EXHIBIT 10.1

 

NEITHER THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE. THESE SECURITIES HAVE BEEN SOLD IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.

 

COATES INTERNATIONAL, LTD.

 

Convertible Note

 

Issuance Date:  September 11, 2015 Original Principal Amount:  $52,500 Interest
Rate: 7% Consideration Paid at Close:    $50,000

 

FOR VALUE RECEIVED, COATES INTERNATIONAL, LTD., a Delaware corporation (the
"Company"), hereby promises to pay to the order of Kris Iyer, residing at 410
Foxford Dr., Buffalo Grove, IL 60089 (the "Holder") the amount set forth above
as the Original Principal Amount (as reduced pursuant to the terms hereof
pursuant to redemption, conversion or otherwise, the "Principal") when due,
whether upon the Maturity Date (as defined below), acceleration, redemption or
otherwise (in each case in accordance with the terms hereof) and to pay interest
("Interest") on any outstanding Principal at the applicable Interest Rate from
the date set forth above as the Issuance Date (the "Issuance Date") until the
same becomes due and payable, upon the Maturity Date or acceleration,
conversion, redemption or otherwise (in each case in accordance with the terms
hereof).

 

The Original Principal Amount is $52,500 (fifty two thousand five hundred
dollars) plus accrued and unpaid interest and any other fees. The Consideration
is payable by wire transfer. For purposes hereof, the term “Outstanding Balance”
means the Original Principal Amount, as reduced or increased, as the case may
be, pursuant to the terms hereof for conversion, breach hereof or otherwise,
plus any accrued but unpaid interest, collection and enforcements costs, and any
other fees or charges incurred under this Note.

 

(1)          GENERAL TERMS

 

(a)          Payment of Principal. The "Maturity Date" shall be one year from
the date of payment of Consideration, as may be extended at the option of the
Holder in the event that, and for so long as, an Event of Default (as defined
below) shall not have occurred and be continuing on the Maturity Date (as may be
extended pursuant to this Section 1) or any event shall not have occurred and be
continuing on the Maturity Date (as may be extended pursuant to this Section 1)
that with the passage of time and the failure to cure would result in an Event
of Default.

 

 

 

 

(b)          Interest. Interest shall accrue at a rate of 7% (“Interest Rate”)
compounded monthly and shall be applied to the Original Principal Amount.
Interest hereunder shall be paid on the Maturity Date (or sooner as provided
herein) to the Holder.

 

(c)          Security. This Note shall not be secured by any collateral or any
assets pledged to the Holder.

 

(2)          EVENTS OF DEFAULT.

 

(a)        An “Event of Default”, wherever used herein, means any one of the
following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any administrative or
governmental body):

 

(i)         The Company's failure to pay to the Holder any amount of Principal,
Interest, or other amounts when and as due under this Note (including, without
limitation, the Company's failure to pay any redemption payments or amounts
hereunder);

 

(ii)        A Conversion Failure as defined in section 3(b)(ii)

 

(iii)      The Company or any subsidiary of the Company shall commence, or there
shall be commenced against the Company or any subsidiary of the Company under
any applicable bankruptcy or insolvency laws as now or hereafter in effect or
any successor thereto, or the Company or any subsidiary of the Company commences
any other proceeding under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Company or any
subsidiary of the Company or there is commenced against the Company or any
subsidiary of the Company any such bankruptcy, insolvency or other proceeding
which remains undismissed for a period of 61 days; or the Company or any
subsidiary of the Company is adjudicated insolvent or bankrupt; or any order of
relief or other order approving any such case or proceeding is entered; or the
Company or any subsidiary of the Company suffers any appointment of any
custodian, private or court appointed receiver or the like for it or any
substantial part of its property which continues undischarged or unstayed for a
period of sixty one (61) days; or the Company or any subsidiary of the Company
makes a general assignment for the benefit of creditors; or the Company or any
subsidiary of the Company shall fail to pay, or shall state that it is unable to
pay, or shall be unable to pay, its debts generally as they become due; or the
Company or any subsidiary of the Company shall call a meeting of its creditors
with a view to arranging a composition, adjustment or restructuring of its
debts; or the Company or any subsidiary of the Company shall by any act or
failure to act expressly indicate its consent to, approval of or acquiescence in
any of the foregoing; or any corporate or other action is taken by the Company
or any subsidiary of the Company for the purpose of effecting any of the
foregoing;

 

(iv)      The Company or any subsidiary of the Company shall default in any of
its obligations under any other Note or any mortgage, credit agreement or other
facility, indenture agreement, factoring agreement or other instrument under
which there may be issued, or by which there may be secured or evidenced any
indebtedness for borrowed money or money due under any long term leasing or
factoring arrangement of the Company or any subsidiary of the Company in an
amount exceeding $100,000, whether such indebtedness now exists or shall
hereafter be created; and

 

(v)       The Common Stock is suspended or delisted for trading on the Over the
Counter Bulletin Board market (the “Primary Market”).

 

(vi)      The Company loses its ability to deliver shares via “DWAC/FAST”
electronic transfer.

 

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(vii)      The Company loses its status as “DTC Eligible.”

 

(viii)     The Company shall become late or delinquent in its filing
requirements as a fully-reporting issuer registered with the Securities &
Exchange Commission.

 

(b)        If an Event of Default is not cured within 30 days, the Outstanding
Balance shall increase to 110% of the Outstanding Balance immediately prior to
the occurrence of the Event of Default (the “Default Effect”). The Default
Effect shall automatically apply upon the occurrence of an Event of Default
without the need for any party to give any notice or take any other action.

 

(3)          CONVERSION OF NOTE.   This Note shall be convertible into shares of
the Company's Common Stock, on the terms and conditions set forth in this
Section 3.

 

(a)          Conversion Right. Subject to the provisions of Section 3(c), at any
time or times on or after 180 days from the Issuance Date, the Holder shall be
entitled to convert any portion of the outstanding and unpaid Conversion Amount
(as defined below) into fully paid and nonassessable shares of Common Stock in
accordance with Section 3(b), at the Conversion Price (as defined below). The
number of shares of Common Stock issuable upon conversion of any Conversion
Amount pursuant to this Section 3(a) shall be equal to the quotient of dividing
the Conversion Amount by the Conversion Price. The Company shall not issue any
fraction of a share of Common Stock upon any conversion. If the issuance would
result in the issuance of a fraction of a share of Common Stock, the Company
shall round such fraction of a share of Common Stock to the nearest whole share.
The Holder shall pay any transfer taxes and all legal fees and expenses, as well
as any other fees or costs that may be incurred or charged in connection with
providing documentation requested by the Company’s transfer agent in connection
with the issuance of shares of the Company’s Common Stock to the Holder arising
out of or relating to the conversion of this Note.

 

(i)          "Conversion Amount" means the portion of the Original Principal
Amount and Interest to be converted, plus any penalties, redeemed or otherwise
with respect to which this determination is being made.

 

(ii)          "Conversion Price" shall equal 70% of the average of the three
lowest closing prices occurring during the ten (10) consecutive Trading Days
immediately preceding the applicable Conversion Date on which the Holder elects
to convert all or part of this Note, subject to adjustment as provided in this
Note.

 

(b)          Mechanics of Conversion.

 

(i)          Optional Conversion. To convert any Conversion Amount into shares
of Common Stock on any date (a "Conversion Date"), the Holder shall (A) transmit
by email, facsimile (or otherwise deliver), for receipt on or prior to 5:00
p.m., Eastern Time, on such date, a copy of an executed notice of conversion in
the form attached hereto as Exhibit A (the "Conversion Notice") to the Company.
On or before the second Business Day following the date of receipt of a
Conversion Notice (the "Share Delivery Date"), the Company shall, provided that
the Transfer Agent is participating in the Depository Trust Company's ("DTC")
Fast Automated Securities Transfer Program, instruct its transfer agent to
credit such aggregate number of shares of Common Stock to which the Holder shall
be entitled to the Holder's or its designee's balance account with DTC through
its Deposit Withdrawal Agent Commission system or (B) if the Transfer Agent is
not participating in the DTC Fast Automated Securities Transfer Program, issue
and deliver to the address as specified in the Conversion Notice, a certificate,
registered in the name of the Holder or its designee, for the number of shares
of Common Stock to which the Holder shall be entitled which certificates shall
not bear any restrictive legends unless required pursuant the Rule 144.

 

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(ii)          Company's Failure to Timely Convert. If within two (2) Trading
Days after the day that (i) the Company has received a facsimile or email copy
of a validly completed, undisputed Conversion Notice, and (ii) Holder having
contacted the Company to confirm receipt thereof, the Company shall have failed
to issue and deliver to Holder via “DWAC/FAST” electronic transfer the number of
shares of Common Stock to which the Holder is entitled upon such holder's
conversion of any Conversion Amount (a "Conversion Failure"), the Original
Principal Amount of the Note shall increase by $1,000 per day until the Company
issues and delivers a certificate to the Holder or credit the Holder's balance
account with DTC for the number of shares of Common Stock to which the Holder is
entitled upon such holder's conversion of any Conversion Amount (under Holder’s
and Company’s expectation that the holding period of any damages will tack back
to the Issuance Date). Company will not be subject to any penalties once its
transfer agent processes the shares to the DWAC system.

 

(iii)         Book-Entry. Notwithstanding anything to the contrary set forth
herein, upon conversion of any portion of this Note in accordance with the terms
hereof, the Holder shall not be required to physically surrender this Note to
the Company unless the full Conversion Amount represented by this Note is being
converted. The Holder and the Company shall maintain records showing the
Principal and Interest converted and the dates of such conversions or shall use
such other method, reasonably satisfactory to the Holder and the Company, so as
not to require physical surrender of this Note until after conversion or
repayment of the entire Note, including interest and penalties, if any.
Thereafter, the Note shall be promptly marked “Paid in Full” and returned to the
Company within 15 days.

 

(c)          Limitations on Conversions or Trading.

 

(i)          Beneficial Ownership. The Company shall not effect any conversions
of this Note and the Holder shall not have the right to convert any portion of
this Note or receive shares of Common Stock as payment of interest hereunder to
the extent that after giving effect to such conversion or receipt of such
interest payment, the Holder, together with any affiliate thereof, would
beneficially own (as determined in accordance with Section 13(d) of the Exchange
Act and the rules promulgated thereunder) in excess of 9.99% of the number of
shares of Common Stock outstanding immediately after giving effect to such
conversion or receipt of shares as payment of interest. Since the Holder will
not be obligated to report to the Company the number of shares of Common Stock
it may hold at the time of a conversion hereunder, unless the conversion at
issue would result in the issuance of shares of Common Stock in excess of 9.99%
of the then outstanding shares of Common Stock without regard to any other
shares which may be beneficially owned by the Holder or an affiliate thereof,
the Holder shall have the authority and obligation to determine whether the
restriction contained in this Section will limit any particular conversion
hereunder and to the extent that the Holder determines that the limitation
contained in this Section applies, the determination of which portion of the
principal amount of this Note is convertible shall be the responsibility and
obligation of the Holder. If the Holder has delivered a Conversion Notice for a
principal amount of this Note that, without regard to any other shares that the
Holder or its affiliates may beneficially own, would result in the issuance in
excess of the permitted amount hereunder, the Company shall undertake its best
efforts to recognize this condition and notify the Holder of this fact and shall
honor the conversion for the maximum principal amount permitted to be converted
on such Conversion Date in accordance with Section 3(a) and, any principal
amount tendered for conversion in excess of the permitted amount hereunder shall
remain outstanding under this Note. The provisions of this Section may be waived
by Holder upon written notification to the Company.

 

(d)          Other Provisions.

 

(i)          Share Reservation.  The Company shall at all times reserve and keep
available out of its authorized Common Stock the full number of shares of Common
Stock issuable upon conversion of all outstanding amounts under this Note; and
within five (5) Business Days following the receipt by the Company of a Holder's
notice that such minimum number of Underlying Shares is not so reserved, the
Company shall promptly reserve a sufficient number of shares of Common Stock to
comply with such requirement. The Company will at all times reserve at least
12,000,000 shares of Common Stock for conversion.

 

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(ii)          Prepayment.   At any time within the 180 day period immediately
following the Issuance Date, the Company shall have the option, upon 10 business
days’ notice to Holder, to pre-pay the entire remaining outstanding principal
amount of this Note in cash, provided that (i) the Company shall pay the Holder
125% of the Outstanding Balance, (ii) such amount must be paid in cash on the
next business day following such 10 business day notice period.

 

(iii)         All calculations under this Section 3 shall be rounded off to the
nearest $0.00001 or whole share.

 

(iv)         Nothing herein shall limit a Holder's right to pursue actual
damages or declare an Event of Default pursuant to Section 2 herein for the
Company's failure to deliver certificates representing shares of Common Stock
upon conversion within the period specified herein and such Holder shall have
the right to pursue all remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief,
in each case without the need to post a bond or provide other security. The
exercise of any such rights shall not prohibit the Holder from seeking to
enforce damages pursuant to any other Section hereof or under applicable law.

 

(4)          REISSUANCE OF THIS NOTE.

 

(a)          Assignability. The Company may not assign this Note. This Note will
be binding upon the Company and its successors and will inure to the benefit of
the Holder and its successors and assigns and may be assigned by the Holder with
prior written consent of the Company, which consent shall not be unreasonably
withheld.

 

(b)          Lost, Stolen or Mutilated Note. Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Note, and, in the case of loss, theft or destruction, of
any indemnification undertaking by the Holder to the Company in customary form
and, in the case of mutilation, upon surrender and cancellation of this Note,
the Company shall execute and deliver to the Holder a new Note representing the
outstanding Principal.

 

(5)          APPLICABLE LAW AND VENUE. This Note shall be governed by and
construed in accordance with the laws of the State of Illinois, without giving
effect to conflicts of laws thereof. Any action brought by either party against
the other concerning the transactions contemplated by this Agreement shall be
brought only in the state or federal courts of Illinois, as appropriate.

 

(6)          WAIVER. Any waiver by the Holder of a breach of any provision of
this Note shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this Note.
The failure of the Holder to insist upon strict adherence to any term of this
Note on one or more occasions shall not be considered a waiver or deprive that
party of the right thereafter to insist upon strict adherence to that term or
any other term of this Note. Any waiver must be in writing.

 

[Signature Page Follows]

 

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[Signature Page to Convertible Note]

 

IN WITNESS WHEREOF, the Company has caused this Convertible Note to be duly
executed by a duly authorized officer as of the date set forth above.

 

  COMPANY:         COATES INTERNATIONAL, LTD.         By: /s/ Barry C. Kaye  
Name: Barry C. Kaye   Title: Chief Financial Officer

 

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EXHIBIT A

 

NOTICE OF CONVERSION

 

Barry Kaye, CFO

Coates International, Ltd.

2100 Highway 34

Wall Township, NJ 07719

 

The undersigned hereby elects to convert a portion of the $50,000 Convertible
Note 1 issued to Kris Iyer on _____________, 2016, into Shares of Common Stock
of Coates International, Ltd. according to the conditions set forth in such Note
as of the date written below.

 

Date of Conversion:     Conversion Amount:     Conversion Price:     Shares to
be Delivered:    

 

Shares delivered in name of:

 

Kris Iyer

 

Signature:

 

 

 

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