with its
      main offices at 12 – 14 David Place, St Helier, Jersey JE2 4TD, British
      Channel Islands and appointed by the Noteholder to, inter alia, manage the
      Bank Accounts (as the term is defined below) and the remittances to be
      made in respect of the Book Debts.

            

    

     

    Background

     

    
      	
              (A)

            	
              WHEREAS COGI is a party
      to a Subscription Agreement dated 21 February 2008 (Subscription Agreement)
      and certain related documents (together Transaction Documents) pursuant to
      which it has issued certain Notes to RBS, and under which its subsidiaries
      are guarantors of COGI’s obligations under such
  Notes.

            

    

     

    
      	
              (B)

            	
              COGI
      and its subsidiaries have granted security interests to RBS in their
      property to secure the prompt payment, performance and discharge of the
      obligations undertaken in the Transaction
  Documents.

            

    

     

    
      	
              (C)

            	
              Under
      the Transaction Documents, a portion of the proceeds of the Notes was for
      the specific purpose identified in the Confidentiality Agreement dated 21
      February 2008 (hereinafter referred to as Specific
      Purpose).

            

    

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    
      	
              (D)

            	
              WHEREAS the Specific
      Purpose has not been fulfilled within the time stipulated in the
      Transaction Documents and no alternative use of proceeds has been approved
      by the Noteholder Majority at the date of this
  Agreement.

            

    

     

    
      	
              (E)

            	
              WHEREAS the Parties
      agree, in order to preserve the Specific Purpose amounts to satisfy either
      the Specific Purpose or any demand the Noteholder Majority may make in
      accordance with Clause 3.4 (Redemption if no acquisition) of the Loan Note
      Instrument, to remit to the Bank Accounts the Specific Purpose amounts and
      place the Bank Accounts under the management of the Agent appointed
      specifically for this purpose.

            

    

     

    
      	
              (F)

            	
              WHEREAS COGI has
      remitted US$2,151,000 of the Specific Purpose amounts to the Bank Accounts
      which represent only a part of the Special Purpose amounts provided for
      under the Transaction Documents.

            

    

     

    
      	
              (G)

            	
              WHEREAS the Bank Account
      Security has been (or will be) entered into by COGI in order to grant
      fixed security over the Bank Accounts and the amounts standing to the
      credit of the Bank Accounts from time to
time.

            

    

     

    
      	
              (H)

            	
              WHEREAS without
      derogating from or otherwise varying, modifying, amending, waiving or
      consenting to the waiver or impairment of any of the rights including
      future rights of the Subscriber or Noteholder under the Transaction
      Documents, it is recognised that COGI and its group members require
      ongoing working capital.

            

    

     

    
      	
              (I)

            	
              Therefore it is agreed,
      subject to the terms herein and the Conditions Precedent (without
      obligation and always subject to the overriding rights of the Noteholder
      under the Transaction Documents), that  RBS, through the Agent,
      may from time to time  permit the release of funds standing to
      the credit of the Bank Accounts such amounts as the Agent deems in its
      sole discretion on the condition that COGI and/or its group members remit
      to the Bank Accounts all receivables from the Book Debts within each Book
      Debt Schedule and to replenish during the term of this Agreement those
      amounts required under the Loan Note Instrument to be set aside for the
      Specific Purpose.

            

    

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    
      	
              (J)

            	
              NOW,
      THEREFORE, in consideration of the premises and the representations,
      warranties, covenants and acts referred to herein, and for good and
      valuable consideration, the receipt and adequacy of which are hereby
      acknowledged by each Invoicing Unit, the Parties agree as
      follows:

            

    

     

    Agreed
terms

     

    
      	
              1.

            	
              Interpretation

            

    

     

    
      	
              1.a

            	
              The
      definitions and rules of interpretation in this Clause apply in this
      Agreement.

            

    

     

    Administrative Fees: the fees
provided for in Clause 6.1(a).

     

    Agent: GIL or any replacement
agent which RBS may, in its sole discretion, appoint as its agent in connection
with this Agreement.

     

    Associate: any partner,
director, shareholder or employee of COGI, any Invoicing Unit or any Related
Company or any member of the immediate family of any such partner, director,
shareholder or employee.

     

    Bank Accounts: the Bank
Accounts to which Invoicing Units shall instruct their Customers relating to a
Book Debt to remit the Invoice Receipts, the details of which are:

     

    Bank Account Number 1 (US Customers):
Chase Bank; 245 7th Avenue;
New York, NY 10001; ABA Routing Number 021000021; Checking account number 792266983; Account name Coda
Octopus Group, Inc.; 164 west 25th street;
6th
floor; New York, NY 10001.

     

    Bank Account Number 2 (Non-US
Customers): Royal Bank of Scotland International Limited, Account Number
1028-50657863, Sort Code 16-10-28 IBAN Number
GB14RBOS16102850657863.

     

    Bank Account Security: means
each security agreement (entered into, or to be entered into) in respect of each
Bank Account.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

       

    

    Book Debts: means an amount
calculated at Gross Invoice Amount which is owed to an Invoicing Unit for goods
supplied or services performed and which is included in ea Book Debt
Schedule.

     

    Book Debt Schedule: the
schedule in the form set out in Schedule 1 hereof showing the Book Debts and the
proceeds of which shall be paid into one of the Bank Accounts and against which
a Release is requested to be made.

     

    Commencement: the date of this
Agreement.

     

    COGI Group: COGI and all its
Subsidiaries which are listed in Schedule 3 hereto.

     

    Conditions Precedents: those
set out in Schedule 2 hereof and which shall, unless waived in writing, be a
condition precedent to each Release.

     

    Cost Reduction Plan: COGI’s
cost reduction plan set out in Binding and Enforceable Memorandum of
Understanding dated February 6, 2009 which is deemed amended to reflect the
further Cost Reduction set forth in paragraph 2 of  Schedule
2.

     

    Customer:  any
person to whom any Invoicing Unit supplies goods or services in respect of a
Book Debt.

     

    Gross Invoice Amount: is the
total amount of a Book Debt including VAT and other Sales Taxes.

     

    Deductions: all Fees and
Charges, Disbursements and Impairments.

     

    Disbursements:  all
amounts which are clearly identifiable as being attributable to any of the
Invoicing Units and which are not covered by the Agent’s usual service including
credit reference fees, legal fees for Book Debt recovery and other such matters,
but they will not include travelling costs, stationery costs and our bank
charges or indeed our overheads.

     

    Excess Revenues: all of the
COGI Group revenues that exceed its quarterly forecasted revenues shown in its
business plan set forth in its Binding and Enforceable Memorandum of
Understanding dated February 6, 2009.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

       

    

    Invoicing Unit: the lawful
owner of the Book Debt within the COGI Group that issued the invoice relating to
the Book Debt to the Customer.

     

    Invoice Receipt: the amounts
remitted by the Customer to one of the Bank Accounts in respect of the Book
Debts shown in the Book Debt Schedule.

     

    Impairments: are those
suffered in respect of a Book Debt included as a result of returns, credit
notes, age, dispute, adverse currency fluctuations, insolvency of the Customer
who owes the Book Debt or any other defect which results in the Book Debt being
likely to be uncollectible from the Customer.

     

    Loan Note Instrument: the
instrument under which the Notes are constituted and which was executed by COGI
on 21 February 2008.

     

    Non-Qualifying Book Debts (NQBD):
are Book Debts relating to (i) private individuals; or (ii) cash sales;
or (iii) sales to a Related Company; or pro forma sales; or (v) any invoice that
is 90 days or more past due.

     

    Noteholder Majority: has the
meaning ascribed to it in the Transaction Documents.

     

    Notes: has the meaning
ascribed to it in the Transaction Documents.

     

    Release or Released (as the context
requires): such amounts as the Agent may determine in its absolute
discretion, to be released from time to time from the Bank Account against
Validated Book Debts.

     

    
      	
               
      

            	
              Related Company: means a
      company within the COGI Group, whether at the date of this Agreement or
      subsequent to the date of this
Agreement.

            

    

     

    Transaction Documents: has the
meaning in the Subscription Agreement, Loan Note Instrument and related
documents.

     

    Validated Book Debts: A Book
Debt of a member of COGI Group (which does not comprise any NQBD) listed in a
Book Debt Schedule and in relation to which a Release from time to time is
permitted by the Agent.

     

    Warranties: the warranties set out in
this Agreement.

     

    
      	
              1.b

            	
              Clause
      and schedule headings do not affect the interpretation of this
      agreement.

            

    

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    
      	
              1.c

            	
              A
      person includes a
      corporate or unincorporated body.

            

    

     

    
      	
              1.d

            	
              Words
      in the singular include the plural and in the plural include the
      singular.

            

    

     

    
      	
              1.e

            	
              A
      reference to one gender includes a reference to the other
      gender.

            

    

     

    
      	
              1.f

            	
              The
      Background shall form part of this Agreement.

            

    

     

    
      	
              1.g

            	
              Writing or written includes faxes
      but not e-mail.

            

    

     

    
      	
              2.

            	
              Request
      for Release

            

    

     

    
      	
              2.1.

            	
              A
      member of the COGI Group may submit a request in writing to the Agent for
      a specific amount from either Bank Account (a Release Request)
      provided that such request:

            

    

     

    
      	
               
      

            	
              (a)

            	
              confirms
      that the proposed Release will be used for the COGI Group’s working
      capital requirements;

            

    

     

    
      	
               
      

            	
              (b)

            	
              confirms
      that all representations and warranties given by COGI and the Group under
      clause 11 (Warranties) of this Agreement are true and
      accurate;

            

    

     

    
      	
               
      

            	
              (c)

            	
              is
      accompanied by a Book Debt Schedule containing: (1) Validated Book Debts
      with a face value of at least 125% of the amount requested to be Released
      and (2) details of all Impairments;
and

            

    

     

    
      	
               
      

            	
              (d)

            	
              identifies
      the account to which the Release will be remitted if the Release is
      released by the Agent.

            

    

     

    
      	
              2.2

            	
              All
      representations and warranties given by COGI and the Group under Clause 11
      (Warranties) of this Agreement are deemed repeated each time a Release
      Request is made and such representations and Warranties shall be construed
      as repeated accordingly.

            

    

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    
      	
              3.

            	
              Conditions
      of a Release

            

    

     

    
      	
              3.1

            	
              The
      Agent will only consider any Release Request if, on or prior to the date
      of the request for the first Release Request under this Agreement, the
      Agent (or RBS as the case may be) has received the Conditions Precedent in
      form and substance satisfactory to the Agent (or RBS as the case may
      be).

            

    

     

    
      	
              3.2

            	
              The
      Agent will only consider a request for any Release (including the first
      Release), if, on the date of the request and the date on which the Agent
      agrees (if it so agrees) to release the
Release:

            

    

     

    
      	
               
      

            	
              (a)

            	
              the
      representations and Warranties given by COGI and the Group under Clause 11
      (Warranties) of this Agreement are true and
  accurate;

            

    

     

    
      	
               
      

            	
              (b)

            	
              COGI
      and/or each of its other Invoicing Units is/are not in breach of execution
      on the Cost Reduction Plan and have provided to the Agent an updated
      report in writing detailing the achievement to date against the Cost
      Reduction Plan (such report to contain the same level of detail as in the
      Appendix to the Cost Reduction Plan);
and

            

    

     

    
      	
               
      

            	
              (c)

            	
              COGI
      and/or each of its other Invoicing Units is not in breach of any other
      term of this Agreement or the Transaction
  Documents.

            

    

     

    
      	
              3.3

            	
              Any
      Release which the Agent may consent to will be on the further conditions
      that:

            

    

     

    
      	
               
      

            	
              (a)

            	
              the
      proceeds of the Release are used in the ordinary course of business for
      the working capital of the COGI Group as is set out in its business plan;
      and

            

    

     

    
      	
               
      

            	
              (b)

            	
              the
      proceeds of all the Validated Book Debts within the relevant Book Debt
      Schedule are paid into one of the designated Bank
  Accounts.

            

    

     

    
      	
              3.4.

            	
              Nothing
      in this Agreement shall put any obligation on the Agent or RBS to consent
      to the Release and all parties to this Agreement expressly agree that the
      Agent and/or RBS has an unfettered discretion as to whether or not to
      permit any Release.

            

    

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    
      	
              3.5.

            	
              Nothing
      in this Agreement, including but not limited to the provisions set out in
      Clause 22 (Transaction Documents) shall be construed as varying the
      permitted use of the proceeds provisions under any of (and as defined in)
      the Transaction Documents entered into on or around 21 February 2008 or
      derogating from the overriding rights of the Noteholder Majority to serve
      written notice under Clause 3.4 of the Loan Note
    Instrument.

            

    

     

    
      	
              4.

            	
              Impairments
      of Book Debts and Specific Purpose
Fund

            

    

     

    
      	
              4.1.

            	
              The
      Agent shall be entitled at any time to reduce any permitted Release by a
      sum equivalent to any Book Debt within the Book Debt Schedule which
      suffers or which, in the reasonable judgment of the Agent, is likely to
      suffer Impairment.

            

    

     

    
      	
              4.2.

            	
              If
      any Customer becomes entitled to a credit or Customer discount in respect
      of any Book Debt  the relevant Invoicing Unit will notify the
      Agent immediately and send a copy of the credit note in respect of the
      credited or discounted Book Debt with any other documents and information
      which the Agent may request.

            

    

     

    
      	
              4.3.

            	
              COGI
      shall procure that on a quarterly basis any gross profits on the Excess
      Revenues realised in the financial quarter are within 30 days of the end
      of the relevant quarter deposited in the  Bank Accounts to make
      up the shortfall in the Specific Purpose amounts stipulated in the
      Transaction Documents. This obligation shall cease to apply when the Bank
      Accounts are replenished to an amount in excess of that required for the
      Specific Purpose under the Transaction Documents.  A certified
      statement of the Company’s auditors shall be conclusive of what the gross
      profits on the Excess Revenues are in any one financial
      quarter.

            

    

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    
      	
              5.

            	
              Releases

            

    

     

    
      	
              5.1.

            	
              The
      Agent will inform COGI whether it has granted its consent to a Release
      against a Book Debt Schedule within three (3) working days of the
      acceptance of that Book Debt Schedule by the
  Agent.

            

    

     

    
      	
              6.

            	
              Fees

            

    

     

    
      	
              6.1.

            	
              During
      the term of this Agreement, the following Fees will
  apply:

            

    

     

    
      	
               
      

            	
              (a)

            	
              COGI
      shall pay the Agent an Administrative Fee of USD 10,000 per month payable
      in advance and COGI agrees that the Agent may deduct this from the Bank
      Accounts.

            

    

     

    
      	
               
      

            	
              (b)

            	
              All
      bank charges for making the Release and Disbursements shall be borne by
      COGI.

            

    

     

    
      	
              7.

            	
              Collection
      from Customers

            

    

     

    
      	
              7.1.

            	
              The
      Invoicing Unit shall collect the debts within each Book Debt Schedule and
      procure that the proceeds of these are remitted to one of the Bank
      Accounts.

            

    

     

    
      	
              7.2.

            	
              COGI
      and Invoicing Units shall direct Customers to make payments in respect of
      the Book Debts subject to a Book Debt Schedule in relation to which a
      Release has or will be made to the Bank Account Number 1 (in the case of
      customers located in the USA) and Bank Account Number 2 (in the case of
      customers located outside of the
USA).

            

    

     

    
      	
              7.3.

            	
              If
      a Customer makes a general payment to the Invoicing Unit without
      specifying which debts are covered by the payment then the Invoicing Unit
      shall apply it firstly against any Book Debts
  outstanding.

            

    

     

    
      	
              8.

            	
              Disputed
      Goods

            

    

     

    If any
goods relating to any Book Debt are returned by a Customer or delivery is
refused or the goods are rejected or repossessed by the relevant Invoicing Unit,
it will issue a credit note to the Customer within 10 days of the goods being
returned, rejected or repossessed and provide a copy of such credit note to the
Agent. In addition, COGI will repay to the Bank Accounts the amount of such
credit note.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    
      	
              9.

            	
              Bank
      Accounts

            

    

     

    
      	
              9.1.

            	
              The
      amounts standing to the credit of each Bank Account are legally owned by
      COGI alone and no other member of the COGI Group has any rights and/or any
      other entitlement in and/or over those amounts standing to the credit of
      each Bank Account and the Bank Accounts are or will be subject to a first
      ranking security interest in favour of
RBS.

            

    

     

    
      	
              9.2

            	
              If
      an amount (a Relevant
      Amount) is paid into a Bank Account by an Invoicing Unit (other
      than COGI) (a Relevant
      Unit) then COGI will owe the Relevant Unit an inter-company
      receivable in an amount equal to the Relevant Amount (the Receivable).  Such
      Receivable will not become repayable to the Relevant Unit by COGI on an
      actual or contingent basis until all amounts under the Notes have been
      paid and satisfied irrevocably in full.  Each Receivable will be
      fully subordinated to all and any payments by any member of the COGI Group
      under or in connection with the Notes and no Relevant Unit may make any
      demand, take any action to recover, make any claim in relation to any
      Receivable until all amounts under the Notes have been paid and satisfied
      irrevocably in full.

            

    

     

    
      	
              9.3.

            	
              COGI
      and its Invoicing Units shall keep a permanent and accurate record to show
      all transactions in relation to Book Debts and payments in and out of the
      Bank Accounts and upon request by the Agent shall make such records
      available to the Agent or RBS.

            

    

     

    
      	
              10.

            	
              Accounting
      and Access to Information

            

    

     

    COGI and each Invoicing Unit agrees
to:

     

    
      	
               
      

            	
              (a)

            	
              keep
      up to date and proper accounting records, in such detail as may be
      reasonably requested by the Agent and allow the Agent or its properly
      authorised representatives to enter any of the premises of any of its
      Invoicing Units whenever it wishes to inspect them and such other papers
      as the Agent may wish relating to the COGI Group business and Book Debts
      generally and allow the Agent to take possession of such material to
      enable the Agent or its  representatives  to make
      copies provided that the Agent returns such material to COGI or the
      relevant Invoicing Unit within a reasonable
  time;

            

    

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              (b)

            	
              permit
      the Agent and its representative to verify with the Invoicing Units’
      Customers by sampling or such other means as the Agent may deem
      appropriate, the existence and collectability of Book Debts at any
      time  during the term of this Agreement and as long as
      any  Book Debts remain
outstanding;

            

    

     

    
      	
               
      

            	
              (c)

            	
              endeavour
      in good faith to keep the Agent informed at all times of the financial
      position of COGI and each Invoicing Unit Customers and the validity of
      each Book Debt and in particular of any counter-claims, right of set off
      raised by a Customer in relation to any Book Debt, Impairment and assist
      the Agent in every way to safeguard its
  interests;

            

    

     

    
      	
               
      

            	
              (d)

            	
              as
      and when produced, send the Agent management accounts for the COGI Group
      business in a format and at intervals acceptable to the
    Agent;

            

    

     

    
      	
               
      

            	
              (e)

            	
              if
      the Agent requires, send to it  within 10 days from the end of
      each month an aged list of each Invoicing Unit’s
  creditors;

            

    

     

    
      	
               
      

            	
              (f)

            	
              report
      to the Agent promptly about reclaimed, repossessed or returned
      merchandise, Customers' claims and disputes, and any other matters
      affecting any Book Debts;

            

    

     

    
      	
               
      

            	
              (g)

            	
              notify
      the Agent in writing

            

    

     

    
      	
               
      

            	
              (i)

            	
              as
      soon as becoming aware of any event which affects or is likely to affect
      COGI and each Invoicing Unit’s
Warranties;

            

    

     

    
      	
               
      

            	
              (ii)

            	
              of
      any existing mortgages, charges, liens or other security over COGI or any
      of its Invoicing Units assets;

            

    

     

    
      	
               
      

            	
              (iii)

            	
              of
      any company which becomes or ceases to be a Related Company;
      and

            

    

     

    
      	
               
      

            	
              (iv)

            	
              of
      any Customer which is an Associate.

            

    

     

    
      	
              11.

            	
              Warranties

            

    

     

    
      	
              11.1.

            	
              COGI
      and each of the other Invoicing Unit warrants generally
    that:-

            

    

     

    
      	
               
      

            	
              (a)

            	
              The
      obligations to be assumed by COGI and each Invoicing Unit in this
      Agreement are valid binding and enforceable on COGI and each of the
      Invoicing Unit in respect of the Book Debts in accordance with their terms
      and in entering into this Agreement COGI and each of its Invoicing Unit
      will not be in breach of any existing contractual
    obligations.

            

    

     

    
      	
               
      

            	
              (b)

            	
              COGI
      and each Invoicing Unit has the requisite corporate power and authority to
      enter into and to consummate the transactions contemplated by herein
      including dealing with the Book Debts within the Book Debt Schedule in the
      manner provided for herein and otherwise to carry out its obligations
      hereunder and thereunder.  The execution and delivery of this
      Agreement by COGI and each other Invoicing Unit and the consummation by
      each member of the COGI Group which has signed this Agreement of the
      transactions contemplated hereby have been duly authorised by all
      necessary action on the part of COGI and each member of the COGI Group
      which has signed this Agreement and no further action is required by COGI
      or each of its other Invoicing Unit, their board of directors or its
      stockholders or shareholders in connection
  therewith.

            

    

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              (c)

            	
              No
      member of the COGI Group has taken any corporate action or any other step
      nor have any legal proceedings been threatened or served for the
      winding-up, administration, receivership, administrative receivership or
      other insolvency or recovery
process.

            

    

     

    
      	
               
      

            	
              (d)

            	
              No
      member of the COGI Group is in breach or default under any agreement to
      which it is a party or which may affect it or any of its assets to an
      extent or in a manner which might have a material adverse effect on the
      business or financial condition of any member of the COGI
      Group.

            

    

     

    
      	
               
      

            	
              (e)

            	
              All
      financial statements delivered to the Agent unless otherwise expressly
      stated have been prepared in accordance with US GAAP and UK GAAP (in
      respect of Invoicing Units in the United Kingdom) consistently applied and
      give a true and fair view of the financial condition of that Invoicing
      Unit or the COGI Group at the date as of which they were prepared and the
      result of the Invoicing Unit or COGI Group operations for the period to
      which they relate.

            

    

     

    
      	
               
      

            	
              (f)

            	
              All
      information provided by COGI or any of its Invoicing Units is true
      complete, accurate and up to date in all material respects and neither
      COGI nor any of its Invoicing Units is aware of any material facts or
      circumstances that have not been fairly disclosed to  the Agent
      in writing as an annex to a Book Debt Schedule which if disclosed might
      adversely affect the willingness of RBS or the Agent  to enter
      into this Agreement or accept any person to be an indemnifier of COGI and
      its Invoicing Units obligations and liabilities such as, but not limited,
      to invoices from related  third
  parties.

            

    

     

    
      	
               
      

            	
              (g)

            	
              For
      the purposes of the Warranties given herein, nothing in the public domain
      including any of COGI’s Securities Exchange Commission (SEC) filings
      including its quarterly and annual filings, shall be deemed notice or
      serve to qualify in any way the representations and Warranties made herein
      unless COGI has specifically brought such matter to the attention of RBS
      or the Agent in writing.

            

    

     

    
      	
              11.2.

            	
              COGI
      and each Invoicing Unit warrant and undertake in respect of each Book Debt
      that:-

            

    

     

    
      	
               
      

            	
              (a)

            	
              No
      Invoicing Unit will waive or modify its normal trading terms with any
      Customer without obtaining the Agent’s prior written consent nor will COGI
      or the relevant Invoicing Unit extend the time for
  payment;

            

    

     

    
      	
               
      

            	
              (b)

            	
              the
      relevant Invoicing Unit has already performed all the obligations required
      for enforcement of the Book Debt including delivery of goods or
      performance of services and is not aware of any actual or threatened
      dispute arising from or relating to such
  obligations;

            

    

     

    
      	
               
      

            	
              (d)

            	
              the
      Customer will pay the full amount of each Book Debt no later than 90 days
      from the end of the month in which the relevant Book Debt Schedule was
      signed and dated;

            
	 	 	 
	 	      
              (e)

            	      
              the
      Customer has an established place of business, is not connected or
      associated with the relevant Invoicing Unit (owner of the Book Debt) and
      has no right which would reduce or extinguish the Gross Invoice Amount of
      the Book Debt which is subject to the Book Debt
      Schedule.

            
	 	 	 
	 	(f)	the
      supply contract giving rise to that Book
Debt:

    

     

    
      	
               
      

            	
              (i)

            	
              is
      valid, binding and enforceable against the Customer;

            
	 	 	 
	 	      
              (ii)

            	      
              has
      been made in the ordinary course of
  business;

            

    

     

    
      	
               
      

            	
              (iii)

            	
              contains
      no prohibition against that would invalidate the arrangements contemplated
      herein;

            

    

     

    
      	
               
      

            	
              (iv)

            	
              is
      not regulated by the Consumer Credit Act 1974 or subordinate legislation
      (or any equivalent legislation in any other jurisdiction);
    or

            
	 	 	 
	 	      
              (v)

            	      
              provides
      for payment in US$ or in GB£ or
EUROs.

            

    

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              (g)

            	
              Each
      Invoicing Unit has taken all reasonable steps to ascertain the
      creditworthiness of the Customer prior to the delivery of goods or the
      rendering of services;

            

    

     

    
      	
               
      

            	
              (h)

            	
              Neither
      COGI nor the relevant Invoicing Unit has any reason to believe that the
      Customer will be unable to, or will not for any reason, pay the Book Debt
      in full when it falls due;

            
	 	 	 
	 	      
              (i)

            	      
              the
      Book Debt:

            

    

     

    
      	
               
      

            	
              (i)

            	
              is
      a bona fide Book Debt owed by the Customer to the relevant Invoicing Unit
      in the amount notified to the Agent by COGI or its other Invoicing
      Unit;

            

    

     

    
      	
               
      

            	
              (ii)

            	
              has
      not been sold, assigned (whether absolutely or by way of security),
      mortgaged, charged, pledged, hypothecated or otherwise disposed of or
      transferred to, or encumbered in favour of, to any other person, nor has
      any agreement been made to do so;
and

            

    

     

    
      	
               
      

            	
              (iii)

            	
              is
      not subject to withholding tax; and

            

    

     

    
      	
               
      

            	
              (j)

            	
              the
      Customer has no right of set-off, deduction, abatement or counterclaim in
      respect of the Book Debt.

            

    

     

    
      
        	
                12

              	
                Undertakings

              

      

       

      
        
          	
                  12.1

                	
                  Negative
      Undertakings

                

        

         

      

    

    Except as
is provided herein neither COGI nor any of its Invoicing Units
will:

     

    
      	
               
      

            	
              (a)

            	
              sell,
      assign, transfer, mortgage, charge, pledge or otherwise dispose of or
      encumber any Book Debt and/or its related rights and/or the proceeds of a
      Book Debt or its related rights or your rights under this Agreement, or
      agree or purport to do so, other than in favour of RBS in its capacity as
      Noteholder under the Loan Note
Instrument;

            

    

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              (b)

            	
              without
      the Agent’s prior written consent, waive or modify (or purport to waive or
      modify) any of the terms on which COGI or the relevant Invoicing Unit
      supplies goods or provide services and, in particular COGI nor the
      relevant Invoicing Unit will not extend the time for payment of any Book
      Debt or purport to do so.

            

    

     

    
      	
              12.2

            	
              Positive
      Undertakings

            

    

     

    COGI and
its Invoicing Units will:

     

    
      	
               
      

            	
              (a)

            	
              ensure
      that all proceeds of the Book Debts within each Book Debt Schedule are
      remitted when paid to by the Customers to the Bank Accounts and no other
      account.

            

    

    

    
      	
               
      

            	
              (b)

            	
              ensure
      that gross profits on all Excess Revenues are remitted to the Bank
      Accounts in accordance with the provisions set forth in Clause 4.3
      (Impairment of Book Debts and Specific Purpose
  Fund).

            

    

     

    
      	
               
      

            	
              (c)

            	
              ensure
      that the Bank Accounts are replenished with the Specific Purpose amounts
      within the term of this Agreement;

            

    

     

    
      	
               
      

            	
              (d)

            	
              execute
      and deliver or (as the case may be) procure that the relevant person or
      persons execute and deliver such documents that may be required to perfect
      title in the Book Debts whenever requested by RBS or the
      Agent;

            

    

     

    
      	
               
      

            	
              (e)

            	
              comply
      in all material respects with all legislation and regulatory requirements
      relating to its business or assets where failure to do so might adversely
      affect its business, assets or financial
  condition;

            

    

     

    
      	
               
      

            	
              (f)

            	
              promptly
      perform its continuing obligations under every supply contract giving rise
      to a Book Debt, including without limitation the repair and/or maintenance
      of goods supplied, to ensure that the Customer will accept the invoice
      relating to it (or, if the Customer is insolvent, the Customer’s trustee
      in bankruptcy or liquidator will accept a proof of the unpaid balance of
      the Book Debt) without any dispute or claim whatsoever (whether or not
      justifiable);

            

    

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              (g)

            	
              promptly
      notify the Agent in writing of any dispute of any kind between an
      Invoicing Unit and the Customer of a Book Debt subject to the Book Debt
      Schedule and to use all reasonable endeavours promptly to settle every
      such dispute;

            

    

     

    
      	
               
      

            	
              (h)

            	
              COGI
      shall grant RBS or its security agent a first ranking security interest in
      the Bank Account(s) in a form satisfactory to RBS or its security agent
      and shall within 14 days of Commencement perfect the security in respect
      of the said pledge.  This shall be a condition of further
      Release;

            

    

     

    
      	
               
      

            	
               (i)

            	
              enter
      into the Bank Account Security and any associated documentation, and take
      all such action as is available to it (including making all filings and
      registrations) as may be necessary for the purpose of the creation,
      perfection, protection or maintenance of any security conferred or
      intended to be conferred on RBS by or pursuant to the Bank Account
      Security;

            

    

     

    
      	
               
      

            	
              (j)

            	
              enter
      into any such bank account mandates or equivalent or related documentation
      so as to ensure that the Agent and COGI’s
      representative  are  a co-signatories on each Bank
      Account and that no withdrawals can be made without the Agent’s consent
      evidenced by its signature;

            

    

     

    
      	
               
      

            	
              (k)

            	
              COGI
      shall meet formally with the Agent quarterly (to report progress in the
      Company towards profitability, and answer, or obtain answers to any
      questions that the Agent shall deem it suitable to ask. These meetings
      shall be held on or around the same time as the Board Meeting of COGI.
      This provision shall lapse after three successive profitable
      quarters;

            

    

     

    
      	
               
      

            	
              (l)

            	
              COGI
      shall produce in writing on a monthly basis a report to the Agent which
      details the achievement against the Cost Reduction Plan. This progress
      report will be at the same level of detail as in the Appendix to the Cost
      Reduction Plan which identifies the specific
  cost-cuts.

            

    

     

    
      	
               
      

            	
              (m)

            	
              COGI
      and each Invoicing Unit will:

            

    

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              (i)

            	
              keep
      the Agent informed at all times of the creditworthiness of all Customers
      and (without prejudice to any of your other obligations under this
      Agreement) of any counterclaim, right of set-off, deduction, abatement or
      contra-item raised by a Customer at any time;

            
	 	 	 
	 	(ii)	if
      the Agent so requires:

    

     

    
      	
               
      

            	
              (a)

            	
              instruct
      COGI’s auditors to report directly to the Agent at COGI’s expense;
      and/or

            

    

     

    
      	
               
      

            	
              (b)

            	
              procure
      that each bank or similar financial institution with which COGI or an
      Invoicing Unit maintains accounts provides the Agent with copies of
      statements of those accounts.

            

    

     

    13.           Power
of Attorney

     

    
      	
               
      

            	
              COGI
      and each Invoicing Unit irrevocably appoint the Agent as COGI’s and each
      Invoicing Unit’s attorney both during the term of this Agreement and
      thereafter for so long as any  Book Debts remain outstanding to
      act in COGI and/or each of the Invoicing Unit name, as may be appropriate,
      and on each of the said behalf to execute all documents and do all things
      necessary in the sole opinion of the Agent and/or RBS to give effect to
      this Agreement or their  rights including making any arrangement
      or compromise, taking or defending any proceedings endorsing any
      negotiable instrument on any Invoicing Unit’s behalf and executing legal
      assignments of all or any Book
Debt.

            

    

     

    
      	
              14.

            	
              Project
      Financing

            

    

     

    
      	
              14.1.

            	
              The
      Agent will consider proposals from COGI and Invoicing Units for Releases
      in relation to projects having a value of at least the equivalent of
      US$140,000 (Project Financing) on a case by case basis.  In
      principle, for a Project Financing proposal to be accepted a valid and
      binding contract must exist between COGI or another Invoicing Unit and the
      potential customer, the contract value must not be less than US$140,000
      and the contract period for performance (including payment) of the same
      must not be longer than six (6) months from the commencement date of the
      contract.

            

    

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

       

    

    15.           Duration
of Agreement and Termination

     

    
      	
              15.1.

            	
              The
      Agreement shall commence on Commencement and shall be for a period of
      twelve (12) months.

            

    

     

    
      	
              15.2.

            	
              Notwithstanding
      the provisions set out in Clause 15.1, RBS or the Agent may terminate this
      Agreement during the term (i) for material breach including but not
      limited to breach of any of the Warranties by COGI; or (ii) failure to
      execute on the Cost Reduction Plan and achieving the committed cost
      reduction within the financial year 2009; or (iii) where the Bank Accounts
      are withdrawn from use in the manner provided herein; or (iv) where there
      has been the occurrence of an Event of Default (as defined in the
      Transaction Documents).

            

    

     

    
      	
              15.3.

            	
              Except
      for termination on the grounds provided for in paragraphs (iii) and (iv)
      of Clause15.2 above (where any termination will occur on the date of
      notice from RBS or the Agent to COGI), RBS or the Agent shall give COGI
      and each of its Invoicing Unit 30 days notice of termination in
      writing.

            

    

     

    
      	
              16.

            	
              Indemnity
      and Liability

            

    

     

    
      	
              16.1.

            	
              COGI
      and each Invoicing Unit agree to jointly and severally indemnify each of
      RBS and the Agent against any loss, action, cost, expense (including
      reasonable legal expenses), claim, damage or liability (or action in
      respect of any of the same) incurred by RBS or the Agent (as applicable)
      as a result of its entering into this Agreement (including, but not
      limited to, in connection with any claim by a Customer in relation to the
      Book Debts or related rights or any claim in respect of breach of the
      Warranties or other obligations hereunder by any of COGI or the Invoicing
      Units).  No waiver, forbearance or indulgence granted by RBS or
      the Agent to COGI or any Invoicing Unit or to any Customer will in any way
      discharge COGI or any of its Invoicing Units from its liabilities to
      RBS.

            

    

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    
      	
              16.2.

            	
              RBS
      shall have no liability to COGI or any Associate in respect of any matter
      connected with this agreement whether in relation to any acts or omissions
      of RBS or the Agent or otherwise. RBS shall further have no liability to
      the Agent in respect of any matter connected with this
      Agreement.

            

    

     

    
      
        	
                17.

              	
                Transfer
      of Rights

              

      

       

    

    Neither
COGI nor any of its Invoicing Unit may assign or otherwise deal with this
Agreement or each of their rights and obligations hereunder without the Agent’s
prior written consent.

     

    
      	
              18.

            	
              Variation

            

    

     

    
      	
               
      

            	
              This
      Agreement may only be varied by a document signed by the Parties
      hereto.

            

    

     

    19.          Applicable
Law and Notices

     

    
      	
               
      

            	
              This
      Agreement is to be interpreted in accordance with and governed by English
      Law.  Any notices to be given by either of parties to the other
      may be either delivered by hand to the other party or its authorised agent
      or sent by pre-paid first class letter, registered post, recorded delivery
      fax transmission or telex to such party as its principal place of business
      or at its registered office.

            

    

     

    
      	
              20.

            	
              Third
      Parties

            

    

     

    No person
who is not a party to this Agreement shall have any rights under the Contracts
(Rights of Third Parties) Act 1999 to enforce any term of this
Agreement.

     

    21.          Counterparts

     

    
      	
              21.1

            	
              This
      Agreement may be executed in any number of counterparts, and on separate
      counterparts, but shall not be effective until at least one counterpart
      has been executed on behalf of each
party.

            

    

     

    
      	
              21.2

            	
              Each
      counterpart shall constitute an original of this Agreement, but all the
      counterparts shall together constitute but one and the same
      instrument.

            

    

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    22.           Transaction
Documents

     

    
      	
              22.1.

            	
              This
      Agreement and each document creating Bank Account Security are designated
      Transaction Documents under and in connection with the Loan Note
      Instrument.

            

    

     

    
      	
              22.2.

            	
              For
      the avoidance of doubt, the designation of the documents referred to in
      Clause 22.1 above as Transaction Documents does not derogate from or
      otherwise vary, modify, amend, waive or imply consent to the waiver or
      impairment of any of the rights including future rights of the Subscriber
      or Noteholder under the Transaction Documents (other than the documents
      referred to in Clause 22.1 above).

            

    

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    Schedule
1

     

     RELEASE
BOOK DEBT SCHEDULE

    
    

     

    
      	Invoicing Unit
      Name:     	Schedule Number
      ________________
	 	 
	Page ____ of
      _____   	Date ________
      200[..]

    

     

    
      	
              Invoice
      Date

            	
              Invoice
      Number

            	
              Name
      of Account Book Debtor

            	
              Location

            	
              Invoice
      Amount

            	
              Credit
      Notes

            	
              Other
      Impairment

            
	
              ii

            	
              iii

            	
              iv

            	
              v

            	
              vi

            	
              vii

            	
              viii

            
	
              ix

            	
              x

            	
              xi

            	
              xii

            	
              xiii

            	
              xiv

            	
              xv

            
	
              xvi

            	
              xvii

            	
              xviii

            	
              xix

            	
              xx

            	
              xxi

            	
              xxii

            
	
              xxiii

            	
              xxiv

            	
              xxv

            	
              xxvi

            	
              xxvii

            	
              xxviii

            	
              xxix

            
	
              xxx

            	
              xxxi

            	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      

    

    

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    Schedule
2: Conditions Precedent

     

    
      	
               
      

            	
              1.

            	
              At
      the date of this Agreement, COGI providing  a report in writing
      to the Agent which details the achievement against the Cost Reduction
      Plan. This progress report will be at the same level of detail as in the
      Appendix to the Cost Reduction Plan which identifies the specific
      cost-cuts achieved at the date of the agreement and its impact on COGI
      Selling, General Administrative (SG&A)
  expenses.

            

    

     

     

    
      	
               
      

            	
              2.

            	
              COGI
      shall undertake to further reduce costs by a minimum of US$850,000 with an
      agreed target level of US$1 million on an annualised basis, of which at
      least $350,000 to be achieved in Financial Year 2009 with an agreed target
      of US$400,000.     The Amended Cost Reduction
      Plan (with the same level of detail as in the Appendix to the Cost
      Reduction Plan identifying the specific cost cuts) shall be furnished
      within 10 days from this Agreement along with a revised business plan for
      Financial Year 2009 showing the impact of the overall Cost Reduction
      Plan.

            

    

     

     

    
      	
               
      

            	
              3.

            	
              COGI
      shall reconstitute its Board of Directors in accordance with the
      discussions between the parties.

            

    

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    

    Schedule
3: List of COGI GROUP MEMBERS

    

    
      	
              1.

            	
              Coda
      Octopus Products Limited (Company Number SC151068), a company incorporated
      under the laws of Scotland and having its registered office at Anderson
      House, Breadalbane Street, Edinburgh EH6 5JR, Scotland. Prior to this,
      this Company was registered under the name of Coda Octopus
      Limited.

            

    

    

    
      	
              2.

            	
              Coda
      Octopus Products Inc., a Delaware Corporation with its place of business
      at 164 West 25th
      Street, 6th
      Floor (6F), New York, NY 10001.  Prior to this, this Company was
      registered under the name of Coda Octopus,
Inc.

            

    

    

    
      	
              3.

            	
              Coda
      Octopus (US) Holdings, Inc., a Delaware corporation with its place of
      business at 164 West 25th
      Street, 6th
      Floor (6F), New York, NY 10001.

            

    

    

    
      	
              4.

            	
              Coda
      Octopus (UK) Holdings Limited (Company Number 05834897), a company
      incorporated under the laws of England and Wales and having its registered
      office at 14 Albany Road, Granby Industrial Estate, Weymouth, DT4
      9TH.

            

    

    

    
      	
              5.

            	
              Coda
      Octopus Omnitech AS (Organisation Number NO 985 252 076), a company
      incorporated under the laws of Norway and having its place of business at
      Sandviksboder 1A, N-5035 Bergen,
Norway.

            

    

    

    
      	
              6.

            	
              Coda
      Octopus Martech Limited (Company Number 2300406), a company incorporated
      under the laws of England and Wales and having its registered office at 14
      Albany Road, Granby Industrial Estate, Weymouth, DT4
  9TH.

            

    

    

    
      	
              7.

            	
              Coda
      Octopus Innalogic, Inc., a Delaware corporation with its place of business
      at 164 West 25th
      Street, 6th
      Floor (6R), New York, NY 10001.

            

    

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    
      	
              8.

            	
              The
      Port Security Group, Inc., a Delaware corporation with its place of
      business at 164 West 25th
      Street, 6th
      Floor (6F), New York, NY 10001.

            

    

    

    
      	
              9.

            	
              Coda
      Octopus Colmek, Inc. (“Colmek”), a Utah corporation with Corporation
      Number 2400704-0150 and whose address is 2001 South 3480 West, Salt Lake
      City, Utah 84104

            

    

    

    
      	
              10.

            	
              Coda
      Octopus Research and Development, Inc., a Delaware corporation, with its
      place of business at 164 West 25th
      Street, 6th
      Floor (6F), New York, NY 10001.

            

    

    

    
      	
              11.

            	
              Coda
      Octopus R & D Limited (Company Number SC232622), a company
      incorporated under the laws of Scotland and having its registered office
      at Anderson House, Breadalbane Street, Edinburgh EH6 5JR,
      Scotland.

            

    

    

    
      	
              12.

            	
              Dragon
      Design Limited (Company Number 3726245) having its registered office at
      14a Cambridge Road, Granby Industrial Estate, Weymouth, DT4
      9TJ.

            

    

    

    
      	
              13.

            	
              Coda
      Octopus Tactical Intelligence, Inc., a Delaware corporation, with its
      place of business at 164 West 25th
      Street, 6th
      Floor (6F), New York, NY 10001.

            

    

    

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    IN
WITNESS this Deed has been duly executed and delivered by each of the Parties
hereto on the day and year first before written.

    

    

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

     

    SIGNATURE
PAGES FOR PARTIES FOLLOW]

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

    

    Executed
and delivered as a Deed

    by Coda
Octopus Group, Inc.

    acting
by

    

    

    

    Director

    

    

    

    Director/Secretary

    

    Executed
and delivered as a Deed

    by The
Royal Bank of Scotland plc

    acting by
it authorised signatory

    

    

    

    

    Executed
and delivered as a Deed

    by
Greenhouse Investments Limited

    acting
by

    

    

    

    Director

    

    

    

    Director/Secretary

    

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

    

    Executed
and delivered as a Deed

    by Coda
Octopus Products Limited

    acting
by

    

    

    

    Director

    

    

    

    Director/Secretary

    

    

    

    Executed
and delivered as a Deed

    by Coda
Octopus Products Inc.

    acting
by

    

    

    

    Director

    

    

    

    Director/Secretary

    

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

    Executed
and delivered as a Deed

    by Coda
Octopus (US) Holdings, Inc.

    acting
by

    

    

    

    Director

    

    

    

    Director/Secretary

    

    

    

    Executed
and delivered as a Deed

    by Coda
Octopus (UK) Holdings Limited

    acting
by

    

    

    

    Director

    

    

    

    Director/Secretary

    

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

    

    Executed
and delivered as a Deed

    by Coda
Octopus Omnitech AS

    acting
by

    

    

    

    Director

    

    

    

    Director/Secretary

    

    

    Executed
and delivered as a Deed

    by Coda
Octopus Martech Limited

    acting
by

    

    

    

    Director

    

    

    

    Director/Secretary

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

    

    Executed
and delivered as a Deed

    by Coda
Octopus Innalogic, Inc.

    acting
by

    

    

    

    Director

    

    

    

    Director/Secretary

    

    

    

    Executed
and delivered as a Deed

    by the
Port Security Group, Inc.

    acting
by

    

    

    

    Director

    

    

    

    Director/Secretary

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

    

    Executed
and delivered as a Deed

    by Coda
Octopus Colmek, Inc.

    acting
by

    

    

    

    Director

    

    

    

    Director/Secretary

    

    

    

    Executed
and delivered as a Deed

    by Coda
Octopus Research and Development, Inc.

    acting
by

    

    

    

    Director

    

    

    

    Director/Secretary

    

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

     

    Executed
and delivered as a Deed

    by Coda
Octopus R & D Limited

    acting
by

    

    

    

    Director

    

    

    

    Director/Secretary

    

    

    

    

    Executed
and delivered as a Deed

    by Dragon
Design Limited

    acting
by

    

    

    

    Director

    

    

    

    Director/Secretary

    

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

     

    Executed
and delivered as a Deed

    by Coda
Octopus Tactical Intelligence, Inc.

    acting
by

    

    

    

    Director

    

    

    

    Director/SecretaryExhibit
10.1

    

    MAGNUM D’OR RESOURCES
INC.

    

    CONVERTIBLE PROMISSORY
NOTE

     

    
      
        	
                Issue
      Date:

              	
                March
      16, 2009

              	
                Principal
      Amount:

              	
                $15,000,000
      (U.S.)

              
	
                Maturity
      Date:

              	
                March
      16, 2017

              	
                Maturity
      Total Due:

              	
                $24,750,000
      (U.S.)

              

      

    

    

    

    FOR VALUE RECEIVED, Magnum d’Or
Resources, Inc., a Nevada corporation (the “Maker”), promises to pay to
the order of SIMCO GROUP (the “Payee”), at the principal
office of the Payee, or
other location as may be directed by the Payee, the sum of twenty-four
million seven hundred fifty thousand dollars ($24,500,000 U.S.) on or before
March 16, 2017 (the “Maturity Date”).

    

    The Payee of This Note may pursue
any rights or remedies as the holder of this Note or under any security
agreement, pledge, guaranty or other collateral documents, independently or
concurrently.  All rights, remedies, or powers herein conferred upon
the holder of this Note or related documentation upon the holder of this Note
shall, to the extent not prohibited by law, be deemed cumulative and not
exclusively of any others thereof, or of any other rights, remedies, or powers
available to the holder of this Note under applicable law.  No delay
or omission of the holder of this Note to exercise any right, remedy, or power
shall impair the same or be construed to be a waiver of any default or impair
any rights, remedies, or powers available to the holder of this
Note.  No single or partial exercise of any right, remedy, or power
shall preclude any other or future exercise thereof by the holder of this
Note.

    

    This Note will be subject to conversion
at the option of the holder, exercisable at any time until the close of business
(Florida time) on the date of the Note's maturity, but not before the fourth
year, commencing March 17, 2013. Upon such election, the principal amount of the
Note (or any portion thereof that is an integral multiple of $10,000) shall be
converted into fully paid and non-assessable whole shares of Common Stock at a
Conversion Price per share that is equal to the average closing bid price of the
Common Stock during the twenty (20) consecutive trading days immediately
preceding the date the holder completes a request to convert as described below.
The conversion rate will be calculated by multiplying the principal amount
($15,000,000 US) by a factor of 1.5 plus any accrued interest on the date of
conversion. The conversion right will terminate at the close of business on the
Business Day immediately preceding the date fixed for redemption (March 16,
2017). Anything to the contrary herein contained notwithstanding, the Holder of
the Note may not convert any portion of the Note, which if converted would
result in the Holder owning of record or beneficially more the 4.9% of the
issued and outstanding common Shares of the Company at the time of such
conversion without proper disclosure to the US Securities Exchange
Commission.

    

    To
convert the Note, the holder must surrender the Note to the Maker, furnish appropriate
endorsements or transfer documents if required by a Registrar or Conversion
Agent, and pay any transfer or similar tax, if required. The number of shares
issued upon conversion of the Note is determined by dividing the principal
amount, multiplied by a factor of 1.5 plus any accrued interest, at the time of
conversion of the Note, converted by the Conversion price as determined above in
effect on the Conversion Date. No fractional shares will be issued upon
conversion but a cash adjustment will be made for any fractional
interest.

    

    In
addition to and not in limitation of the foregoing, the Maker further agrees to pay
the holder of this Note such additional amounts as shall be sufficient to cover
the costs and expenses of collection, including reasonable compensation for the
holder’s agents and attorneys, in endeavoring to collect any amounts payable
hereunder which are not paid when due, whether by acceleration or
otherwise.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    The Maker, endorsers, sureties,
guarantors and all other persons who may become liable for all or any part of
this obligation severally waive notice of default, notice of dishonor, notice of
acceleration, presentment for payment, protest and notice of
nonpayment.  Said parties consent to any extension of time (whether
one or more) of payment hereof, the release of all or any part of the collateral
securing the payment hereof, or the release of any party liable for payment of
this obligation.  Any such extension or the release may be made
without notice to any such party and without discharging said party’s liability
hereunder.

    

    The Maker and the Payee intend and believe that
each provision in this Note comports with all applicable local, state and
federal laws and judicial decisions.  However, if any provision or
provisions, or if any portion of any provision or provisions, in this Note is
found by a court of law to be in violation of any applicable local, state or
federal ordinance, statute, law, administrative or judicial decision, or public
policy, and if such court should declare such portion, provision or provisions
of this Note to be illegal, invalid, unlawful, void or unenforceable as written,
then it is the intent of all parties hereto that such portion, provision or
provisions shall be given force to the fullest possible extent that they are
legal, valid and enforceable, that the remainder of this Note shall be construed
as if such illegal, invalid, unlawful, void or unenforceable portion, provision
or provisions were not contained therein, and that the rights, obligations and
interest of Maker and
Payee under the
remainder of this Note shall continue in full force and effect.

    

    This Note
is made under and governed by the laws of the State of Florida.  This
Note may be prepaid in whole or in part without penalty.

    

    

    AUTHORIZED
SIGNATURES

    

    

    
      
        
          
            
              
                
                  	
                          MAGNUM
      D’OR RESOURCES, INC.

                        	
                           

                        	      
                          PAYEE

                        
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                           
      

                        	
                           

                        	   
      
	 
      	 
      	 
      
	
                          Joseph
      J. Glusic, President

                        	 
      	
                          SIMCO
      GROUP

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