EXHIBIT 10.1


 





 


NEITHER THE ISSUANCE AND SALE OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION
IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING,
THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.


 


 





	Principal Amount: $77,500.00	Issue Date: June 12, 2015
	Purchase Price: $77,500.00	 










CONVERTIBLE PROMISSORY NOTE


 


FOR VALUE RECEIVED,
COATES INTERNATIONAL, LTD., a Delaware corporation (hereinafter called the “Borrower”), hereby promises to pay
to the order of VIS VIRES GROUP, INC., a New York corporation, or registered assigns (the “Holder”) the sum
of $77,500.00 together with any interest as set forth herein, on March 15, 2016 (the “Maturity Date”), and to pay interest
on the unpaid principal balance hereof at the rate of eight percent (8%) (the “Interest Rate”) per annum from the date
hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment
or otherwise. This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal
or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from
the due date thereof until the same is paid (“Default Interest”). Interest shall commence accruing on the date that
the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed. All payments
due hereunder (to the extent not converted into common stock, $0.0001 par value per share (the “Common Stock”) in accordance
with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address
as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever
any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead
be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on
which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining
the amount of interest due on such date. As used in this Note, the term “business day” shall mean any day other than
a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive
order to remain closed. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in
that certain Securities Purchase Agreement dated the date hereof, pursuant to which this Note was originally issued (the “Purchase
Agreement”).


 






    	 



    	 



    

 


This Note is free from
all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other
similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.


 


The following terms shall
apply to this Note:


 


Article
I. CONVERSION RIGHTS


 


1.1 
 Conversion Right. The Holder shall have the right from time to time, and at any time during the period beginning
on the date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity
Date and (ii) the date of payment of the Default Amount (as defined in Article III) pursuant to Section 1.6(a) or Article III,
each in respect of the remaining outstanding principal amount of this Note to convert all or any part of the outstanding and unpaid
principal amount of this Note into fully paid and non- assessable shares of Common Stock, as such Common Stock exists on the Issue
Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed
or reclassified at the conversion price (the “Conversion Price”) determined as provided herein (a “Conversion”);
provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of
that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the
Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the
unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation
on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable
upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result
in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes
of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d)
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except as
otherwise provided in clause (1) of such proviso, provided, further, however, that the limitations on conversion
may be waived by the Holder upon, at the election of the Holder, not less than 61 days’ prior notice to the Borrower, and
the provisions of the conversion limitation shall continue to apply until such 61st day (or such later date, as determined by the
Holder, as may be specified in such notice of waiver). The number of shares of Common Stock to be issued upon each conversion of
this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect
on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”),
delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted
by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00
p.m., New York, New York time on such conversion date (the “Conversion Date”). The term “Conversion Amount”
means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion
plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates
provided in this Note to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts
referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder’s option, any amounts owed
to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.


 






    	2



    	 



    

 


1.2 
Conversion Price.


 


(a) 
Calculation of Conversion Price. The conversion price (the “Conversion Price”) shall equal the Variable
Conversion Price (as defined herein) (subject to equitable adjustments for stock splits, stock dividends or rights offerings by
the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization,
reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price" shall mean 61% multiplied
by the Market Price (as defined herein) (representing a discount rate of 39%). “Market Price” means the average of
the lowest three (3) Trading Prices (as defined below) for the Common Stock during the ten (10) Trading Day period ending on the
latest complete Trading Day prior to the Conversion Date. “Trading Price” means, for any security as of any date, the
closing bid price on the Over-the-Counter Bulletin Board, Pink Sheets electronic quotation system or applicable trading market
(the “OTC”) as reported by a reliable reporting service (“Reporting Service”) designated by the Holder
(i.e. Bloomberg) or, if the OTC is not the principal trading market for such security, the closing bid price of such security on
the principal securities exchange or trading market where such security is listed or traded or, if no closing bid price of such
security is available in any of the foregoing manners, the average of the closing bid prices of any market makers for such security
that are listed in the “pink sheets”. If the Trading Price cannot be calculated for such security on such date in the
manner provided above, the Trading Price shall be the fair market value as mutually determined by the Borrower and the holders
of a majority in interest of the Notes being converted for which the calculation of the Trading Price is required in order to determine
the Conversion Price of such Notes. “Trading Day” shall mean any day on which the Common Stock is tradable for any
period on the OTC, or on the principal securities exchange or other securities market on which the Common Stock is then being traded.


 






    	3



    	 



    

 


(b)  
Conversion Price During Major Announcements. Notwithstanding anything contained in Section 1.2(a) to the contrary,
in the event the Borrower (i) makes a public announcement that it intends to consolidate or merge with any other corporation (other
than a merger in which the Borrower is the surviving or continuing corporation and its capital stock is unchanged) or sell or transfer
all or substantially all of the assets of the Borrower or (ii) any person, group or entity (including the Borrower) publicly announces
a tender offer to purchase 50% or more of the Borrower’s Common Stock (or any other takeover scheme) (the date of the announcement
referred to in clause (i) or (ii) is hereinafter referred to as the “Announcement Date”), then the Conversion Price
shall, effective upon the Announcement Date and continuing through the Adjusted Conversion Price Termination Date (as defined below),
be equal to the lower of (x) the Conversion Price which would have been applicable for a Conversion occurring on the Announcement
Date and (y) the Conversion Price that would otherwise be in effect. From and after the Adjusted Conversion Price Termination Date,
the Conversion Price shall be determined as set forth in this Section 1.2(a). For purposes hereof, “Adjusted Conversion Price
Termination Date” shall mean, with respect to any proposed transaction or tender offer (or takeover scheme) for which a public
announcement as contemplated by this Section 1.2(b) has been made, the date upon which the Borrower (in the case of clause (i)
above) or the person, group or entity (in the case of clause (ii) above) consummates or publicly announces the termination or abandonment
of the proposed transaction or tender offer (or takeover scheme) which caused this Section 1.2(b) to become operative.


 


1.3 
 Authorized Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will
reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for
the issuance of Common Stock upon the full conversion of this Note issued pursuant to the Purchase Agreement. The Borrower is
required at all times to have Two Hundred Sixty (260,000,000) million shares authorized but unissued in its capital structure
such that when the Holder submits a Notice of Conversion there will be at a minimum Two Hundred Sixty (260,000,000) million shares
of Common Stock that are authorized but unissued for the Borrower's transfer agent to issue to the Holder (the “Reserved
Amount”). This Reserved Amount is in addition to any shares presently held or to be held in the future by the transfer agent
for the benefit of the Holder. If at any time the Reserved Amount is less than Two Hundred Sixty (260,000,000) million shares
of Common Stock then the Borrower will take immediate steps to increase the reserve but in any event will increase the reserve
within thirty (30) days of the Reserved Amount falling below Two Hundred Sixty (260,000,000) million shares of Common Stock (the
"Cure Period"). The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid
and non-assessable. In addition, if the Borrower shall issue any securities or make any change to its capital structure which
would change the number of shares of Common Stock into which the Notes shall be convertible at the then current Conversion Price,
the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common
Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Notes. The Borrower (i) acknowledges
that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this
Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged
with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance
with the terms and conditions of this Note. If, at any time the Borrower does not maintain the Reserved Amount (subject to the
Cure Period) it will be considered an Event of Default under Section 3.2 of the Note.






    	4



    	 



    




1.4 
Method of Conversion.


 


(a) 
Mechanics of Conversion. Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at
any time from time to time after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail
or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject
to Section 1.4(b), surrendering this Note at the principal office of the Borrower.


 


(b)  
Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of
this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower
unless the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing
the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to
the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion. In the event of any
dispute or discrepancy, such records of the Borrower shall, prima
facie, be controlling and determinative in the absence of manifest error. Notwithstanding the foregoing, if any portion
of this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders this
Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the Holder a new Note of like tenor,
registered as the Holder (upon payment by the Holder of any applicable transfer taxes) may request, representing in the aggregate
the remaining unpaid principal amount of this Note. The Holder and any assignee, by acceptance of this Note, acknowledge and agree
that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted
principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.


 


(c) 
Payment of Taxes. The Borrower shall not be required to pay any tax which may be payable in respect of any transfer
involved in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name
other than that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or
other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name
such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the
amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid.


 






    	5



    	 



    

 


(d)  
Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission
or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided
in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder
certificates for the Common Stock issuable upon such conversion within three (3) business days after such receipt (the “Deadline”)
(and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with
the terms hereof and the Purchase Agreement.


 


(e) 
Obligation of Borrower to Deliver Common Stock. Upon receipt by the Borrower of a Notice of Conversion, the Holder
shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount
and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower
defaults on its obligations under this Article I, all rights with respect to the portion of this Note being so converted shall
forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided,
on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to
issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action
by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against
any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to
the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the
Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation
of the Borrower to the Holder in connection with such conversion. The Conversion Date specified in the Notice of Conversion shall
be the Conversion Date so long as the Notice of Conversion is received by the Borrower before 6:00 p.m., New York, New York time,
on such date.


 


(f) 
Delivery of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common
Stock issuable upon conversion, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast
Automated Securities Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions contained
in Section 1.1 and in this Section 1.4, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit
the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through
its Deposit Withdrawal Agent Commission (“DWAC”) system.


 






    	6



    	 



    

 


(g)  
Failure to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder’s right to pursue
other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable
upon conversion of this Note is not delivered by the Deadline (other than a failure due to the circumstances described in Section
1.3 above, which failure shall be governed by such Section) the Borrower shall pay to the Holder $2,000 per day in cash, for each
day beyond the Deadline that the Borrower fails to deliver such Common Stock. Such cash amount shall be paid to Holder by the fifth
day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower
by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note,
in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall
be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a
valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right
are difficult if not impossible to qualify. Accordingly the parties acknowledge that the liquidated damages provision contained
in this Section 1.4(g) are justified.


 


1.5 
 Concerning the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred
unless (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer
agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions
of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant
to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act (or
a successor rule) (“Rule 144”) or (iv) such shares are transferred to an “affiliate” (as defined in Rule
144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an
Accredited Investor (as defined in the Purchase Agreement). Except as otherwise provided in the Purchase Agreement (and subject
to the removal provisions set forth below), until such time as the shares of Common Stock issuable upon conversion of this Note
have been registered under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities
as of a particular date that can then be immediately sold, each certificate for shares of Common Stock issuable upon conversion
of this Note that has not been so included in an effective registration statement or that has not been sold pursuant to an effective
registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form,
as appropriate:


 


“NEITHER THE ISSUANCE AND SALE
OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE
FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING
THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT
SECURED BY THE SECURITIES.”


 






    	7



    	 



    

 


The legend set forth above
shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if (i) the
Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary for opinions of
counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made without registration
under the Act, which opinion shall be accepted by the Company so that the sale or transfer is effected or (ii) in the case of the
Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration
statement filed under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities
as of a particular date that can then be immediately sold. In the event that the Company does not accept the opinion of counsel
provided by the Holder with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144
or Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.


 


1.6 
Effect of Certain Events.


 


(a) 
Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or
substantially all of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions
in which more than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination
of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall either:
(i) be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to
the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in
Article III) or (ii) be treated pursuant to Section 1.6(b) hereof. “Person” shall mean any individual, corporation,
limited liability company, partnership, association, trust or other entity or organization.


 






    	8



    	 



    

 


(b)  
Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior
to conversion of all of the Notes, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization,
or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different
number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or
conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation
of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the
basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable
upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had
this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth
herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this
Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and
of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in
relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not affect any transaction
described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, thirty (30) days prior written notice (but
in any event at least fifteen (15) days prior written notice) of the record date of the special meeting of shareholders to approve,
or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization
or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting
successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Section 1.6(b). The above
provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.


 


(c) 
Adjustment Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to
acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including
any dividend or distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock
of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion
of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such
assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had
such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to
such Distribution.


  


(d)  
Adjustment Due to Dilutive Issuance. If, at any time when any Notes are issued and outstanding, the Borrower issues
or sells, or in accordance with this Section 1.6(d) hereof is deemed to have issued or sold, any shares of Common Stock for no
consideration or for a consideration per share (before deduction of reasonable expenses or commissions or underwriting discounts
or allowances in connection therewith) less than the Conversion Price in effect on the date of such issuance (or deemed issuance)
of such shares of Common Stock (a “Dilutive Issuance”), then immediately upon the Dilutive Issuance, the Conversion
Price will be reduced to the amount of the consideration per share received by the Borrower in such Dilutive Issuance.


 






    	9



    	 



    

 


The Borrower shall
be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or grants any warrants, rights or
options (not including employee stock option plans), whether or not immediately exercisable, to subscribe for or to purchase Common
Stock or other securities convertible into or exchangeable for Common Stock (“Convertible Securities”) (such warrants,
rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as “Options”) and
the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Conversion Price then
in effect, then the Conversion Price shall be equal to such price per share. For purposes of the preceding sentence, the “price
per share for which Common Stock is issuable upon the exercise of such Options” is determined by dividing (i) the total amount,
if any, received or receivable by the Borrower as consideration for the issuance or granting of all such Options, plus the minimum
aggregate amount of additional consideration, if any, payable to the Borrower upon the exercise of all such Options, plus, in the
case of Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of additional consideration
payable upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable,
by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Options (assuming full conversion
of Convertible Securities, if applicable). No further adjustment to the Conversion Price will be made upon the actual issuance
of such Common Stock upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon
exercise of such Options.


 


Additionally, the
Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or sells any Convertible
Securities, whether or not immediately convertible (other than where the same are issuable upon the exercise of Options), and the
price per share for which Common Stock is issuable upon such conversion or exchange is less than the Conversion Price then in effect,
then the Conversion Price shall be equal to such price per share. For the purposes of the preceding sentence, the “price
per share for which Common Stock is issuable upon such conversion or exchange” is determined by dividing (i) the total amount,
if any, received or receivable by the Borrower as consideration for the issuance or sale of all such Convertible Securities, plus
the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the conversion or exchange thereof
at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of
Common Stock issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment to the Conversion
Price will be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities.


 






    	10



    	 



    

 


(e) 
Purchase Rights. If, at any time when any Notes are issued and outstanding, the Borrower issues any convertible securities
or rights to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record
holders of any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares
of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion contained herein)
immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights or, if no such record
is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase
Rights.


 


(f) 
Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result
of the events described in this Section 1.6, the Borrower, at its expense, shall promptly compute such adjustment or readjustment
and prepare and furnish to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Borrower shall, upon the written request at any time of the Holder, furnish
to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect
and (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would
be received upon conversion of the Note.


 


1.7 
Trading Market Limitations. Unless permitted by the applicable rules and regulations of the principal securities
market on which the Common Stock is then listed or traded, in no event shall the Borrower issue upon conversion of or otherwise
pursuant to this Note and the other Notes issued pursuant to the Purchase Agreement more than the maximum number of shares of Common
Stock that the Borrower can issue pursuant to any rule of the principal United States securities market on which the Common Stock
is then traded (the “Maximum Share Amount”), which shall be 4.99% of the total shares outstanding on the Closing Date
(as defined in the Purchase Agreement), subject to equitable adjustment from time to time for stock splits, stock dividends, combinations,
capital reorganizations and similar events relating to the Common Stock occurring after the date hereof. Once the Maximum Share
Amount has been issued, if the Borrower fails to eliminate any prohibitions under applicable law or the rules or regulations of
any stock exchange, interdealer quotation system or other self-regulatory organization with jurisdiction over the Borrower or any
of its securities on the Borrower’s ability to issue shares of Common Stock in excess of the Maximum Share Amount, in lieu
of any further right to convert this Note, this will be considered an Event of Default under Section 3.3 of the Note.


 






    	11



    	 



    

 


1.8 
Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other
than the shares, if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the
Reserved Amount or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights
as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates
for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because
of a failure by the Borrower to comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received
certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect
to a conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a
holder of Common Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to
such unconverted portions of this Note and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder
or, if the Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted.
In all cases, the Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive Conversion
Default Payments pursuant to Section 1.3 to the extent required thereby for such Conversion Default and any subsequent Conversion
Default and (ii) the right to have the Conversion Price with respect to subsequent conversions determined in accordance with Section
1.3) for the Borrower’s failure to convert this Note.


 


1.9 
Prepayment. . Notwithstanding anything to the contrary contained in this Note, at any time during the periods set
forth on the table immediately following this paragraph (the “Prepayment Periods”), the Borrower shall have the right,
exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note
(principal and accrued interest), in full, in accordance with this Section 1.9. Any notice of prepayment hereunder (an “Optional
Prepayment Notice”) shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the
Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading
Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the “Optional Prepayment Date”),
the Borrower shall make payment of the Optional Prepayment Amount (as defined below) to Holder, or upon the order of the Holder
as specified by the Holder in writing to the Borrower, at least one (1) business day prior to the Optional Prepayment Date. If
the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Optional
Prepayment Amount”) equal to the percentage (“Prepayment Percentage”) as set forth in the table immediately
following this paragraph opposite the applicable Prepayment Period, multiplied by the sum of: (w) the then outstanding principal
amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional
Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any
amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice
and fails to pay the Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional
Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.



    	12



    	 



    

 


	Prepayment Period	Prepayment Percentage
	1.  The period beginning on the Issue Date and ending on the date which is sixty (60) days following the Issue Date.	130%
	2.  The period beginning  on the date which is sixty-one (61) days following the Issue Date and ending on the date which is ninety (90) days following the Issue Date	135%
	3.   The period beginning  on the date which is ninety-one (91) days following the Issue Date and ending on the date which is one hundred twenty (120) days following the Issue Date	140%
	4.  The period beginning on the date that is one hundred twenty-one  (121)  day from the Issue Date and ending one hundred fifty (150) days following the Issue Date	145%
	5.   The period beginning on the date that is one hundred fifty-one (151)  day from the Issue Date and ending one hundred eight (180) days following the Issue Date	150%


 


 


 


 


After the expiration
of one hundred eighty (180) days following the Issue Date, the Borrower shall have no right of prepayment. 


Article
II.  CERTAIN COVENANTS


 


2.1 
Distributions on Capital Stock. So long as the Borrower shall have any obligation under this Note, the Borrower shall
not without the Holder’s written consent (a) pay, declare or set apart for such payment, any dividend or other distribution
(whether in cash, property or other securities) on shares of capital stock other than dividends on shares of Common Stock solely
in the form of additional shares of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment
or distribution in respect of its capital stock except for distributions pursuant to any shareholders’ rights plan which
is approved by a majority of the Borrower’s disinterested directors.


 


2.2 
Restriction on Stock Repurchases. So long as the Borrower shall have any obligation under this Note, the Borrower
shall not without the Holder’s written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for
property or other securities or otherwise) in any one transaction or series of related transactions any shares of capital stock
of the Borrower or any warrants, rights or options to purchase or acquire any such shares.


 






    	13



    	 



    

 


2.3 
Borrowings. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the
Holder’s written consent, create, incur, assume guarantee, endorse, contingently agree to purchase or otherwise become liable
upon the obligation of any person, firm, partnership, joint venture or corporation, except by the endorsement of negotiable instruments
for deposit or collection, or suffer to exist any liability for borrowed money, except (a) borrowings in existence or committed
on the date hereof and of which the Borrower has informed Holder in writing prior to the date hereof, (b) indebtedness to trade
creditors or financial institutions incurred in the ordinary course of business or (c) borrowings, the proceeds of which shall
be used to repay this Note.


 


2.4 
Sale of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without
the Holder’s written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary
course of business. Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.


 


2.5 
Advances and Loans. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without
the Holder’s written consent, lend money, give credit or make advances to any person, firm, joint venture or corporation,
including, without limitation, officers, directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits
or advances (a) in existence or committed on the date hereof and which the Borrower has informed Holder in writing prior to the
date hereof, (b) made in the ordinary course of business or (c) not in excess of $100,000.


 


Article
III.  EVENTS OF DEFAULT


 


If any of the following events
of default (each, an “Event of Default”) shall occur:


 


3.1 
Failure to Pay Principal or Interest. The Borrower fails to pay the principal hereof or interest thereon when due
on this Note, whether at maturity, upon acceleration or otherwise.


 


3.2 
Conversion and the Shares. The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens
in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in
accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in
certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to
this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or
hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for shares of
Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note,
or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing)
any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of
Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes
any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and
any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not
be rescinded in writing) for three (3) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation
of the Borrower to remain current in its obligations to its transfer agent. It shall be an event of default of this Note, if a
conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the
option of the Holder, the Holder advances any funds to the Borrower’s transfer agent in order to process a conversion, such
advanced funds shall be paid by the Borrower to the Holder within forty eight (48) hours of a demand from the Holder.


 






    	14



    	 



    

 


3.3 
Breach of Covenants. The Borrower breaches any material covenant or other material term or condition contained in
this Note and any collateral documents including but not limited to the Purchase Agreement and such breach continues for a period
of ten (10) days after written notice thereof to the Borrower from the Holder.


 


3.4 
Breach of Representations and Warranties. Any representation or warranty of the Borrower made herein or in any agreement,
statement or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase
Agreement), shall be false or misleading in any material respect when made and the breach of which has (or with the passage of
time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.


 


3.5 
Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors,
or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business,
or such a receiver or trustee shall otherwise be appointed.


 


3.6 
Judgments. Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary
of the Borrower or any of its property or other assets for more than $50,000, and shall remain unvacated, unbonded or unstayed
for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.


 






    	15



    	 



    

 


3.7 
Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or
involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower
or any subsidiary of the Borrower.


 


3.8 
Delisting of Common Stock. The Borrower shall fail to maintain the listing of the Common Stock on at least one of
the OTC (which specifically includes the Pink Sheets electronic quotation system) or an equivalent replacement exchange, the Nasdaq
National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock Exchange.


 


3.9 
Failure to Comply with the Exchange Act. The Borrower shall fail to comply with the reporting requirements of the
Exchange Act; and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.


 


3.10 
Liquidation.Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.


 


3.11 
Cessation of Operations.Any cessation of operations by Borrower or Borrower admits it is otherwise generally
unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue
as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.


 


3.12 
Maintenance of Assets.The failure by Borrower to maintain any material intellectual property rights, personal,
real property or other assets which are necessary to conduct its business (whether now or in the future).


 


3.13 
Financial Statement Restatement.The restatement of any financial statements filed by the Borrower with the SEC
for any date or period from two years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the
result of such restatement would, by comparison to the unrestated financial statement, have constituted a material adverse effect
on the rights of the Holder with respect to this Note or the Purchase Agreement.


 


3.14 
Reverse Splits.The Borrower effectuates a reverse split of its Common Stock without twenty (20) days prior written
notice to the Holder.


 


3.15 
Replacement of Transfer Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails
to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form
as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares
of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.


 






    	16



    	 



    




 


3.16Cross-Default. 
Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default
by the Borrower of any covenant or other term or condition contained in any of the Other Agreements, after the passage of all applicable
notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the Other Agreements,
in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the
terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder.
“Other Agreements” means, collectively, all agreements and instruments between, among or by: (1) the Borrower,
and, or for the benefit of, (2) the Holder and any affiliate of the Holder, including, without limitation, promissory notes;
provided, however, the term “Other Agreements” shall not include the related or companion documents to this Note. Each
of the loan transactions will be cross-defaulted with each other loan transaction and with all other existing and future debt of
Borrower to the Holder.


Upon the occurrence of
any Event of Default specified in Section 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when
due at the Maturity Date), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full
satisfaction of its obligations hereunder, an amount equal to the Default Sum (as defined herein).  UPON THE OCCURRENCE OF
ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE SHALL BECOME IMMEDIATELY DUE AND PAYABLE AND THE BORROWER SHALL PAY TO
THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO: (Y) THE DEFAULT SUM (AS DEFINED HEREIN); MULTIPLIED
BY (Z) TWO (2). Upon the occurrence of any Event of Default, other than Section 3.2, exercisable through the delivery of written
notice to the Borrower by such Holders (the “Default Notice”), the Note shall become immediately due and payable and
the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the greater of (i)
150% times the sum of (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest
on the unpaid principal amount of this Note to the date of payment (the “Mandatory Prepayment Date”) plus (y)
Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder pursuant
to Sections 1.3 and 1.4(g) hereof (the then outstanding principal amount of this Note to the date of payment plus the amounts
referred to in clauses (x), (y) and (z) shall collectively be known as the “Default Sum”) or (ii) the “parity
value” of the Default Sum to be prepaid, where parity value means (a) the highest number of shares of Common Stock issuable
upon conversion of or otherwise pursuant to such Default Sum in accordance with Article I, treating the Trading Day immediately
preceding the Mandatory Prepayment Date as the “Conversion Date” for purposes of determining the lowest applicable
Conversion Price, unless the Default Event arises as a result of a breach in respect of a specific Conversion Date in which case
such Conversion Date shall be the Conversion Date), multiplied by (b) the highest Closing Price for the Common Stock during
the period beginning on the date of first occurrence of the Event of Default and ending one day prior to the Mandatory Prepayment
Date (the “Default Amount”) and all other amounts payable hereunder shall immediately become due and payable, all without
demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation,
legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at
law or in equity. 


 






    	17



    	 



    

 


 If the Borrower
fails to pay the Default Amount within five (5) business days of written notice that such amount is due and payable, then the Holder
shall have the right at any time, so long and to the extent that there are sufficient authorized shares, to require the Borrower,
upon written notice, to convert the Default Amount into shares of Common Stock of the Borrower pursuant to Section 1.1 hereof.


 


 


Article
IV. MISCELLANEOUS


 


4.1 
Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right
or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.


 


4.2 
Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder
shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered
or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid,
or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party
shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder
shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting
facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where
such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during
normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be:


 






    	18



    	 



    

 


If to the Borrower,
to:


COATES INTERNATIONAL, LTD.


2100 Highway 34


Wall Township, NJ 07719


Attn: BARRY C.
KAYE, Chief Financial Officer


facsimile:


 


With a copy by fax only
to (which copy shall not constitute notice):


[enter name of law firm]


Attn: [attorney
name]


[enter address
line 1]


[enter city,
state, zip]


facsimile:
[enter fax number]


 


If to the Holder:


VIS VIRES GROUP, INC.


111 Great Neck
Road – Suite 216


Great Neck, NY
11021


Attn: Curt Kramer, President


e-mail: info@visviresgroup.com


  


With a copy by fax only
to (which copy shall not constitute notice):


Naidich Wurman LLP


Att: Judah A. Eisner,
Esq.


Attn: Bernard S. Feldman,
Esq.


facsimile:
516-466-3555


 


4.3 
Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower
and the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument
(and the other Notes issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then
as so amended or supplemented.


 


4.4 
Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be
the benefit of the Holder and its successors and assigns. Each transferee of this Note must be an “accredited investor”
(as defined in Rule 501(a) of the 1933 Act). Notwithstanding anything in this Note to the contrary, this Note may be pledged as
collateral in connection with a bona fide margin account or other lending arrangement.


 


4.5 
Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs
of collection, including reasonable attorneys’ fees.


 






    	19



    	 



    

 


4.6 
Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York
without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions
contemplated by this Note shall be brought only in the state courts of New York or in the federal courts located in the state and
county of Nassau. The parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted
hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The
Borrower and Holder waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable
attorney's fees and costs. In the event that any provision of this Note or any other agreement delivered in connection herewith
is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision
which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of
any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit,
action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered
or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under
this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.


 


4.7 
Certain Amounts. Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding
principal amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest
on such interest, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this
Note may be difficult to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty
and is intended to compensate the Holder in part for loss of the opportunity to convert this Note and to earn a return from the
sale of shares of Common Stock acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant
to this Note. The Borrower and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to
the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of
Common Stock.


 


4.8 
Purchase Agreement. By its acceptance of this Note, each party agrees to be bound by the applicable terms of the
Purchase Agreement.


 






    	20



    	 



    

 


4.9 
Notice of Corporate Events. Except as otherwise provided below, the Holder of this Note shall have no rights as a
Holder of Common Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the
Holder with prior notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information
sent to shareholders). In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining
shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or
otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any
other securities or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to
vote in connection with any proposed sale, lease or conveyance of all or substantially all of the assets of the Borrower or any
proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty
(20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event,
whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right
or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to
the extent known at such time. The Borrower shall make a public announcement of any event requiring notification to the Holder
hereunder substantially simultaneously with the notification to the Holder in accordance with the terms of this Section 4.9.


 


4.10 
Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm
to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges
that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach
or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other
available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining,
preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity
of showing economic loss and without any bond or other security being required.


 


IN WITNESS WHEREOF, Borrower
has caused this Note to be signed in its name by its duly authorized officer this June 12, 2015.


 


COATES INTERNATIONAL, LTD.


 


	By:		/s/ Barry C. Kaye
	 	 	BARRY C. KAYE
	 	 	Chief Financial Officer









 






    	21



    	 



    

 


 

EXHIBIT A -- NOTICE OF CONVERSION 


 


The undersigned hereby elects
to convert $_________________ principal amount of the Note (defined below) into that number
of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth
below, of COATES INTERNATIONAL, LTD., a Delaware corporation (the “Borrower”) according to the conditions of the convertible
note of the Borrower dated as of June 12, 2015 (the “Note”), as of the date written below. No fee will be charged to
the Holder for any conversion, except for transfer taxes, if any.


 


Box Checked as to applicable
instructions:


 


		☐	The Borrower shall electronically transmit the Common Stock issuable pursuant to this
Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission
system (“DWAC Transfer”).



 


Name of DTC Prime Broker:


Account Number:


 


		☐	The undersigned hereby requests that the Borrower issue a certificate or certificates
for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto)
in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:



 


VIS VIRES GROUP, INC.


111 Great Neck
Road – Suite 216


Great Neck, NY
11021


Attention: Certificate
Delivery


e-mail: info@visviresgroup.com


 





	Date of Conversion:  	___________
	Applicable Conversion Price: 	$__________
	Number of Shares of Common Stock to be Issued 	 
	    Pursuant to Conversion of the Notes:  	___________
	Amount of Principal Balance Due remaining	 
	    Under the Note after this conversion:                    	___________




  





	VIS VIRES GROUP, INC.	 
	 	 	 
	By:	 	 
	Name:	Curt Kramer	 
	Title: 	President	 
	Date: 	 	 




 






    	22