AMENDMENT NO. 1 TO SUBLICENSE AGREEMENT


      THIS AMENDMENT NO.1 TO SUBLICENSE AGREEMENT, (the "Amendment"), is made as
      of the 5th day of March, 2004, by and between COATES INTERNATIONAL,  LTD.,
      A Delaware  corporation,  having  its  principal  offices  located at 2100
      Highway #34 & Ridgewood  Road,  Wall  Township,  New Jersey  07719-9738  (
      SUBLICENSOR")  and COATES MOTORCYCLE  COMPANY,  LTD., having its principal
      offices  located at Central  Avenue,  Building 3  Farmingdale,  New Jersey
      07727 ( the " SUBLICENSEE").

                                   BACKGROUND

            WHEREAS,  SUBLICENSOR  owns the  exclusive  license (the  "Exclusive
      License") to make,  use and sell  combustion  engines  utilizing  the CSRV
      Valve System as well as the rights to  franchise  and  sublicense  certain
      Patent Rights* and Technical  Information*  relating to Licensed Products*
      utilizing  the  CSRV  Valve  System*   throughout  the  countries,   their
      territories and possessions,  of North America,  Central America and South
      America (the "Territory");

            WHEREAS,  pursuant  to  its  rights  under  the  Exclusive  License,
      SUBLICENSOR and SUBLICENSEE  entered into a certain Sublicense  Agreement,
      dated April 30, 2003 (the "Sublicense  Agreement") pursuant to the general
      terms of which SUBLICENSOR granted SUBLICENSEE an exclusive  sublicense to
      make, use and sell  motorcycles  utilizing the CSRV Valve System in all of
      the countries  and their  territories  and  possessions  comprising  North
      America, Central America and South America (the "Territory"), for a period
      equal to the duration of the patents,  including the periods  covering any
      continuations  and reissuances  thereof as well as any additional  patents
      that may be issued  relating to the CSRV Valve System as well as a certain
      "anti-dilution"  right in order that the SUBLICENSOR have the right at all
      times to maintain a fifty percent plus ownership and control position over
      the SUBLICENSEE;

            WHEREAS,  SUBLICENSEE  is engaged in the  preparation  of an initial
      public  offering of its securities and has determined  that it would be in
      the best  interests  of its present and future  shareholders  to amend the
      Sublicense  Agreement to terminate the  "anti-dilution"  rights granted by
      the SUBLICENSEE to the SUBLICENSOR in the original Sublicense Agreement as
      well  as  to  clarify  SUBLICENSEE's  rights  to  further  sublicense  and
      franchise its sublicense rights;

            WHEREAS,  SUBLICENSOR  currently owns 2,558,000 shares of the common
      stock of SUBLICENSEE and  notwithstanding  any dilution resulting from the
      contemplated  initial  public  offering of  SUBLICENSEE's  common  shares,
      SUBLICENSOR  acknowledges that it will be a direct  beneficiary and obtain
      material benefits as a result of SUBLICENSEE's public offering,  which may
      include but not be limited to  enhanced  opportunities  to earn  royalties
      from licensed products sold by a  well-capitalized  SUBLICENSEE as well as
      increased marketing awareness and brand recognition for its technology and
      licensed   products  which  could  result  from  the   motorcycle   sales,
      anticipated in part from the funds derived by  SUBLICENSEE's  contemplated
      initial public offering;

            WHEREAS,  SUBLICENSOR and SUBLICENSEE desire and intend to set forth
      in this Amendment the express  modifications  to the Sublicense  Agreement
      that shall govern their business relationship.



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<PAGE>

            NOW, THEREFORE, in consideration of the premises and covenants,  and
      other good and  valuable  consideration,  and the mutual  promises  of the
      performance  of the  undertakings  set forth  herein,  it is agreed by and
      among the SUBLICENSOR and SUBLICENSEE as follows:

      I. Amendment of Sublicense Agreement.

            Subject to the terms and  conditions  set forth herein,  SUBLICENSOR
      and SUBLICENSEE  agree to amend the Sublicense  Agreement in the following
      manner:

                  1.  Article  1.14,  Sold Unit,  shall be  amended by  deleting
      Article 1.14 in its entirety and  substituting  the  following new Article
      1.14 in lieu thereof:

                  1.14.(A)  Manufactured Unit shall mean a Licensed Product that
                  has  completed  the  manufacturing   process  by  a  permitted
                  sublicensee  or franchisee of  SUBLICENSEE  under the terms of
                  this   Agreement   and  as  a  result,   is  included  in  the
                  determination of royalty payments due and owing to SUBLICENSOR
                  pursuant to the terms of this Agreement.

                        (B) Sold Unit  shall mean a  Licensed  Product  that has
                  been sold by SUBLICENSEE under the terms of this Agreement and
                  the sales price from such sale has been  received or collected
                  by  the  SUBLICENSEE  and  as a  result,  is  included  in the
                  determination of royalty payments due and owing to SUBLICENSOR
                  pursuant to the terms of this Agreement.

            3. Article 2.1,  Licenses  Granted to LICENSEE,  shall be amended by
            deleting  Article 2.1 in its entirety and substituting the following
            new Article 2.1 in lieu thereof:

                  2.1 Sublicenses Granted to SUBLICENSEE

      Subject to the terms and  conditions  set forth  herein,  for a sublicense
period equal to the duration of the Patents commencing upon the Payment Date, as
defined in Section 5.1 (the "Sublicense Period"),  unless terminated pursuant to
Article VIII, SUBLICENSOR hereby grants to SUBLICENSEE:

            (a)  Engines.  An  exclusive  sublicense,  with  the  right to grant
            further  sublicenses  and franchises to make, use or sell to others,
            throughout  the  Territory  within the Field of Use under the Patent
            Rights and Technical Information subject to the payment of royalties
            as provided  herein,  to make or retrofit  motorcycle  engines  that
            incorporate  the CSRV Valve System in accordance  with the Technical
            Specifications,  and to sell,  lease or  otherwise  dispose  of such
            motorcycle engines; and

            (b) CSRV Valve Seals.Within the limitations set forth in subsections
            2.1(a), a non-exclusive sublicense to use CSRV Valve Seals solely in
            the  manufacture  of  CSRV  Valve  Systems  for  incorporation  into
            motorcycle  engines throughout the Territory within the Field of Use
            under the Patent  Rights and  Technical  Information  subject to the
            payment of royalties as provided herein.



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<PAGE>

          1. Article 5.1, Licensing Fee, 5.2, Royalties,  5.3, and 5.7 Books and
     Records,  shall be amended by  deleting  Article  5.1 in its  entirety  and
     substituting the following new Article 5.1 in lieu thereof:

         5.1 - Sublicensing Fee and Undertakings.

                  In  consideration  of the rights  granted under the Sublicense
                  Agreement,  SUBLICENSEE paid to SUBLICENSOR a Sublicensing Fee
                  of 2,550,000 shares of SUBLICENSEE'S  common stock and granted
                  to  SUBLICENSOR  an  antidilution  right  to  maintain  a 50%+
                  ownership  position in SUBLICENSEE'S  securities.  SUBLICENSOR
                  and  SUBLICENSEE  hereby agree to terminate  the  antidilution
                  rights granted to  SUBLICENSOR  in the  Sublicense  Agreement,
                  effective  immediately.  As consideration for the expansion of
                  its  sublicense  rights  granted to it by  SUBLICENSOR in this
                  Amendment, SUBLICENSEE and SUBLICENSOR agree as follows:

                  (a)  SUBLICENSEE  hereby  agrees  to issue to  SUBLICENSOR  an
                  additional  1,000,000  shares of its  common  stock as partial
                  consideration for the expanded sublicense rights granted to it
                  in this Amendment;

                  (b) SUBLICENSEE  further agrees to utilize its best efforts to
                  register  1,000,000 shares of its common stock transferred and
                  paid to  SUBLICENSOR  and to include  such  shares in the Form
                  SB-2  registration  statement  SUBLICENSEE  has filed with the
                  U.S. Securities and Exchange Commission and which is currently
                  under review;

                  (c)  SUBLICENSEE   acknowledges  that  it  is  the  intent  of
                  SUBLICENSOR to distribute the subject  1,000,000 shares to its
                  shareholders  of record as a stock  dividend  following  their
                  registration under the Securities Act of 1933, provided,  that
                  the  subject  registration  statement,  including  the subject
                  1,000,000 shares, is declared  effective by the Securities and
                  Exchange   Commission   and  its  intended   distribution   to
                  SUBLICENSOR'S  shareholders  is in compliance  with applicable
                  state securities laws;

                  (d) In the event  the  SUBLICENSEE'S  registration  statement,
                  including  the  1,000,000  common  shares,   is  not  declared
                  effective  by the  Securities  and Exchange  Commission  on or
                  before June 1, 2004, SUBLICENSEE'S obligations to continue its
                  efforts to register  said shares under the  Securities  Act of
                  1933 shall  terminate,  unless such  obligation is extended by
                  mutual agreement of SUBLICENSOR and SUBLICENSEE;

                  (e) SUBLICENSEE agrees to take all necessary  corporate action
                  in order to register the 1,000,000  shares of its common stock
                  under the  Securities  Act of 1933 on behalf of SUBLICENSOR in
                  order to permit the lawful distribution of these shares to the
                  shareholders of SUBLICENSOR;

                  (f)  SUBLICENSOR  shall  utilize its best efforts to cooperate
                  and assist  SUBLICENSEE  in the  preparation  of any documents
                  necessary  in  order  to  facilitate  the   registration   and
                  distribution of the subject  1,000,000  common shares pursuant
                  to the Securities Act of 1933 and applicable  state securities
                  laws.



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<PAGE>

                  SUBLICENSOR  acknowledges  its receipt of the Sublicensing Fee
                  payment of  2,550,000  shares of  SUBLICENSEE'S  common  stock
                  pursuant  to the  Sublicense  Agreement,  and  the  additional
                  1,000,000  shares  pursuant  to  this  Amendment;  SUBLICENSOR
                  further agrees that such stock  issuances to it represents the
                  only   payment  and   consideration   that   constitutes   the
                  Sublicensing   Fee  due  and  payable  under  the   Sublicense
                  Agreement and this Amendment. Accordingly, SUBLICENSOR further
                  acknowledges  that  its  equity  ownership   position  in  the
                  SUBLICENSEE'S   common  stock  shall  be  subject  to  further
                  dilution  for proper  corporate  purposes  and that the common
                  shares issuable to SUBLICENSOR under the Sublicense  Agreement
                  and this  Amendment  do not bear any pre-  emptive  or similar
                  rights.

     5.2 - Royalties.

                  (a) In further  consideration  for the grant of the Sublicense
                  described   in  Article  II  of  the   Sublicense   Agreement,
                  SUBLICENSEE and its further sublicensees and franchisees shall
                  pay  SUBICENSOR  royalties  as  follows:  in the  case  of the
                  SUBLICENSEE,  it shall pay a royalty to  SUBLICENSOR  for each
                  Sold Unit in the amount of $25.00  per each  1,000 cc.  within
                  the Territory, and; in the case of a sublicensee or franchisee
                  of SUBLICENSEE, it shall pay a royalty to SUBLICENSOR for each
                  Manufactured Unit that has completed the manufacturing process
                  in the  Territory  in the  amount of $25.00 per each 1,000 cc.
                  and  shall   accrue   when  a  Licensed   Product   becomes  a
                  Manufactured  Unit  produced  by  a  further   sublicensee  or
                  franchisee of the SUBLICENSEE.  The royalties  provided for in
                  this  Section 5.2 shall be payable  with  respect to each Sold
                  Unit by SUBLICENSEE sold within the Territory and with respect
                  to each Manufactured Unit produced by a further sublicensee or
                  franchisee of the SUBLICENSEE within the Territory.

                  (b)  Except  as  otherwise  specified,  the  royalty  payments
                  required  by  Section  5.2  shall  accrue,  in the case of the
                  SUBLICENSEE  when a Licensed  Product becomes a Sold Unit and,
                  in  the  case  of  a  further  sublicensee  or  franchisee  of
                  SUBLICENSEE,  shall accrue when a Licensed  Product  becomes a
                  Manufactured Unit.

                  5.3 - SUBLICENSEE  or a further  sublicensee  or franchisee of
                  SUBLICENSEE,  as the  case  may be,  shall  pay the  royalties
                  accruing during each Payment Computation Period (consisting of
                  each day during each calendar  month for each  calendar  year,
                  including the first and the last day of each calendar  month),
                  ten (10) days after the end of such Payment Computation Period
                  and such  payment  shall be  accompanied  by a royalty  report
                  stating the following:

                  (a) in the case of the  SUBLICENSEE,  the number of Sold Units
                  of  each  Licensed  Product  type  sold  during  such  Payment
                  Computation  Period, and in the case of a further  SUBLICENSEE
                  or franchisee of the  SUBLICENSEE,  the number of Manufactured
                  Units of each Licensed Product type  manufactured  during such
                  Payment Computation Period; and

                  (b) the  amount  of the  royalty  payment  due for  each  such
                  Licensed Product during each such Payment  Computation Period,
                  broken down to reflect the derivation of such amount.



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         5.7 - Books and Records.

                  Until five (5) years after the  termination  of the Sublicense
                  Period,  SUBLICENSEE  shall keep full and  accurate  books and
                  records  setting  forth the sales  records  and the  amount of
                  compensation  payable  with  respect to the Sold Units of each
                  Licensed  Product.  In the case of a  further  sublicensee  or
                  franchisee of SUBLICENSEE,  SUBLICENSEE  shall cause each such
                  further  sublicensee  and franchisee to keep full and accurate
                  books and records setting forth the manufacturing  records and
                  the  amount  of  compensation  payable  with  respect  to  the
                  Manufactured  Units of each Licensed Product.  SUBLICENSEE and
                  its  further  sublicensees  and  franchisees  shall  permit an
                  independent    certified   public   accountant   selected   by
                  SUBLICENSOR to examine such books and records, upon reasonable
                  notice during working  hours,  at any time, but not later than
                  two (2) years  following  the  payment  in  question,  for the
                  purpose of  verifying  the  reports,  accounting  and payments
                  required by this Sublicense Agreement.

     II.  Ratification  and  Confirmation  of Balance of Terms and Provisions of
     Sublicense Agreement

         SUBLICENSOR and SUBLICENSEE  hereby ratify and confirm all of the terms
     and provisions of the Sublicense  Agreement not expressly  modified by this
     Amendment and  incorporate  by reference  all of such terms and  provisions
     into this Amendment as if set forth herein in their entirety.

          IN WITNESS WHEREOF, the SUBLICENSOR and SUBLICENSEE have executed this
     Amendment as of the day, month and year first above written.

                                            SUBLICENSOR:

ATTEST:                                     COATES INTERNATIONAL, LTD.


/s/ Shirley Naidel                          /s/ George J. Coates
---------------------                       -----------------------------------
Secretary                                         George J. Coates, President


ATTEST:                                     SUBLICENSEE:

                                            COATES MOTORCYCLE COMPANY, LTD.

/s/ Shirley Naidel                          By: /s/ Gregory G. Coates
---------------------                       -----------------------------------
Secretary                                         Gregory G. Coates, President



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