constituting
|
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
|
1.
|
DEFINITIONS
AND INTERPRETATION
|
1.1 |
In
this Instrument and the schedules the following words and expressions,
unless the context requires otherwise,
mean:
|
(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;
|
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 |
3.4.4 |
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.
|
CONVERSION
|
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 SCHEDULES
|
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.
|
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.
|
EXECUTED
and delivered as a deed by [ ] acting by two directors or one director
and
the company secretary
|
)
)
)
)
|
|
Director
|
||
Director
/ Secretary
|
1.
|
AMOUNT
AND STATUS OF THE NOTES
|
1.1 |
Status
|
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 NOTEHOLDERS
|
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.
|
1 |
Definitions
|
(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.
|
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
|
Serial
Number
|
Nominee
for Noteholder
|
Authorised
Signatory for [
|
]
|
|
Authorised
Signatory for [
|
]
|
|
Authorised
Signatory for [
|
]
|
EXECUTED
(but
not delivered until the date hereof) as a deed by CODA
OCTOPUS GROUP, Inc. acting
by any two directors:
|
)
)
)
)
)
|
|
Director
|
||
Director
|