Exhibit 10.1
 
FIRST COMMERCIAL FUNDING, LLC
Two BRENTWOOD COMMONS, SUITE 150
750 OLD HICKORY BOULEVARD
BRENTWOOD, TENNESSEE 37027
OFFICE: 615-371-6174 FAx: 615-373-1582
 
JOINT VENTURE AGREEMENT
 
This JOINT VENTURE AGREEMENT (the "Agreement") is made this  20 day of October.
2009 (the "Effective Date") by and between First Commercial Funding, LLC, a
(insert name of state) Limited Liability Company, havine its principal place of
business at Two Brentwood Commons, Suite 150, Brentwood. TN 37027 ("FCF") and
Coates International, Ltd„ a Delaware Corporation having its principal place of
business at 2100 highway 34 and Ridgewood Road, Wall Township. NJ 07717 (the
"Co-Venturer"). Each of the foregoing is a "Party" and together' they are the
"Parties.").
 
INFORMATIONAL STATEMENT
 
WHEREAS. FCF is in the business of providing financial advisory and other
business consulting services. Co-Venturer is in the business of manufacturing
high-efficiency low-emission engines and generators, as well as other specialty
engine systems, and
 
WHEREAS, FCF and Co-Venturer desire to enter into a joint venture through which
they will pursue certain business opportunities together. and
 
WHEREAS, David Goss, President of FCF, is the sole principal officer and key
employee of FCF, and all of FCF's experience, know-how, skills, networks and
contacts required
 
to successfully consummate the transaction contemplated by this Agreement exist
and are entirely dependent upon the continued performance of services and
sufficient availability and time commitment of David Goss, and
 
NOW, THEREFORE, for good and valuable consideration. the receipt and sufficiency
of which are hereby acknowledged. the Parties agree as follows:
 
1. Purpose and Control of Joint Venture. The Parties hereby agree to form a
joint venture that shall own and operate a project known as Coates International
Project (the "Venture"). with dual locations in both New Jersey and Oklahoma.
The Venture will seek to raise approximately three hundred million USD
($300,000,000) ("Offering"). The Venture will form a single purpose entity in
which both Parties will be owners (the "Joint Venture Entity"). The Venture
shall be controlled by a board of directors with Co-Venturer appointing three
directors as members and FCF appointing one director as a member. In the event
that a vacancy arises on the board, the party that originally appointed the
vacated hoard seat shall appoint a replacement. The day to day operations of the
Joint Venture Entity shall be performed by officers appointed by board of
directors of Co-Venturer.
 
 
 
 
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2. Contributions of the Parties.
 
  a.
FCF. FCF's contribution to the Joint Venture Entity shall be to provide
expertise, an existinu, previously developed network of likely potential
investors, access to various experienced industry contacts and knowledge on how
to organize and raise funds for the Co-Venture's Project through the use of a
private placement memorandum 144A offering (a "PPM") and in preparing relevant
documentation. The intent is to raise approximately $400­$450 million through
the sale of collateralized five-year zero coupon bonds. The bonds shall be
collateralized by a diversified portfolio of contestable and non-contestable
senior life insurance policies carefully selected based on mutually agreed upon
investment objectives (the "Policies). The portfolio of specific Policies shall
be reserved upon remittance by the Venture of a non­refundable down payment to
the seller(s) of the Policies of approximately 1.5% of the agreed upon Policies
purchase price. During the intervening period thereafter, any policies paid out
will be replaced with other suitable policies until title to the Policies
legally passes. FCF shall furnish Co-Venturer with an example of the Risk
Factors section of a PPM from a prior similar, successful offering. FCF has
represented that its unique, proprietary transaction structure is designed to
achieve a value for the portfolio of Policies of approximately 50% of the
principal amount of the zero coupon bonds issued from the 144A private offering.
Although FCF will undertake its best efforts to select the right mix of
policies, there can be no assurance that the actual value of the portfolio of
policies will achieve that value. FCF itself, will not be involved in the offer.
sale or purchase of' securities. and will not receive any compensation as a
result of the offer or sale of securities, or in assisting the Joint Venture
Entity to purchase securities if, in fact, the Joint Venture Entity does so.
 

 
  b.
 Co-Venturer. Co-Venturer's contribution shall be the preparation and expertise
to setup and run the Venture. Venturer shall pay from the proceeds of the
$400,000 Engagement and Services fee to be paid by Co-Venturer as more fully
discussed in Section 3 below, all of the expenses of the Venture including
(without limitation) retaining legal counsel and accountants, drafting all of
the documents for a PPM, (ii) listing the offering on the NASDAQ PORTAL system
and (iii) posting the offering on either DTC, Euroclear or Clearstream. Other
expenses include, but are not limited to, securing the collateral of senior life
settlement policies (the "Policies"), registration fees and maintenance fees of
the Policies. A list of approximated, non-binding expenses is attached hereto as
Exhibit A. Marketing fees and broker/dealer fees will be paid at such time as
the Venture receives funding of at least three hundred million USD
($300,000,000) (hereinafter, the Closing").

 
3. Fees. The Co-Venturer shall pay FCF a fee of four hundred thousand dollars
USD (S400,000) for covering operational expenses and providing the resources
necessary to accomplishing FCF's contribution as set forth in paragraph 2.1 and
2.2 (the "Engagement and Services Fee"). The Co-Venturer shall remit an initial
payment of 550.000.00 within 48 hours after execution of this agreement.
Thereafter. Co-Venturer shall continue to remit additional monies to FCF as soon
as practicable with the objective of having remitted the entire Engagement Fee
within thirty (30) days after execution hereof..
 
 
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4. Ownership of Venture-Created Entities. Co-Venturer or its assignees shall own
ninety percent (90%) of the ownership interests in the Joint Venture Entity and
FCF shall own ten percent JO%) of the ownership interests in the Joint Venture
Entity. However, FCF shall not share in any of the profits, losses, gains and
expenses of the Venture. Any and all subsequent ventures undertaken by the
Parties shall adhere to the same ownership percentage structure set forth in
this Section 4, unless the Parties mutually agree in writing to different
ownership percentages.
 
5. Success Fee. In addition to the Escrowed Expense Funds set forth in Section 3
above. Co-Venturer shall pay FCF a fee, at Closing, of seven and one half
million USD ($7,500,000) and shares of restricted shares of common stock of the
Co-Venturer equal to one percent (1%) of the total issued and outstanding common
stock of the Co-Venturer on the date of the Closing (the "Success Fee"). The
Success Fee will be deducted simultaneously from the three hundred million USD
($300,000.000) proceeds of the Offerine being disbursed at the Closing of the
Offering.
 
7. Use of Net Proceeds by Co-Venturer. A minimum of $25,000,000 shall be
disbursed to Co-Venturer at the closing of the Offering and the balance of the
net proceeds after disbursement or reserving funds for payment of any unpaid
expenses of the Offering and the balance of the purchase price of the portfolio
of Policies shall be disbursed to the Venture at the closing of the Offering.
The unused portion of the net proceeds from the Offering shall be invested by
the Venture in various highly rated. secure. agree-upon securities with varying
maturities to match the projected timetable for the use of funds (the
"Investment Portfolio"). The Venture agrees that it will engage a professional
"money manager" to invest such funds in accordance with reasonable investment
objectives of the Co-Venturer. Co-Venturer shall use the net proceeds from the
Offering to acquire manufacturing facilities, establish and operate manthcturing
operations and for general working capital purposes directly related to the
successful conduct of its business. From time to time, and at any time. upon
submission of a request for disbursement of additional funds to the Co-Venturer
for its planned expenditures over the ensuing 3-6 month period, the parties
shall have three business days to review such request and disburse such addition
funds, to the extent there are sufficient remaining funds held by the Venture in
its investment portfolio. New and/or adjusted requests may be submitted as
frequently as is necessary to ensure the efficient and timely access to funds by
Co-Venturer to carry out its business objectives. Each such request shall be
accompanied by a projected schedule of production units by product type and
shall provide reasonable detail of the estimated timing and amount of each main
category of expenditure. Approval of the request for such disbursement of funds
shall not be unreasonably withheld by the Venture, provided all previously
disbursed funds were utilized by the Co-Venture in a manner consistent with the
herein described intended us of proceeds. The portfolio of Policies shall be
registered in the name of the Co-Venturer and upon obtaining possession and
control. immediately transferred to the Co-Venturer.
 
8. Representations of FCF.
 
  a.
FCF represents that it has experience, skills and know-how in all aspects of the
structured transaction contemplated by this Joint Venture Agreement. FCF
acknowledges that it has been informed by Co-Venturer that it has virtually no
experience and only limited understanding of Collateralized Zero Coupon Bonds,
secured by portfolios of Policies and that it has no experience and a very
limited understanding of the market for buying and selling portfolios of
Policies. Therefore, FCF further acknowledges that Co-Venturer is solely relying
on FCF's experience, skills and know-how in making its decision to enter into
this agreement.

 
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b.  
FCF further represents that it has assembled a network of broker-dealers and
investments bankers that, based on recent feedback from firms in this network,
are enthusiastic about marketing investment opportunities in similarly
collateralized five-year coupon bonds to its clients. To be clear, the
Co-Venturer is relying on these representations to gain confidence that there is
a ready market for the sale of such collateralized securities.

 
c.  
FCF further represents that it has assembled a team of experts in the field
necessary to competently analyze the senior life insurance policy portfolios and
provide expert opinions on the extent to which such portfolios are designed to
meet the agreed-upon investment objectives.

 
d.  
FCF further represents that. as of the date, hereof, a ready, active market for
acquiring Policies that will meet our investment objective over the five-year
period of the collateralized zero coupon bonds.

 
e.  
FCF further represents that there is, as of the date hereof, a ready, active
market for reselling Policies in accordance with the Venture's criteria for
appreciation in the value of the Policies

 
f.  
FCF acknowledges that any breach of these representations could likely result in
substantial damages to Co-Venturer consisting of monetary losses and opportunity
costs caused by delays in its commencement of large scale production of it
proprietary technology. Co-Venturer is highly dependent on receiving the net
proceeds of at least $300 million from the sale of the collateralized zero
coupon bonds. These funds are intended to provide critically needed start-up
capital for production of various products incorporating Co-Venturer's
technology.

 
g.  
FCF represents that it has advised Co-Venturer. based on its experience that it
is likely that the Offering will raise net proceeds of approximately $300
million and possibly be closed before the end of the calendar year 2009.

 
9.Representations of David Goss. David Goss represents that:
 
a.  
Except for the two disclosed felony convictions in connection with prior real
estate transactions involving bankruptcy proceedings, there have never been any
felony or misdemeanor convictions nor are there currently any pending or
threatened felony or misdemeanor charges. Furthermore, there are no matters of
any nature relating to his background or arising from any of his prior business
dealings that could prevent or interfere with the willingness or ability of
broker-dealers and investment bankers to market the zero coupon bonds to its
customers or with the Venture's ability to purchase and sell the portfolio of
Senior Policies.

 
 
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b.  
Except for the matter disclosed to the Co-Venturer involving the cease and
desist order from the Alabama Securities Commission regarding sales of taxl ien
certificates, he never been, nor is he now, the actual or potential subject of,
or defendant in. any pending or threatened litigations. claims, assessment,
legal actions with any federal, state, local, SEC, NASD or other authoritative
investigations of any nature.

 
c.  
He is not a party to any agreement. decree or the restrictive order of any kind
that could prevent him from freely entering into this agreement and performing
the services and fulfilling his obligations contemplated by, and arising out oil
this Agreement.

 
d.  
He will not overcommit his personal time and resources and will throughout the
Project devote whatever time and resources are necessary and appropriate to
ensure the delivery of prompt, timely and competent professional services in the
interest of a successful outcome of the Project.

 
10. Title to Property; Waiver of Partition Right. Legal title to any property,
including the Policies, acquired as a result of the Venture shall be taken in
the name of the Venture, and shall be held for the benefit of both Parties.
Notwithstanding same, FCF acknowledges that any real property and Policies
purchased with the proceeds from the Offering shall be owned by the Co-Venturer
and not the Joint Venture Entity. Each Party waives and renounces any right that
such Party may have to institute or maintain any action for partition with
respect to any property owned by or held for the benefit of the Venture.
 
11. Information. Co-Venturer shall provide FCF with access to all current and
historical data requested by FCF for the purpose of preparing the PPM.
Co-Venturer recognizes and confirms that FCF may use and rely upon all data.
material and other information furnished to FCF by Co-Venturer without
independent verification.
 
12. Confidentiality.
 
 
a. Each Party acknowledges that it may receive confidential and proprietary
non­public information related to the other Party's business. The receiving
Party shall keep confidential and shall not use or disclose such Confidential
Information (defined herein) except in accordance with and in furtherance of
this Agreement. "Confidential Inibrmation" shall mean any and all information
the disclosing Party provides to the receiving Party, verbal or written, which
is identified as confidential or proprietary. Provided. however, the following
shall be Confidential Information regardless of whether marked as such: the
manner in which FCF structures financial transactions and the identities of
FCF's clients and persons who provide funding (including their employees, agents
and representatives) for financing transactions. "Confidential Information"
shall not include information which the receiving Party can prove: (i) was
previously known to the receiving. Party free of any obligation to keep it
confidential; or (ii) is or becomes publicly available by any means other than
unauthorized disclosure; or (iii) is developed by or on behalf of the receiving
Party independent of any information furnished under this Agreement: or (iv) is
received from a third party (which shall include those persons or entities that
directly or indirectly through one or more intermediaries control, are
controlled by, or are under common control of a Party) whose disclosure does not
violate any confidentiality agreement or obligation.

 
 
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b. All Confidential Information is and shall he the sole and exclusive property
of the disclosing Party. The receiving Party shall not disclose any Confidential
Information or take or cause any action which would be inconsistent with or tend
to diminish or impair the disclosing Party's rights in the Confidential
Information.

 
13. Non-Circumvention. For a period of five years from the termination of this
Agreement. Co-Venturer shall not use FCF's Confidential Information for any
reason for the benefit of Co-Venturer or any third party (including any persons
or entities that directly or indirectly through one or more intermediaries'
control, are controlled by. or are under common control of Co-Venturer). In the
event Co-Venturer violates this Section 9. in each such instance, Co-Venturer
shall pay FCF an amount equal to Engagement Fee set forth in Section 3 above.
FCF shall be entitled to all available remedies in the event this Section 9 is
violated and such remedies are cumulative.
 
14. Term. This Agreement shall remain in effect from the Effective Date until
the occurrence of any of the following events: (a) adjudication of bankruptcy,
filing of a petition pursuant to the United States Federal I3ankruptcy Act, or
the withdrawal, removal or insolvency of either of the Parties; (b) the sale or
other disposition of all, or substantially all, of the Venture assets; or (c)
the mutual agreement of the Parties.
 
15. Dissolution of Joint Venture:
 
a.  
Upon maturity and repayment of the zero coupon bonds issued in connection with
the 144A Offering. the Venture shall promptly undertake to wind up its affairs
by satisfying all remaining liabilities and obligations; and thereafter,
disbursing and remaining assets to the Co-Venturer. Co-Venturer shall thereafter
dissolve the Venture.

 
b.  
In the event that Co-Venturer determines that, based on its assessment of the
facts and circumstances that it is highly unlikely that the $300 million
targeted amount of funds can be successfully raised from the Offering, then the
Venture shall be promptly dissolved in accordance with the Section 1 I a.

 
Return of Material. Each receiving Party shall return to the disclosing Party
any and all documents containing Confidential Information of the disclosing
Party and materials of any kind related to the business of the disclosing Party
within three (3) days of the termination of this Agreement unless the disclosing
Party has agreed in writing that the receiving Party may destroy all such
documents and certify such destruction in writing.
 
l6. Indemnification.
 
  a.
Co-Venturer. Co-Venturer agrees to indemnify FCF and its controlling persons.
directors, officers, managers, partners. members, shareholders, affiliates,
agents, representatives, successors and assigns (collectively, the
"Representatives") from and against any and all losses, liabilities,
deficiencies, costs, damages, expenses and amounts paid in settlement of any
claims sustained by Co-Venturer in connection with the business of the Venture
(including, without limitation, reasonable attorneys' fees, charges and
disbursements) (collectively. the "Losses") incurred by the Co-Venturer as a
result of any claim, action, judgment or proceeding related to this Agreement;

 
 
 
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  b.
FCF. FCF agrees to indemnify Co-Venturer and its Representatives from and
against the Losses incurred by FCF as a result of any claim. action. judgment or
proceeding related to this Agreement.

 
17. Other Business Interests. Each Party may have interests in business other
than the Venture described in this Agreement. The Parties shall not have the
right to the income or proceeds derived from such other business interests, even
if they are competitive with the Venture or the other Party's business, so long
as this Agreement has not been terminated. Provided, however, any financing
transaction sought by Co-Venturer shall first be presented to FCF. who shall
have the right. but not the obligation, to participate in such transaction.
 
18. Fiscal Year and Accounting Method. The fiscal year for the Joint Venture
Entity shall be the calendar year ending December 31. The Venture shall use the
accrual method of accounting in compliance with United States .Generally
Accepted Accounting Principles.
 
19. Limitation of Liability. The Co-Venturer agrees that in no event shall FCF's
liability under this Agreement exceed the Engagement Fee received by FCF under
this Agreement except to the extent that damages to the Co-Venturer resulted
from FCF's gross negligence, reckless or willful misconduct, or violation of
law. This limitation of FCF's liability to the Co-Venturer shall not be affected
in any way by any determination that the indemnification provisions in this
Agreement are not fully enforceable or otherwise not fully available.
 
 20. Disputes.
 
a.  
The Parties agree that in the event of a violation of Sections 8, 9 or 13 above,
the non-breaching Party shall be entitled to seek an injunction to prevent the
breach or further breach and to seek injunctive relief or specific performance
without the posting of a bond or other security. The non-breaching Party shall
also be entitled to seek all other available remedies.

 
b.  
In the event of any dispute arising out of this Agreement, the Parties shall
meet and confer prior to filing a demand for arbitration to attempt to resolve
the dispute without incurring the costs of arbitration. Should the dispute not
be resolved, the Parties agree to submit the dispute and all related issues to
binding arbitration. The dispute shall be heard by one arbitrator who shall be a
licensed attorney with at least ten (10) years of experience. The decision of
the arbitrator shall be binding and judgment may be entered in any court of
competent jurisdiction. All Parties shall cooperate with the arbitration and
promptly pay all necessary lees. Until a final decision on distribution of
costs, all fees shall be paid equally by both Parties. The arbitrator shall
award reasonable attorney's fees to the prevailing Party.

 
 21. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey applicable to contracts
executed and to be wholly performed therein without giving effect to its
conflicts of laws, principles or rules.
 
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 22. Amendments. This Agreement may be modified or amended, or its provisions
waived. only by a writing signed by the Party against whom enforcement of the
modifications, amendment or waiver is sought.
 
 23. Notices. All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given (a) upon
personal delivery; (b) upon delivery by nationally recognized overnight delivery
service, or (c) upon the earlier of receipt or three (3) business days after
being mailed by registered or certified mail, postage prepaid. All notices
pursuant to this Section 19 shall be addressed as follows or to such other
address as a party.
 
a. If to FCF:
 
First Commercial Funding
Two Brentwood Commons, Suite 150 750 Old Hickory Boulevard
Brentwood, TN 37027
 
b. If to Co-Venturer:
 
Coates International LTD
2100 I Iwy. 34 Ridgewood Road Wall Township, NJ 07719
 
 24. Binding Agreement; No Assignment. This Agreement shall be binding upon and
shall inure to the benefit of each of the Parties and their respective
successors and permitted assigns. Neither Party may assign its interest in this
Agreement or the Venture without the prior written consent of the other Party.
 
 25. Not a Partnership. The Parties agree that this Venture is not a partnership
and shall not he governed by the partnership laws of any country or state, and
shall not be subject to taxation under subchapter K of the U.S. Internal Revenue
Code of 1986, as amended.
 
 26. Entire Agreement. This Agreement constitutes the entire Agreement between
the Parties hereto pertaining to the subject matter hereof and supersedes all
prior agreements and understandings of the Parties, whether written or oral, and
there are no warranties, representations or other agreements between the Parties
in connection with the subject matter hereof except as specifically set forth
herein.
 
 27. Severability. If any provision or portion thereof of this Agreement shall
be held invalid or unenforceable, such provision shall be modified to the extent
necessary to make such provision enforceable to the fullest extent permitted by
law. To the extent modification will not remedy such invalidity or
unenforceability; such provision shall be stricken from this Agreement without
invalidating the remaining provisions of this Agreement.
 
28. Contract Construction. This Agreement is the product of negotiations between
the Parties, therefore. the rule of construction which provides that ambiguities
in a contract shall be construed against the drafter shall not apply to this
Agreement. and the Parties hereby waive any such defense to the terms of this
Agreement. 'the descriptive headings of the paragraphs, subparagraphs of this
Agreement are inserted for convenience only. and do not constitute a part of
this Agreement, and shall not affect in any way the meaning or interpretation of
this Agreement.
 
 
 
 
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29. No Waiver. No failure or delay by either Party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder.
 
30. Survival. Sections 3, 4, 8, 9, 1 1, 12, 13, 15 and such other sections as
the context reasonably requires shall survive the expiration or termination of
this Agreement.
 
31. Signatures. This Agreement may be executed in counterparts and all such
counterparts shall constitute but one and the same instrument. A facsimile
signature may substitute for and have the same legal effect as the original
signature. Each person signing on behalf of a Party hereto warrants that such
Party has perlbrmed all corporate or partnership actions necessary to make this
agreement a binding obligation, enforceable in accordance with its terms.
 
 
 
 
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IN WITNESS WHEREOF, the Parties have executed this Agreement on the date set
forth above.
 

FCF:           FIRST COMMERCIAL FUNDING                              
/s/ David Goss
   
 
 
Name: David Goss
   
 
 
Title: President
   
 
 

 
 
 

CO-VENTURER:        
COATES INTERNATIONAL LTD
                           
/s/ George J. Coates
   
 
 
Name: George J. Coates
   
 
 
Title: President and Chief Executive Officer 
   
 
 

 
 
 
 
 
 
 
 
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