EXHIBIT 10.16

                                LICENSE AGREEMENT

         THIS  AGREEMENT,  dated this 22 day of December,  1997,  by and between
GEORGE J. COATES,  individually,  residing at 1811 Murray Drive,  Wall Township,
New Jersey 07719  (hereinafter  referred to as "LICENSOR I") and GREGORY COATES,
residing at 1811  Murray  Drive Wall  Township,  New Jersey  07719  (hereinafter
referred  to as  "LICENSOR  II"),  and  COATES  INTERNATIONAL,  LTD.  having its
principle place of business at Route 34 and Ridgewood  Road, Wall Township,  New
Jersey 07719, (hereinafter referred to as "LICENSEE").

                              B A C K G R O U N D:

         WHEREAS,  LICENSOR  I is the  patentee  and owns  and has the  right to
license  certain PATENT RIGHTS (as  hereinafter  defined) used in the design and
construction of internal  combustion  engines employing  spherical rotary valves
(the "COATES SPHERICAL ROTARY VALVE SYSTEM"); and

         WHEREAS, LICENSOR II has loaned LICENSOR I funds to reimburse
Coates International, ltd. for patent expenses; and

         WHEREAS,  LICENSOR  I has  granted  to  LICENSOR  II and  LICENSOR  has
accepted an exclusive, revocable license with the right to sublicense; and

         WHEREAS,  LICENSOR I and  LICENSOR  II have each  granted to  LICENSEE,
previously,  an exclusive  revocable license for the United States of America to
make, use, sell and have made,  LICENSED PRODUCT falling within the scope of the
PATENT RIGHTS; and

         WHEREAS,  it is the desire of LICENSOR I and  LICENSOR II to modify and
expand  upon the  previously  granted  license for the  consideration  set forth
herein and to render the previously granted licenses  superseded by this license
and hence null and void.

         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  herein,  it is agreed by and between  the  parties  hereto as
follows:
                             ARTICLE I - DEFINITIONS

head or heads for an
         1.1 - "CSRV VALVE  SYSTEM"  shall mean a cylinder  head or heads for an
internal combustion engine manufactured in accordance with the PATENT RIGHTS (as
hereinafter defined) .
         1.2  -   "IMPROVEMENTS"   shall  mean  any  improvement,   change,   or
modification  to the CSRV  VALVE  SYSTEM  which may be  developed,  created,  or
acquired by either party to this Agreement, but only to the extent that the same
comes  within the scope of one or more of the  claims of the  patent  rights (as
hereinafter defined).

         1.3 - "PATENT  RIGHTS"  shall mean the patents as listed in  Attachment
1.3.

         1.4 - "PROTOTYPES" shall mean LICENSED PRODUCT manufactured for testing
and evaluation purposes only.

         1.5 - "TERRITORY"  shall mean all of the countries,  their  territories
and possessions, comprising North America, Central America and South America.

                          ARTICLE II - LICENSES GRANTED

         2.1 - LICENSES GRANTED TO LICENSEE
<PAGE>

                  (1)  LICENSOR  I and  LICENSOR  II  (hereinafter  referred  to
jointly as  "LICENSOR")  hereby  grants to LICENSEE an exclusive  license in the
TERRITORY,  to make, use, sell, and have made,  product falling within the scope
of the PATENT  RIGHTS,  and to prevent  others from  making,  using,  selling or
having made product falling within the scope of the PATENT RIGHTS;

                  (2) LICENSOR hereby grants to LICENSEE the non-exclusive right
to manufacture and sell PROTOTYPES falling within the scope of the PATENT RIGHTS
anywhere in the world.

         2.2 - IMPROVEMENTS

         If LICENSORS have heretofore  brought about or shall  hereafter  during
the term of this  Agreement  bring about any  IMPROVEMENTS  to the PATENT RIGHTS
LICENSORS  shall  promptly  disclose  such  IMPROVEMENTS  TO LICENSEE.  Any such
IMPROVEMENTS shall become subject to this Agreement.

         2.3 - PATENT MARKINGS

         LICENSEE shall mark on an exposed  surface of all products made through
use of the PATENT RIGHTS  hereunder,  appropriate  patent  markings  identifying
LICENSOR I as the owner of the  pertinent  PATENT  RIGHTS.  The content,  formal
language  used in such  markings  shall  be in  accordance  with  the  laws  and
practices of the countries  where such products  bearing such markings are made,
sold, or used and shall be approved by LICENSOR I.

         2.4      ACKNOWLEDGMENT OF LICENSE

         On all CSRV VALVE SYSTEMS, LICENSEE and Sublicensee shall
acknowledge that the same are manufactured under license from
LICENSOR I.  Unless otherwise agreed to by the parties, the
following notice shall be used by LICENSEE and sublicensees on an
exposed surface of all products:  "Manufactured under License from
George J. Coates".  Sublicensees shall use the notice:
"Manufactured under License from Coates International, Ltd. and
George J. Coates."  Such notices shall be used in all descriptive
materials, instruction and service manuals relating to the CSRV
VALVE SYSTEM.
                             ARTICLE III - PAYMENTS

         3.1 - In  consideration  for the grant of this  license,  the  LICENSEE
shall grant to LICENSORS, shares of stock in LICENSEE.

     The shares shall be granted as follows:  500,000 Series A Preferred  shares
to LICENSOR I $4,000.00  to LICENSOR II 3.2 - In further  consideration  of this
License,  LICENSEE  shall  pay all  costs  associated  with  the  PATENT  RIGHTS
identified herein both in the TERRITORY and world wide.

            ARTICLE IV - REPRESENTATIONS, OBLIGATIONS, WARRANTIES AND
                                   DISCLAIMERS

         4.1 -  LICENSOR  I  represents  and  warrants  that  LICENSOR  I is the
rightful  owner of the PATENT RIGHTS and has the exclusive  right to license all
of the PATENT  RIGHTS and that all such  PATENT  RIGHTS  pertaining  to the CSRV
VALVE SYSTEM under  LICENSOR'S  control and  possession in the TERRITORY are set
forth in Attachment 1.4.
<PAGE>

Further,  LICENSOR I and  LICENSOR II have the power and  authority  to execute,
deliver and perform its obligations under this Agreement, nor the performance of
its obligations hereunder will constitute a breach of the terms or provisions of
any contract or agreement to which LICENSOR is a party.

         4.2 - LICENSEE  will use its best  efforts to execute all such tasks as
may be necessary to bring about the speedy manufacture,  sale or use of products
manufactured  with the use of the PATENT  RIGHTS  consistent  with good business
practice;  and ensure that all steps  within its power are  undertaken  with all
reasonable  speed to ensure  that such  products  made by  LICENSEE  comply with
relevant  government  regulations  and to ensure that all steps within its power
are  undertaken  with  all  reasonable  speed to  ensure  that  sublicenses  are
negotiated and executed with respect to the PATENT RIGHTS.

                      ARTICLE V - DURATION AND TERMINATION

         5.1 - Subject to the  provisions of Section 5.1 hereof,  all rights and
obligations under this Agreement shall expire upon the last to expire patents of
the PATENT RIGHTS.

         5.2 - This Agreement shall terminate effective immediately
upon:
                  (a) The  filing by  LICENSEE  of an  involuntary  petition  in
         bankruptcy,  the  entry of a decree  or order by a court or  agency  or
         supervisory  authority  having  jurisdiction  in the  premises  for the
         appointment  of a  conservator,  receiver,  trustee  in  bankruptcy  or
         liquidator  for  LICENSEE  in any  insolvency,  readjustment  of  debt,
         marshaling   of  assets   and   liabilities,   bankruptcy   or  similar
         proceedings,  or the winding up or liquidation of its affairs,  and the
         continuance  of any  such  petition,  decree  or order  undismissed  or
         unstayed and in effect for a period of sixty (60) consecutive days; or

                  (b)  The  consent  by  LICENSEE  to  the   appointment   of  a
         conservator,  receiver,  trustee in  bankruptcy  or  liquidator  in any
         insolvency, readjustment of debt, marshaling of assets and liabilities,
         bankruptcy  or similar  proceedings  of or  relating  to  LICENSEE,  or
         relating to  substantially  all of its property,  or if LICENSEE  shall
         admit in  writing  its  inability  to pay its debts  generally  as they
         become due,  file a petition to pay its debts  generally as they become
         due, file a petition to take  advantage of any  applicable  insolvency,
         reorganization  or  bankruptcy  statute,  make  an  assignment  for the
         benefit  of  its  creditors  or  voluntarily  suspend  payment  of  its
         obligations.

                ARTICLE VI - LIMITATION OF ASSIGNMENT BY LICENSEE

         6.1 - This  Licensee  is  non-assignable  and the  rights,  duties  and
privileges of LICENSEE hereunder shall not be sold,  transferred,  hypothecated,
or  assigned  by  LICENSEE,  either in whole or in part  without  the consent of
LICENSORS.

                           ARTICLE VII - GOVERNING LAW

         7.1 - This Agreement shall be governed by and construed and enforced in
accordance  with  the Laws of the  State of New  Jersey  and each  party  hereby
submits to the  jurisdiction  of any state or federal  court in the State of New
Jersey in the event of any claims arising under this Agreement.

                         ARTICLE VIII - ENTIRE AGREEMENT

         8.1 - This Agreement sets forth the entire Agreement and  understanding
by and between  LICENSOR  and LICENSEE as to the subject  matter  hereof and has
priority over all documents,  verbal consents and understandings made before the
execution of this  Agreement  and none of the terms of this  Agreement  shall be
amended  or  modified  except in a written  document  signed  by  LICENSORS  and
LICENSEE hereto.

         8.2 - Should any portion of this Agreement be declared null and void by
operation of law, or otherwise,  the remainder of this Agreement shall remain in
full force and effect.
<PAGE>

         8.3  -  This   Agreement  is  understood  by  the  parties   hereto  to
specifically supersede the February 17, 1997 License from LICENSOR I to LICENSEE
and any subsequent  amendments  thereto as well s the Agreement from LICENSOR II
to LICENSEE dated February 22, 1997 and any subsequent amendments thereto.

                              ARTICLE IX - NOTICES

         9.1 - Any notice,  consent or approval  required  under this  Agreement
shall be in English  and in writing,  and shall be  delivered  to the  following
addresses (a)  personally by hand, (b) by Certified Air Mail,  postage  prepaid,
with return receipt  requested,  or (c) by telefax,  confirmed by such Certified
Air Mail:

         If to the LICENSORS:

                  Mr. George J. Coates
                  c/o COATES INTERNATIONAL, LTD.
                  Route 34 & Ridgewood Road
                  Wall Township, NJ 07719-9738
                  Telephone:  (732)449-7717
                  Telefax: (732) 449-7736

                  Mr. Gregory Coates
                  c/o COATES  INTERNATIONAL,  LTD.
                  Route 34 & Ridgewood Road
                  Wall Township, NJ 07719-9738
                  Telephone:  (732)449-7717
                  Telefax: (732) 449-7736

         If to LICENSEE:

                  COATES INTERNATIONAL, LTD.
                  Route 34 & Ridgewood Road
                  Wall Township, NJ 07719-9738

         All notices shall be deemed  effective  upon the date delivered by hand
or sent.  If either party  desires to change the address to which notice is sent
to such party,  it shall so notify the other party in writing in accordance with
the foregoing.
                            ARTICLE X - MISCELLANEOUS

         10.1 -  Headings  and  References  -  Headings  in this  Agreement  are
included  herein for ease of reference only and have no legal effect.  Reference
herein to  Sections  or  Attachments  are to Sections  and  Attachments  to this
Agreement, unless expressly stated otherwise.

         10.2              - Reference on Disclosure of Terms and Provisions (a)
                           This Agreement shall be distributed solely to:
(i) those  personnel of LICENSORS  and LICENSEE who shall have a need to know of
its contents; (ii) those persons whose knowledge of its contents will facilitate
performance of the obligations of the parties under this agreement;  (iii) those
persons, if any, whose knowledge of its contents is essential in order to permit
LICENSEE or LICENSORS to place, maintain or secure
 benefits as required by law, regulation or judicial order.

         IN  WITNESS  WHEREOF,  the  parties  have cause  this  Agreement  to be
executed as of the date first above written by their authorized representatives.

<PAGE>

ATTEST:

s/Shirley Naidel                                 s/George J. Coates
Notary Public of New Jersey                     GEORGE J. COATES - INDIVIDUALLY
My Commission Expires
Dec. 27, 2000

s/Shirley Naidel                                s/Gregory Coates
Notary Public of New Jersey                      GREGORY COATES - INDIVIDUALLY
My Commission Expires
Dec. 27, 2000

s/Shirley Naidel                                 s/George J. Coates
Notary Public of New Jersey                     COATES INTERNATIONAL, LTD.
My Commission Expires                            BY:  GEORGE J. COATES
Dec. 27, 2000

Coates License Agr - December 22, 1997