Document:

Exhibit

Exhibit 10.3

APOLLO ENDOSURGERY, INC.
RESTRICTED STOCK UNIT GRANT NOTICE 
(2017 EQUITY INCENTIVE PLAN)

Apollo Endosurgery, Inc. (the “Company”), pursuant to its 2017 Equity Incentive Plan (the “Plan”), hereby awards to Participant a Restricted Stock Unit Award for the number of shares of the Company’s Common Stock (“Restricted Stock Units”) set forth below (the “Award”). The Award is subject to all of the terms and conditions as set forth in this notice of grant (this “Restricted Stock Unit Grant Notice”) and in the Plan and the Restricted Stock Unit Agreement (the “Award Agreement”), both of which are attached hereto and incorporated herein in their entirety. Capitalized terms not otherwise defined herein will have the meanings set forth in the Plan or the Award Agreement. In the event of any conflict between the terms in the Award and the Plan, the terms of the Plan will control.
	
		
	Participant:
	 

	Date of Grant:
	 

	Vesting Commencement Date:
	 

	Number of Restricted Stock Units/Shares:
	 

		
	Vesting Schedule: 
	[___________________]

		
	Issuance Schedule:
	The shares of Common Stock to be issued in respect of the Award will be issued in accordance with the issuance schedule set forth in Section 6 of the Restricted Stock Unit Agreement.

Additional Terms/Acknowledgements:  Participant acknowledges receipt of, and understands and agrees to, this Restricted Stock Unit Grant Notice, the Award Agreement and the Plan. Participant acknowledges and agrees that this Restricted Stock Unit Grant Notice and the Award Agreement may not be modified, amended or revised except as provided in the Plan. Participant further acknowledges that as of the Date of Grant, this Restricted Stock Unit Grant Notice, the Award Agreement and the Plan set forth the entire understanding between Participant and the Company regarding the acquisition of Common Stock pursuant to the Award and supersede all prior oral and written agreements on that subject with the exception, if applicable, of (i) equity awards previously granted and delivered to Participant, (ii) any compensation recovery policy that is adopted by the Company or is otherwise required by applicable law, and (iii) any written employment or severance arrangement that would provide for vesting acceleration of this Award upon the terms and conditions set forth therein.

By accepting this Award, Participant consents to receive such documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.

APOLLO ENDOSURGERY, INC.    PARTICIPANT

By: ____________________________________    _______________________________________                 	
		
	Signature
	Signature

Title: ___________________________________    Date: __________________________________
Date: ___________________________________

		
	ATTACHMENTS: 
	Award Agreement, 2017 Equity Incentive Plan

APOLLO ENDOSURGERY, INC.
2017 EQUITY INCENTIVE PLAN
RESTRICTED STOCK UNIT AGREEMENT

Pursuant to the Restricted Stock Unit Grant Notice (the “Grant Notice”) and this Restricted Stock Unit Agreement (the “Award Agreement”) and in consideration of your services, Apollo Endosurgery, Inc. (the “Company”) has awarded you (“Participant”) a Restricted Stock Unit Award (the “Award”) pursuant to Section 6 of the Company’s 2017 Equity Incentive Plan (the “Plan”) for the number of Restricted Stock Units/shares indicated in the Grant Notice. Capitalized terms not explicitly defined in this Award Agreement or the Grant Notice will have the same meanings given to them in the Plan. The terms of your Award, in addition to those set forth in the Grant Notice and the Plan, are as follows.
1.GRANT OF THE AWARD. This Award represents the right to be issued on a future date one (1) share of Common Stock for each Restricted Stock Unit that vests on the applicable vesting date(s) (subject to any adjustment under Section 3 below) as indicated in the Grant Notice. As of the Date of Grant, the Company will credit to a bookkeeping account maintained by the Company for your benefit (the “Account”) the number of Restricted Stock Units/shares of Common Stock subject to the Award. This Award was granted in consideration of your services to the Company. Except as otherwise provided herein, you will not be required to make any payment to the Company or an Affiliate (other than services to the Company or an Affiliate) with respect to your receipt of the Award, the vesting of the Restricted Stock Units or the delivery of the Company’s Common Stock to be issued in respect of the Award. Notwithstanding the foregoing, the Company reserves the right to issue you the cash equivalent of Common Stock, in part or in full satisfaction of the delivery of Common Stock upon vesting of your Restricted Stock Units, and, to the extent applicable, references in this Award Agreement and the Grant Notice to Common Stock issuable in connection with your Restricted Stock Units will include the potential issuance of its cash equivalent pursuant to such right.
2.    VESTING. Subject to the limitations contained herein, your Award will vest, if at all, in accordance with the vesting schedule provided in the Grant Notice, provided that vesting will cease upon the termination of your Continuous Service. Upon such termination of your Continuous Service, the Restricted Stock Units/shares of Common Stock credited to the Account that were not vested on the date of such termination will be forfeited at no cost to the Company and you will have no further right, title or interest in or to such underlying shares of Common Stock.
3.    NUMBER OF SHARES. The number of Restricted Stock Units/shares subject to your Award may be adjusted from time to time for Capitalization Adjustments, as provided in the Plan. Any additional Restricted Stock Units, shares, cash or other property that becomes subject to the Award pursuant to this Section 3, if any, will be subject, in a manner determined by the Board, to the same forfeiture restrictions, restrictions on transferability, and time and manner of delivery as applicable to the other Restricted Stock Units and shares covered by your Award. Notwithstanding the provisions of this Section 3, no fractional shares or rights for fractional shares of Common Stock will be created pursuant to this Section 3. Any fraction of a share will be rounded down to the nearest whole share.
4.    SECURITIES LAW COMPLIANCE. You may not be issued any Common Stock under your Award unless the shares of Common Stock underlying the Restricted Stock Units are either (i) then registered under the Securities Act, or (ii) the Company has determined that such issuance would be exempt from the registration requirements of the Securities Act. Your Award must also comply with other applicable laws and regulations governing the Award, and you will not receive such Common Stock if the Company determines that such receipt would not be in material compliance with such laws and regulations.

 

5.    TRANSFER RESTRICTIONS. Prior to the time that shares of Common Stock have been delivered to you, you may not transfer, pledge, sell or otherwise dispose of this Award or the shares issuable in respect of your Award, except as expressly provided in this Section 5. For example, you may not use shares that may be issued in respect of your Restricted Stock Units as security for a loan. The restrictions on transfer set forth herein will lapse upon delivery to you of shares in respect of your vested Restricted Stock Units. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you may designate a third party who, in the event of your death, will thereafter be entitled to receive any distribution of Common Stock to which you were entitled at the time of your death pursuant to this Award Agreement. In the absence of such a designation, your legal representative will be entitled to receive, on behalf of your estate, such Common Stock or other consideration.
(a)    Death. Your Award is transferable by will and by the laws of descent and distribution. At your death, vesting of your Award will cease and your executor or administrator of your estate will be entitled to receive, on behalf of your estate, any Common Stock or other consideration that vested but was not issued before your death. 
(b)    Domestic Relations Orders. Upon receiving written permission from the Board or its duly authorized designee, and provided that you and the designated transferee enter into transfer and other agreements required by the Company, you may transfer your right to receive the distribution of Common Stock or other consideration hereunder, pursuant to a domestic relations order, official marital settlement agreement or other divorce or separation instrument that contains the information required by the Company to effectuate the transfer. You are encouraged to discuss the proposed terms of any division of this Award with the Company General Counsel prior to finalizing the domestic relations order or marital settlement agreement to verify that you may make such transfer, and if so, to help ensure the required information is contained within the domestic relations order or marital settlement agreement.
6.    DATE OF ISSUANCE. 
(a)    The issuance of shares in respect of the Restricted Stock Units is intended to comply with Treasury Regulations Section 1.409A-1(b)(4) and will be construed and administered in such a manner. Subject to the satisfaction of the withholding obligations set forth in this Award Agreement, in the event one or more Restricted Stock Units vests, the Company will issue to you one (1) share of Common Stock for each Restricted Stock Unit that vests on the applicable vesting date(s) (subject to any adjustment under Section 3 above, and subject to any different provisions in the Grant Notice). The issuance date determined by this paragraph is referred to as the “Original Issuance Date”. 
(b)    If the Original Issuance Date falls on a date that is not a business day, delivery will instead occur on the next following business day. In addition, if:
(i)    the Original Issuance Date does not occur (1) during an “open window period” applicable to you, as determined by the Company in accordance with the Company’s then-effective policy on trading in Company securities, or (2) on a date when you are otherwise permitted to sell shares of Common Stock on an established stock exchange or stock market (including but not limited to under a previously established written trading plan that meets the requirements of Rule 10b5-1 under the Exchange Act and was entered into in compliance with the Company’s policies (a “10b5-1 Plan”)), and 
(ii)    either (1) Withholding Taxes do not apply, or (2) the Company decides, prior to the Original Issuance Date, (A) not to satisfy the Withholding Taxes by withholding shares of Common Stock from the shares otherwise due, on the Original Issuance Date, to you under this Award, and (B) not to 

 

permit you to enter into a “same day sale” commitment with a broker-dealer pursuant to Section 11 of this Agreement (including but not limited to a commitment under a 10b5-1 Plan) and (C) not to permit you to pay the Withholding Taxes in cash or from other compensation otherwise payable to you by the Company, 
then the shares that would otherwise be issued to you on the Original Issuance Date will not be delivered on such Original Issuance Date and will instead be delivered on the first business day when you are not prohibited from selling shares of the Company’s Common Stock in the open public market, but in no event later than December 31 of the calendar year in which the Original Issuance Date occurs (that is, the last day of your taxable year in which the Original Issuance Date occurs), or, if and only if permitted in a manner that complies with Treasury Regulations Section 1.409A-1(b)(4), no later than the date that is the 15th day of the third calendar month of the applicable year following the year in which the shares of Common Stock under this Award are no longer subject to a “substantial risk of forfeiture” within the meaning of Treasury Regulations Section 1.409A-1(d).
(c)    The form of delivery of the shares of Common Stock in respect of your Award (e.g., a stock certificate or electronic entry evidencing such shares) will be determined by the Company. 
7.    DIVIDENDS. You will receive no benefit or adjustment to your Award with respect to any cash dividend, stock dividend or other distribution that does not result from a Capitalization Adjustment; provided, however, that this sentence will not apply with respect to any shares of Common Stock that are delivered to you in connection with your Award after such shares have been delivered to you. 
8.    RESTRICTIVE LEGENDS. The shares of Common Stock issued under your Award will be endorsed with appropriate legends as determined by the Company.
9.    EXECUTION OF DOCUMENTS. You hereby acknowledge and agree that the manner selected by the Company by which you indicate your consent to your Grant Notice is also deemed to be your execution of your Grant Notice and of this Award Agreement. You further agree that such manner of indicating consent may be relied upon as your signature for establishing your execution of any documents to be executed in the future in connection with your Award.
10.    AWARD NOT A SERVICE CONTRACT. 
(a)    Your Continuous Service with the Company or an Affiliate is not for any specified term and may be terminated by you or by the Company or an Affiliate at any time, for any reason, with or without cause and with or without notice. Nothing in this Award Agreement (including, but not limited to, the vesting of your Award or the issuance of the shares subject to your Award), the Plan or any covenant of good faith and fair dealing that may be found implicit in this Award Agreement or the Plan will: (i) confer upon you any right to continue in the employ of, or affiliation with, the Company or an Affiliate; (ii) constitute any promise or commitment by the Company or an Affiliate regarding the fact or nature of future positions, future work assignments, future compensation or any other term or condition of employment or affiliation; (iii) confer any right or benefit under this Award Agreement or the Plan unless such right or benefit has specifically accrued under the terms of this Award Agreement or Plan; or (iv) deprive the Company of the right to terminate you at will and without regard to any future vesting opportunity that you may have. 
(b)    By accepting this Award, you acknowledge and agree that the right to continue vesting in the Award is earned only by continuing as an employee, director or consultant at the will of the Company or an Affiliate and that the Company has the right to reorganize, sell, spin-out or otherwise restructure one or more of its businesses or Affiliates at any time or from time to time, as it deems appropriate (a “reorganization”). You further acknowledge and agree that such a reorganization could result in the 

 

termination of your Continuous Service, or the termination of Affiliate status of your employer and the loss of benefits available to you under this Award Agreement, including but not limited to, the termination of the right to continue vesting in the Award. You further acknowledge and agree that this Award Agreement, the Plan, the transactions contemplated hereunder and the vesting schedule set forth herein or any covenant of good faith and fair dealing that may be found implicit in any of them do not constitute an express or implied promise of continued engagement as an employee or consultant for the term of this Award Agreement, for any period, or at all, and will not interfere in any way with your right or the right of the Company or an Affiliate to terminate your Continuous Service at any time, with or without cause and with or without notice, and will not interfere in any way with the Company’s right to conduct a reorganization.
11.    WITHHOLDING OBLIGATIONS. 
(a)    On each vesting date, and on or before the time you receive a distribution of the shares underlying your Restricted Stock Units, and at any other time as reasonably requested by the Company in accordance with applicable tax laws, you hereby authorize any required withholding from the Common Stock issuable to you and otherwise agree to make adequate provision in cash for any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or any Affiliate that arise in connection with your Award (the “Withholding Taxes”). Additionally, the Company or any Affiliate may, in its sole discretion, satisfy all or any portion of the Withholding Taxes obligation relating to your Award by any of the following means or by a combination of such means: (i) withholding from any compensation otherwise payable to you by the Company or an Affiliate; (ii) causing you to tender a cash payment; (iii) permitting or requiring you to enter into a “same day sale” commitment, if applicable, with a broker-dealer that is a member of the Financial Industry Regulatory Authority (a “FINRA Dealer”) (pursuant to this authorization and without further consent) whereby you irrevocably elect to sell a portion of the shares to be delivered in connection with your Restricted Stock Units to satisfy the Withholding Taxes and whereby the FINRA Dealer irrevocably commits to forward the proceeds necessary to satisfy the Withholding Taxes directly to the Company and its Affiliates; or (iv) withholding shares of Common Stock from the shares of Common Stock issued or otherwise issuable to you in connection with the Award with a Fair Market Value (measured as of the date shares of Common Stock are issued to you pursuant to Section 6) equal to the amount of such Withholding Taxes; provided, however, that the number of such shares of Common Stock so withheld will not exceed the amount necessary to satisfy the Company’s required tax withholding obligations using the maximum statutory withholding rates for federal, state, local and, if applicable, foreign tax purposes, including payroll taxes, that are applicable to supplemental taxable income; and provided further, that to the extent necessary to qualify for an exemption from application of Section 16(b) of the Exchange Act, if applicable, such share withholding procedure will be subject to the express prior approval of the Company’s Compensation Committee. However, the Company does not guarantee that you will be able to satisfy the Withholding Taxes through any of the methods described in the preceding provisions and in all circumstances you remain responsible for timely and fully satisfying the Withholding Taxes. 
(b)    Unless the tax withholding obligations of the Company and any Affiliate are satisfied, the Company will have no obligation to deliver to you any Common Stock or other consideration pursuant to this Award.
(c)    In the event the Company’s obligation to withhold arises prior to the delivery to you of Common Stock or it is determined after the delivery of Common Stock to you that the amount of the Company’s withholding obligation was greater than the amount withheld by the Company, you agree to indemnify and hold the Company harmless from any failure by the Company to withhold the proper amount.

 

12.    TAX CONSEQUENCES. The Company has no duty or obligation to minimize the tax consequences to you of this Award and will not be liable to you for any adverse tax consequences to you arising in connection with this Award. You are hereby advised to consult with your own personal tax, financial and legal advisors regarding the tax consequences of this Award and by signing the Grant Notice, you have agreed that you have done so or knowingly and voluntarily declined to do so. You understand that you (and not the Company) will be responsible for your own tax liability that may arise as a result of this investment or the transactions contemplated by this Award Agreement. 
13.    UNSECURED OBLIGATION. Your Award is unfunded, and as a holder of a vested Award, you will be considered an unsecured creditor of the Company with respect to the Company’s obligation, if any, to issue shares or other property pursuant to this Award Agreement. You will not have voting or any other rights as a stockholder of the Company with respect to the shares to be issued pursuant to this Award Agreement until such shares are issued to you pursuant to Section 6 of this Award Agreement. Upon such issuance, you will obtain full voting and other rights as a stockholder of the Company. Nothing contained in this Award Agreement, and no action taken pursuant to its provisions, will create or be construed to create a trust of any kind or a fiduciary relationship between you and the Company or any other person. 
14.    NOTICES. Any notice or request required or permitted hereunder will be given in writing to each of the other parties hereto and will be deemed effectively given on the earlier of (i) the date of personal delivery, including delivery by express courier, or delivery via electronic means, or (ii) the date that is five (5) days after deposit in the United States Post Office (whether or not actually received by the addressee), by registered or certified mail with postage and fees prepaid, addressed to the Company at its primary executive offices, attention: Stock Plan Administrator, and addressed to you at your address as on file with the Company at the time notice is given.

15.    HEADINGS. The headings of the Sections in this Award Agreement are inserted for convenience only and will not be deemed to constitute a part of this Award Agreement or to affect the meaning of this Award Agreement.

16.    ADDITIONAL ACKNOWLEDGEMENTS. You hereby consent and acknowledge that:
(a)    Participation in the Plan is voluntary and therefore you must accept the terms and conditions of the Plan and this Award Agreement and Grant Notice as a condition to participating in the Plan and receipt of this Award. This Award and any other awards under the Plan are voluntary and occasional and do not create any contractual or other right to receive future awards or other benefits in lieu of future awards, even if similar awards have been granted repeatedly in the past. All determinations with respect to any such future awards, including, but not limited to, the time or times when such awards are made, the size of such awards and performance and other conditions applied to the awards, will be at the sole discretion of the Company. 
(b)    The future value of your Award is unknown and cannot be predicted with certainty. You do not have, and will not assert, any claim or entitlement to compensation, indemnity or damages arising from the termination of this Award or diminution in value of this Award and you irrevocably release the Company, its Affiliates and, if applicable, your employer, if different from the Company, from any such claim that may arise.
(c)    The rights and obligations of the Company under your Award will be transferable by the Company to any one or more persons or entities, and all covenants and agreements hereunder will inure to the benefit of, and be enforceable by, the Company’s successors and assigns. 

 

(d)    You agree upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of your Award.
(e)    You acknowledge and agree that you have reviewed your Award in its entirety, have had an opportunity to obtain the advice of counsel prior to executing and accepting your Award and fully understand all provisions of your Award.
(f)    This Award Agreement will be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
(g)    All obligations of the Company under the Plan and this Award Agreement will be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and assets of the Company.
17.    GOVERNING PLAN DOCUMENT. Your Award is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your Award, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan. Your Award (and any compensation paid or shares issued under your Award) is subject to recoupment in accordance with The Dodd–Frank Wall Street Reform and Consumer Protection Act and any implementing regulations thereunder, any clawback policy adopted by the Company and any compensation recovery policy otherwise required by applicable law. No recovery of compensation under such a clawback policy will be an event giving rise to a right to voluntarily terminate employment upon a resignation for “good reason,” or for a “constructive termination” or any similar term under any plan of or agreement with the Company.
18.    EFFECT ON OTHER EMPLOYEE BENEFIT PLANS. The value of the Award subject to this Award Agreement will not be included as compensation, earnings, salaries, or other similar terms used when calculating benefits under any employee benefit plan (other than the Plan) sponsored by the Company or any Affiliate except as such plan otherwise expressly provides. The Company expressly reserves its rights to amend, modify, or terminate any or all of the employee benefit plans of the Company or any Affiliate.
19.    CHOICE OF LAW. The interpretation, performance and enforcement of this Award Agreement will be governed by the law of the State of Delaware without regard to that state’s conflicts of laws rules.
20.    SEVERABILITY. If all or any part of this Award Agreement or the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity will not invalidate any portion of this Award Agreement or the Plan not declared to be unlawful or invalid. Any Section of this Award Agreement (or part of such a Section) so declared to be unlawful or invalid will, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.
21.    OTHER DOCUMENTS. You hereby acknowledge receipt of and the right to receive a document providing the information required by Rule 428(b)(1) promulgated under the Securities Act, which includes the Plan prospectus. In addition, you acknowledge receipt of the Company’s policy permitting certain individuals to sell shares only during certain “window” periods and the Company’s insider trading policy, in effect from time to time.

 

22.    AMENDMENT. This Award Agreement may not be modified, amended or terminated except by an instrument in writing, signed by you and by a duly authorized representative of the Company. Notwithstanding the foregoing, this Award Agreement may be amended solely by the Board by a writing which specifically states that it is amending this Award Agreement, so long as a copy of such amendment is delivered to you, and provided that, except as otherwise expressly provided in the Plan, no such amendment materially adversely affecting your rights hereunder may be made without your written consent. Without limiting the foregoing, the Board reserves the right to change, by written notice to you, the provisions of this Award Agreement in any way it may deem necessary or advisable to carry out the purpose of the Award as a result of any change in applicable laws or regulations or any future law, regulation, ruling, or judicial decision, provided that any such change will be applicable only to rights relating to that portion of the Award which is then subject to restrictions as provided herein. 
23.    COMPLIANCE WITH SECTION 409A OF THE CODE. This Award is intended to comply with the “short-term deferral” rule set forth in Treasury Regulation Section 1.409A-1(b)(4). Notwithstanding the foregoing, if it is determined that the Award fails to satisfy the requirements of the short-term deferral rule and is otherwise deferred compensation subject to Section 409A, and if you are a “Specified Employee” (within the meaning set forth in Section 409A(a)(2)(B)(i) of the Code) as of the date of your “separation from service” (within the meaning of Treasury Regulation Section 1.409A-1(h) and without regard to any alternative definition thereunder), then the issuance of any shares that would otherwise be made upon the date of the separation from service or within the first six (6) months thereafter will not be made on the originally scheduled date(s) and will instead be issued in a lump sum on the earlier of: (i) the fifth business day following your death, or (ii) the date that is six (6) months and one day after the date of the separation from service, with the balance of the shares issued thereafter in accordance with the original vesting and issuance schedule set forth above, but if and only if such delay in the issuance of the shares is necessary to avoid the imposition of adverse taxation on you in respect of the shares under Section 409A of the Code. Each installment of shares that vests is intended to constitute a “separate payment” for purposes of Treasury Regulation Section 1.409A-2(b)(2). 
* * * * * 

This Award Agreement will be deemed to be signed by the Company and the Participant upon the signing or electronic acceptance by the Participant of the Restricted Stock Unit Grant Notice to which it is attached.EXHIBIT
10.1

 

SECURITIES
PURCHASE AGREEMENT

  

This
SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of June 7, 2017, is entered into by and between
Coates International, Ltd., a Delaware corporation (the “Company”),
and Typenex Co-Investment, LLC, a Utah limited liability company, its successors
and/or assigns (the “Buyer”).

 

A.       The
Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration
afforded by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”)
under the Securities Act of 1933, as amended (the “1933 Act”).

 

B.       The
Buyer desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement,
a Secured Convertible Promissory Note, in the form attached hereto as Exhibit A, in the original principal amount of $369,000.00
(the “Note”), convertible into shares of common stock, $0.0001 par value per share, of the Company (the “Common
Stock”), upon the terms and subject to the limitations and conditions set forth in such Note. This Agreement, the Note,
the Secured Buyer Notes (as defined below), the Security Agreement (as defined below), the Pledge Agreement (as defined below),
and all other certificates, documents, agreements, resolutions and instruments delivered to any party under or in connection with
this Agreement, as the same may be amended from time to time, are collectively referred to herein as the “Transaction
Documents.”

 

C.       For
purposes of this Agreement: “Conversion Shares” means all shares of Common Stock issuable upon conversion of
all or any portion of the Note; and “Securities” means the Note and the Conversion Shares, as applicable.

 

NOW
THEREFORE, the Company and the Buyer hereby agree as follows:

 

1.           Purchase
and Sale of Securities.

 

1.1.       Purchase
of Securities. On the Closing Date (as defined below), the Company shall issue and sell to the Buyer and the Buyer agrees
to purchase from the Company the Note. In consideration thereof, the Buyer shall pay (i) the amount designated as the initial
cash purchase price on the Buyer’s signature page to this Agreement (the “Initial Cash Purchase Price”),
and (ii) issue to the Company the Secured Buyer Notes (the sum of the initial principal amount of the Secured Buyer Notes, together
with the Initial Cash Purchase Price, the “Purchase Price”). Subject to Section 1.5, the Secured Buyer Notes
shall be secured by the Pledge Agreement substantially in the form attached hereto as Exhibit B, as the same may be amended
from time to time (the “Pledge Agreement”). The Purchase Price is allocated to the Tranches (as defined in
the Note) of the Note as set forth in the table attached hereto as Exhibit C.

 

     

     

    

 

1.2.       Form
of Payment. On the Closing Date, (i) the Buyer shall pay the Purchase Price to the Company against delivery of the Note by
delivering the following at the Closing: (A) the Initial Cash Purchase Price, which shall be delivered by wire transfer of immediately
available funds to the Company, in accordance with the Company’s written wiring instructions, (B) Secured Buyer Note #1
in the principal amount of $25,000.00 duly executed and substantially in the form attached hereto as Exhibit D (“Secured
Buyer Note #1”); (C) Secured Buyer Note #2 in the principal amount of $25,000.00 duly executed and substantially in
the form attached hereto as Exhibit E (“Secured Buyer Note #2”); (D) Secured Buyer Note #3 in the principal
amount of $25,000.00 duly executed and substantially in the form attached hereto as Exhibit F (“Secured Buyer
Note #3”); (E) Secured Buyer Note #4 in the principal amount of $25,000.00 duly executed and substantially in the form
attached hereto as Exhibit G (“Secured Buyer Note #4”); (F) Secured Buyer Note #5 in the principal amount
of $25,000.00 duly executed and substantially in the form attached hereto as Exhibit H (“Secured Buyer Note #5”);
(G) Secured Buyer Note #6 in the principal amount of $25,000.00 duly executed and substantially in the form attached hereto as
Exhibit I (“Secured Buyer Note #6”); (H) Secured Buyer Note #7 in the principal amount of $25,000.00
duly executed and substantially in the form attached hereto as Exhibit J (“Secured Buyer Note #7”);
(I) Secured Buyer Note #8 in the principal amount of $25,000.00 duly executed and substantially in the form attached hereto as
Exhibit K (“Secured Buyer Note #8”); (J) Secured Buyer Note #9 in the principal amount of $25,000.00
duly executed and substantially in the form attached hereto as Exhibit L (“Secured Buyer Note #9”);
(K) Secured Buyer Note #10 in the principal amount of $25,000.00 duly executed and substantially in the form attached hereto as
Exhibit M (“Secured Buyer Note #10”); (L) Secured Buyer Note #11 in the principal amount of $25,000.00
duly executed and substantially in the form attached hereto as Exhibit N (“Secured Buyer Note #11”);
and (M) Secured Buyer Note #12 in the principal amount of $25,000.00 duly executed and substantially in the form attached hereto
as Exhibit O (“Secured Buyer Note #12,” and together with Secured Buyer Note #1, Secured Buyer Note
#2, Secured Buyer Note #3, Secured Buyer Note #4, Secured Buyer Note #5, Secured Buyer Note #6, Secured Buyer Note #7, Secured
Buyer Note #8, Secured Buyer Note #9, Secured Buyer Note #10, and Secured Buyer Note #11, the “Secured Buyer Notes”);
and (ii) the Company shall deliver the duly executed Note on behalf of the Company, to the Buyer, against delivery of such Purchase
Price.

 

1.3.       Closing
Date. Subject to the satisfaction (or written waiver) of the conditions set forth in Section 5 and Section 6 below, the date
and time of the issuance and sale of the Securities pursuant to this Agreement (the “Closing Date”) shall be
12:00 noon, Eastern Time on or about June 7, 2017, or such other mutually agreed upon time. The closing of the transactions contemplated
by this Agreement (the “Closing”) shall occur on the Closing Date at the offices of the Buyer unless otherwise
agreed upon by the parties.

 

1.4.       Note
Collateral. The Note shall be secured by the collateral set forth in that that certain Security Agreement attached hereto
as Exhibit P listing the Secured Buyer Notes as security for the Company’s obligations under the Transaction Documents
(the “Security Agreement”).

 

1.5.       Secured
Buyer Note Collateral. At the Closing, the Buyer shall execute the Pledge Agreement, thereby granting to the Company a security
interest in the collateral described therein (the “Collateral”). The Buyer also agrees to file a UCC Financing
Statement (Form UCC1) with the Utah Department of Commerce in the manner set forth in the Pledge Agreement in order to perfect
the Company’s security interest in the Collateral. Notwithstanding anything to the contrary herein or in any other Transaction
Document, the Buyer may, in the Buyer’s sole discretion, add additional collateral to the Collateral covered by the Pledge
Agreement, and may substitute Collateral as the Buyer deems fit, provided that the net fair market value of the substituted Collateral
may not be less than the aggregate principal balance of the Secured Buyer Notes as of the date of any such substitution. In the
event of a substitution of Collateral, the Buyer shall timely execute any and all amendments and documents necessary or advisable
in order to properly release the original collateral and grant a security interest upon the substitute collateral in favor of
the Company, including without limitation the filing of an applicable UCC Financing Statement Amendment (Form UCC3) with the Utah
Department of Commerce. The Company agrees to sign the documents and take such other measures requested by the Buyer in order
to accomplish the intent of the Transaction Documents, including without limitation, execution of a Form UCC3 (or equivalent)
termination statement against the Collateral within five (5) Trading Days after written request from the Buyer. The Company acknowledges
and agrees that the Collateral may be encumbered by other monetary liens in priority and/or subordinate positions. The intent
of the parties is that the net fair market value of the Collateral (less any other prior liens or encumbrances) will be equal
to or greater than the aggregate outstanding balance of the Secured Buyer Notes. To the extent the fair market value of the Collateral
(less any other liens or encumbrances) is less than the total outstanding balance of all the Secured Buyer Notes, then the Collateral
will be deemed to only secure those Secured Buyer Notes with an aggregate outstanding balance that is less than or equal to such
net fair market value of the Collateral, applied in numerical order of the Secured Buyer Notes. By way of example only, if the
fair market value of the Collateral is determined by appraisal to be $300,000 and the Collateral is encumbered by $200,000 of
prior liens, then the net fair market value for purposes of this section is $100,000 ($300,000 - $200,000). Accordingly, the Collateral
will be deemed to secure only Secured Buyer Note #1, Secured Buyer Note #2, Secured Buyer Note #3, and Secured Buyer Note #4,
while the remaining Secured Buyer Notes shall be deemed unsecured. If the Collateral is subsequently appraised for $400,000 with
all prior liens removed, then the Collateral will automatically be deemed to secure all of the Secured Buyer Notes.

 

    	 	2	 

     

    

 

1.6.       Original
Issue Discount; Transaction Expenses. The Note carries an original issue discount of $17,500.00 (the “OID”).
In addition, the Company agrees to pay $1,500.00 to the Buyer to cover the Buyer’s legal fees, accounting costs, due diligence,
monitoring and other transaction costs incurred in connection with the purchase and sale of the Securities, all of which amount
is included in the initial principal balance of the Note (the “Carried Transaction Expense Amount”). The Purchase
Price, therefore, shall be $350,000.00, computed as follows: $369,000.00 original principal balance, less the OID, less the Carried
Transaction Expense Amount. The Initial Cash Purchase Price shall be the Purchase Price less the sum of the initial principal
amounts of the Secured Buyer Notes.

 

2.            Buyer’s
Representations and Warranties. The Buyer represents and warrants to the Company that: (i) this Agreement has been duly and
validly authorized; (ii) this Agreement, the Secured Buyer Notes, and the Pledge Agreement have been duly executed and delivered
on behalf of the Buyer, (iii) this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance
with its terms; and (iv) the Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation
D of the 1933 Act.

 

3.            Representations
and Warranties of the Company. The Company represents and warrants to the Buyer that: (i) the Company is a corporation duly
organized, validly existing and in good standing under the laws of its state of incorporation and has the requisite corporate
power to own its properties and to carry on its business as now being conducted; (ii) the Company is duly qualified as a foreign
corporation to do business and is in good standing in each jurisdiction where the nature of the business conducted or property
owned by it makes such qualification necessary; (iii) the Company has registered its Common Stock under Section 12(g) of
the Securities Exchange Act of 1934, as amended (the “1934 Act”), and is obligated to file reports pursuant
to Section 13 or Section 15(d) of the 1934 Act; (iv) each of the Transaction Documents and the transactions contemplated
hereby and thereby, have been duly and validly authorized by the Company; (v) this Agreement, the Note, and the Security Agreement
have been duly executed and delivered by the Company and constitute the valid and binding obligations of the Company enforceable
in accordance with their terms, subject as to enforceability only to general principles of equity and to bankruptcy, insolvency,
moratorium, and other similar laws affecting the enforcement of creditors’ rights generally; (vi) the execution and delivery
of the Transaction Documents by the Company, the issuance of Securities in accordance with the terms hereof, and the consummation
by the Company of the other transactions contemplated by the Transaction Documents do not and will not conflict with or result
in a breach by the Company of any of the terms or provisions of, or constitute a default under (a) the Company’s formation
documents or bylaws, each as currently in effect, (b) any indenture, mortgage, deed of trust, or other material agreement or instrument
to which the Company is a party or by which it or any of its properties or assets are bound, including any listing agreement for
the Common Stock, or (c) to the Company’s knowledge, any existing applicable law, rule, or regulation or any applicable
decree, judgment, or order of any court, United States federal or state regulatory body, administrative agency, or other governmental
body having jurisdiction over the Company or any of the Company’s properties or assets; (vii) no further authorization,
approval or consent of any court, governmental body, regulatory agency, self-regulatory organization, or stock exchange or market
or the stockholders or any lender of the Company is required to be obtained by the Company for the issuance of the Securities
to the Buyer; (viii) none of the Company’s filings with the SEC contained, at the time they were filed, any untrue statement
of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not misleading; (ix) the Company has filed all reports, schedules,
forms, statements and other documents required to be filed by the Company with the SEC under the 1934 Act on a timely basis or
has received a valid extension of such time of filing and has filed any such report, schedule, form, statement or other document
prior to the expiration of any such extension; (x) the Company is not, nor has it ever been, a “Shell Company,” as
such type of “issuer” is described in Rule 144(i)(1) under the 1933 Act; (xi) the Company has taken no action which
would give rise to any claim by any person or entity for a brokerage commission, placement agent or finder’s fees or similar
payments by the Buyer relating to the Note or the transactions contemplated hereby; (xii) when issued, the Conversion Shares will
be duly authorized, validly issued, fully paid for and non-assessable, free and clear of all liens, claims, charges and encumbrances;
and (xiii) except for such fees arising as a result of any agreement or arrangement entered into by the Buyer without the knowledge
of the Company (a “Buyer’s Fee”), the Buyer shall have no obligation with respect to such fees or with
respect to any claims made by or on behalf of other persons for fees of a type contemplated in this subsection that may be due
in connection with the transactions contemplated hereby and the Company shall indemnify and hold harmless each of the Buyer, the
Buyer’s employees, officers, directors, stockholders, managers, agents, and partners, and their respective affiliates, from
and against all claims, losses, damages, costs (including the costs of preparation and attorneys’ fees) and expenses suffered
in respect of any such claimed or existing fees (other than a Buyer’s Fee, if any).

 

    	 	3	 

     

    

 

4.            Company
Covenants. Until all of the Company’s obligations hereunder are paid and performed in full, or within the timeframes
otherwise specifically set forth below, the Company shall comply with the following covenants: (i) from the date hereof until
the date that is six (6) months after all the Conversion Shares either have been sold by the Buyer, or may permanently be sold
by the Buyer without any restrictions pursuant to Rule 144, the Company shall timely make all filings required to be made by it
under the 1933 Act, the 1934 Act, Rule 144 or any United States securities laws and regulations thereof applicable to the Company
or by the rules and regulations of its principal trading market, and such filings shall conform to the requirements of applicable
laws, regulations and government agencies, and, unless such filings are publicly available on the SEC’s EDGAR system (via
the SEC’s web site at no additional charge), the Company shall provide a copy thereof to the Buyer promptly after such filings;
(ii) so long as the Buyer beneficially owns any of the Securities and for at least twenty (20) trading days thereafter, the Company
shall file all reports required to be filed with the SEC pursuant to Sections 13 or 15(d) of the 1934 Act, and shall take
all reasonable action under its control to ensure that adequate current public information with respect to the Company, as required
in accordance with Rule 144, is publicly available, and shall not terminate its status as an issuer required to file reports under
the 1934 Act even if the 1934 Act or the rules and regulations thereunder would permit such termination; (iii) the Common Stock
shall be listed or quoted for trading on any of (a) the NYSE Amex, (b) the New York Stock Exchange, (c) the Nasdaq Global Market,
(d) the Nasdaq Capital Market, (e) the OTC Bulletin Board, (f) the OTCQX, (g) the OTCQB, or (h) OTC Pink Current Information;
(iv) the Company shall use the net proceeds received hereunder for working capital and general corporate purposes only; provided,
however, the Company will not use such proceeds to pay fees payable (A) to any broker or finder relating to the offer and
sale of the Securities unless such broker, finder, or other party is a registered investment adviser or registered broker-dealer
and such fees are paid in full compliance with all applicable laws and regulations, or (B) to any other party relating to any
financing transaction effected prior to the date hereof; and (v) from and after the date hereof and until all of the Company’s
obligations hereunder and the Note are paid and performed in full, the Company shall not transfer, assign, sell, pledge, hypothecate
or otherwise alienate or encumber the Secured Buyer Notes in any way without the prior written consent of the Buyer.

 

    	 	4	 

     

    

 

5.            Conditions
to the Company’s Obligation to Sell. The obligation of the Company hereunder to issue and sell the Securities to the
Buyer at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions:

 

5.1.       The
Buyer shall have executed this Agreement, the Secured Buyer Notes, and the Pledge Agreement, and delivered the same to the Company.

 

5.2.       The
Buyer shall have delivered the Purchase Price in accordance with Section 1.2 above.

 

6.           Conditions
to the Buyer’s Obligation to Purchase. The obligation of the Buyer hereunder to purchase the Securities at the Closing
is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions
are for the Buyer’s sole benefit and may be waived by the Buyer at any time in its sole discretion:

 

6.1.       The
Company shall have executed this Agreement and delivered the same to the Buyer.

 

6.2.       The
Company shall have delivered to the Buyer the duly executed Note in accordance with Section 1.2 above.

 

6.3.       The
Company shall have delivered to the Buyer a fully executed secretary’s certificate evidencing the Company’s approval
of the Transaction Documents substantially in the form attached hereto as Exhibit Q.

 

6.4.       The
Company shall have delivered to the Buyer a fully executed share issuance resolution to be delivered to the Company’s transfer
agent substantially in the form attached hereto as Exhibit R.

 

6.5.       The
Company shall have delivered to the Buyer fully executed copies of all other Transaction Documents required to be executed by
the Company herein or therein.

 

7.            Reservation
of Shares. At all times during which the Note is convertible, the Company will reserve from its authorized and unissued Common
Stock to provide for the issuance of Common Stock upon the full conversion of the Note. The Company will at all times reserve
at least three times the number of shares of Common Stock necessary to convert the total Outstanding Balance (as defined in and
determined pursuant to the Note) of the Note, but in any event not less than 400,000,000 shares of Common Stock shall be reserved
at all times for such purpose (the “Share Reserve”). The Company further agrees that it will immediately add
shares of Common Stock to the Share Reserve in increments of 40,000,000 shares as and when requested by the Buyer in writing from
time to time.

 

8.            Governing
Law; Miscellaneous. The provisions set forth in this Section 8 shall apply to this Agreement, as well as all other Transaction
Documents as if these terms were fully set forth therein.

 

8.1.       Governing
Law; Venue. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Utah for contracts
to be wholly performed in such state and without giving effect to the principles thereof regarding the conflict of laws. Subject
to Section 8.2 below, each party hereto hereby (a) consents to and expressly submits to the exclusive personal jurisdiction of
any state or federal court sitting in Salt Lake County, Utah in connection with any dispute or proceeding arising out of or relating
to this Agreement, (b) agrees that all claims in respect of any such dispute or proceeding may only be heard and determined in
any such court, (c) expressly submits to the exclusive venue of any such court for the purposes hereof, and (d) waives any claim
of improper venue and any claim or objection that such courts are an inconvenient forum or any other claim or objection to the
bringing of any such proceeding in such jurisdictions or to any claim that such venue of the suit, action or proceeding is improper.

 

    	 	5	 

     

    

 

8.2.       Arbitration
of Disputes. The parties shall submit all Claims (as defined in Exhibit S) arising under this Agreement or any other
Transaction Document or any other agreement between the parties and their affiliates or any Claim relating to the relationship
of the parties to binding arbitration pursuant to the arbitration provisions set forth in Exhibit S attached hereto (the
“Arbitration Provisions”). The parties hereby acknowledge and agree that the Arbitration Provisions are unconditionally
binding on the parties hereto and are severable from all other provisions of this Agreement. By executing this Agreement, Company
represents, warrants and covenants that Company has reviewed the Arbitration Provisions carefully, consulted with legal counsel
about such provisions (or waived its right to do so), understands that the Arbitration Provisions are intended to allow for the
expeditious and efficient resolution of any dispute hereunder, agrees to the terms and limitations set forth in the Arbitration
Provisions, and that Company will not take a position contrary to the foregoing representations. Company acknowledges and agrees
that Investor may rely upon the foregoing representations and covenants of Company regarding the Arbitration Provisions.

 

8.3.       Counterparts.
This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute
one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other
party. A signature delivered by electronic means (i.e., by “pdf” signature) shall be deemed and original for all purposes.

 

8.4.       Severability.
In the event that any provision of this Agreement 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
to such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the
validity or enforceability of any other provision hereof.

 

8.5.       Entire
Agreement; Amendments. This Agreement and the instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company
nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement
may be waived or amended other than by an instrument in writing signed by the parties hereto.

 

    	 	6	 

     

    

 

8.6.       Notices.
Any notice required or permitted hereunder shall be given in writing (unless otherwise specified herein) and shall be deemed effectively
given on the earliest of: (a) the date delivered, if delivered by personal delivery as against written receipt therefor or by
e-mail to an executive officer, or by confirmed facsimile, (b) the fifth Trading Day after deposit, postage prepaid, in the United
States Postal Service by certified mail, or (c) the third Trading Day after mailing by domestic or international express courier,
with delivery costs and fees prepaid, in each case, addressed to each of the other parties thereunto entitled at the following
addresses (or at such other addresses as such party may designate by ten (10) calendar days’ advance written notice similarly
given to each of the other parties hereto):

 

If
to the Company:

 

Coates
International, Ltd.

Attn:
Barry C. Kaye, CFO

2100
Highway 34 & Ridgewood Road

Wall
Township, NJ 07719

 

If
to the Buyer:

 

Typenex
Co-Investment, LLC

Attn:
John Fife, President

303
East Wacker Drive, Suite 1040 

Chicago,
Illinois 60601

 

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

 

Hansen
Black Anderson Ashcraft PLLC

Attn:
Jonathan K. Hansen

3051
West Maple Loop, Suite 325

Lehi,
Utah 84043

 

8.7.       Successors
and Assigns. This Agreement or any of the severable rights and obligations inuring to the benefit of or to be performed by
the Buyer hereunder may be assigned by the Buyer to a third party, including its financing sources, in whole or in part, but only
with the prior written consent of the Company, which consent shall not be unreasonably withheld. The Company may not assign its
rights or obligations under this Agreement or delegate its duties hereunder without the prior written consent of the Buyer.

 

8.8.       Survival.
The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the
Closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyer. The Company agrees to
indemnify and hold harmless the Buyer and all its officers, directors, employees, attorneys, and agents for loss or damage arising
as a result of or related to any breach or alleged breach by the Company of any of its representations, warranties and covenants
set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as
they are incurred.

 

8.9.       Further
Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request
in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated
hereby.

 

8.10.       Buyer’s
Rights and Remedies Cumulative; Liquidated Damages. All rights, remedies, and powers conferred in this Agreement and the Transaction
Documents on the Buyer are cumulative and not exclusive of any other rights or remedies, and shall be in addition to every other
right, power, and remedy that the Buyer may have, whether specifically granted in this Agreement or any other Transaction Document,
or existing at law, in equity, or by statute; and any and all such rights and remedies may be exercised from time to time and
as often and in such order as the Buyer may deem expedient. The parties agree that the amount of damages for a breach by the Company
of the Transaction Documents is difficult to determine at this time and that the fees and charges included in the Transaction
Documents are a reasonable estimation of the amount of liquidated damages for any such breach under the circumstances existing
at the time this Agreement is entered into and are not penalties. All fees and charges provided for in the Transaction Documents
are agreed to by the parties to be based upon the obligations and the risks assumed by the parties as of the Closing Date. The
liquidated damages provisions of the Transaction Documents shall not limit or preclude a party from pursuing any other remedy
available in law or in equity; provided, however, that the liquidated damages provided for in the Transaction Documents
are intended to be in lieu of actual damages.

 

    	 	7	 

     

    

 

8.11.       Ownership
Limitation. Notwithstanding anything to the contrary contained in this Agreement or the other Transaction Documents, if at
any time the Buyer shall or would be issued shares of Common Stock under any of the Transaction Documents, but such issuance would
cause the Buyer (together with its affiliates) to beneficially own a number of shares exceeding the Maximum Percentage (as defined
in the Note), then the Company must not issue to the Buyer the shares that would cause the Buyer to exceed the Maximum Percentage.
For purposes of this Section, beneficial ownership of Common Stock will be determined under the 1934 Act.

 

8.12.       Attorneys’
Fees and Cost of Collection. In the event of any action at law or in equity to enforce or interpret the terms of this Agreement
or any of the other Transaction Documents, the parties agree that the party who is awarded the most money shall be deemed the
prevailing party for all purposes and shall therefore be entitled to an additional award of the full amount of the attorneys’
fees and expenses paid by such prevailing party in connection with the litigation and/or dispute without reduction or apportionment
based upon the individual claims or defenses giving rise to the fees and expenses. Nothing herein shall restrict or impair a court’s
power to award fees and expenses for frivolous or bad faith pleading. If (a) the Note is placed in the hands of an attorney
for collection or enforcement prior to commencing legal proceedings, or is collected or enforced through any legal proceeding,
or the Buyer otherwise takes action to collect amounts due under the Note or to enforce the provisions of the Note; or (b) there
occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting the Company’s creditors’
rights and involving a claim under the Note; then the Company shall pay the costs incurred by the Buyer for such collection, enforcement
or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, without limitation,
attorneys’ fees and disbursements.

 

8.13.       Waiver.
No waiver of any provision of this Agreement shall be effective unless it is in the form of a writing signed by the party granting
the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or
consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent
or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.

 

8.14.       Waiver
of Jury Trial. EACH PARTY TO THIS AGREEMENT IRREVOCABLY WAIVES ANY AND ALL RIGHTS SUCH PARTY MAY HAVE TO DEMAND THAT ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE
TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE
STATUTE, LAW, RULE OR REGULATION. FURTHER, EACH PARTY HERETO ACKNOWLEDGES THAT SUCH PARTY IS KNOWINGLY AND VOLUNTARILY WAIVING
SUCH PARTY’S RIGHT TO DEMAND TRIAL BY JURY.

 

8.15.       Time
of the Essence. Time is expressly made of the essence of each and every provision of this Agreement and the other Transaction
Documents.

 

[Remainder
of page intentionally left blank; signature page to follow]

 

    	 	8	 

     

    

 

SUBSCRIPTION
AMOUNT:

	Principal Amount of Note:	 	$	369,000.00	 
	Initial Cash Purchase Price:	 	$	50,000.00	 

 

IN
WITNESS WHEREOF, the undersigned Buyer and the Company have caused this Agreement to be duly executed as of the date first above
written.

 

	 	BUYER:
	 	 	 	 
	 	Typenex
    co-investment, llc
	 	 	 	 
	 	By:	Red
    Cliffs Investments, Inc., its Manager
	 	 	 	 
	 	 	By:
    	/s/
    John M. Fife
	 	 	 	John
    M. Fife, President
	 	 	 	 
	 	COMPANY:
	 	 	 	 
	 	Coates
    International, Ltd.
	 	 
	 	By:	/s/
    Barry C. Kaye
	 	Printed
    Name: Barry C. Kaye
	 	Title:
    Chief Financial Officer 

 

ATTACHED
EXHIBITS:

 

	Exhibit A	Note

	Exhibit B	Pledge Agreement

	Exhibit C	Allocation of Purchase Price

	Exhibit D	Secured Buyer Note #1

	Exhibit E	Secured Buyer Note #2

	Exhibit F	Secured Buyer Note #3

	Exhibit G	Secured Buyer Note #4

	Exhibit H	Secured Buyer Note #5

	Exhibit I	Secured Buyer Note #6

	Exhibit J	Secured Buyer Note #7

	Exhibit K	Secured Buyer Note #8

	Exhibit L	Secured Buyer Note #9

	Exhibit M	Secured Buyer Note #10

	Exhibit N	Secured Buyer Note #11

	Exhibit O	Secured Buyer Note #12

	Exhibit P	Security Agreement

	Exhibit Q	Secretary’s Certificate

	Exhibit R	Share Issuance Resolution

	Exhibit S	Arbitration Provisions

 

[Signature page
to Securities Purchase Agreement]

 

    	 	9	 

     

    

   

ARBITRATION
PROVISIONS

 

1.       Dispute
Resolution. For purposes of this Exhibit S, the term “Claims” means any disputes, claims, demands,
causes of action, requests for injunctive relief, requests for specific performance, liabilities, damages, losses, or controversies
whatsoever arising from, related to, or connected with the transactions contemplated in the Transaction Documents and any communications
between the parties related thereto, including without limitation any claims of mutual mistake, mistake, fraud, misrepresentation,
failure of formation, failure of consideration, promissory estoppel, unconscionability, failure of condition precedent, rescission,
and any statutory claims, tort claims, contract claims, or claims to void, invalidate or terminate the Agreement (or these Arbitration
Provisions (defined below)) or any of the other Transaction Documents. The term “Claims” specifically excludes a dispute
over Calculations (as defined in the Note). The parties to the Agreement (the “parties”) hereby agree that
the arbitration provisions set forth in this Exhibit S (“Arbitration Provisions”) are binding on each
of them. As a result, any attempt to rescind the Agreement (or these Arbitration Provisions) or declare the Agreement (or these
Arbitration Provisions) or any other Transaction Document invalid or unenforceable for any reason is subject to these Arbitration
Provisions. These Arbitration Provisions shall also survive any termination or expiration of the Agreement. Any capitalized term
not defined in these Arbitration Provisions shall have the meaning set forth in the Agreement.

 

2.       Arbitration.
Except as otherwise provided herein, all Claims must be submitted to arbitration (“Arbitration”) to be conducted
exclusively in Salt Lake County, Utah and pursuant to the terms set forth in these Arbitration Provisions. Subject to the arbitration
appeal right provided for in Paragraph 5 below (the “Appeal Right”), the parties agree that the award of the
arbitrator rendered pursuant to Paragraph 4 below (the “Arbitration Award”) shall be (a) final and binding
upon the parties, (b) the sole and exclusive remedy between them regarding any Claims, counterclaims, issues, or accountings presented
or pleaded to the arbitrator, and (c) promptly payable in United States dollars free of any tax, deduction or offset (with respect
to monetary awards). Subject to the Appeal Right, any costs or fees, including without limitation attorneys’ fees, incurred
in connection with or incident to enforcing the Arbitration Award shall, to the maximum extent permitted by law, be charged against
the party resisting such enforcement. The Arbitration Award shall include default interest (as defined or otherwise provided for
in the Note, “Default Interest”) (with respect to monetary awards) at the rate specified in the Note for Default
Interest both before and after the Arbitration Award. Judgment upon the Arbitration Award will be entered and enforced by any
state or federal court sitting in Salt Lake County, Utah.

 

3.       The
Arbitration Act. The parties hereby incorporate herein the provisions and procedures set forth in the Utah Uniform Arbitration
Act, U.C.A. § 78B-11-101 et seq. (as amended or superseded from time to time, the “Arbitration Act”).
Notwithstanding the foregoing, pursuant to, and to the maximum extent permitted by, Section 105 of the Arbitration Act, in the
event of conflict or variation between the terms of these Arbitration Provisions and the provisions of the Arbitration Act, the
terms of these Arbitration Provisions shall control and the parties hereby waive or otherwise agree to vary the effect of all
requirements of the Arbitration Act that may conflict with or vary from these Arbitration Provisions.

 

4.       Arbitration
Proceedings. Arbitration between the parties will be subject to the following:

 

4.1       Initiation
of Arbitration. Pursuant to Section 110 of the Arbitration Act, the parties agree that a party may initiate Arbitration by
giving written notice to the other party (“Arbitration Notice”) in the same manner that notice is permitted
under Section 8.6 of the Agreement; provided, however, that the Arbitration Notice may not be given by email or fax. Arbitration
will be deemed initiated as of the date that the Arbitration Notice is deemed delivered to such other party under Section 8.6
of the Agreement (the “Service Date”). After the Service Date, information may be delivered, and notices may
be given, by email or fax pursuant to Section 8.6 of the Agreement or any other method permitted thereunder. The Arbitration Notice
must describe the nature of the controversy, the remedies sought, and the election to commence Arbitration proceedings. All Claims
in the Arbitration Notice must be pleaded consistent with the Utah Rules of Civil Procedure.

 

    	 	10	 

     

    

 

4.2       Selection
and Payment of Arbitrator.

 

(a)      Within ten (10) calendar days after the Service Date, Investor shall select and submit to Company the names of three (3) arbitrators
that are designated as “neutrals” or qualified arbitrators by Utah ADR Services (http://www.utahadrservices.com)
(such three (3) designated persons hereunder are referred to herein as the “Proposed Arbitrators”). For the
avoidance of doubt, each Proposed Arbitrator must be qualified as a “neutral” with Utah ADR Services. Within five
(5) calendar days after Investor has submitted to Company the names of the Proposed Arbitrators, Company must select, by written
notice to Investor, one (1) of the Proposed Arbitrators to act as the arbitrator for the parties under these Arbitration Provisions.
If Company fails to select one of the Proposed Arbitrators in writing within such 5-day period, then Investor may select the arbitrator
from the Proposed Arbitrators by providing written notice of such selection to Company.

 

(b)      If Investor fails to submit to Company the Proposed Arbitrators within ten (10) calendar days after the Service Date pursuant
to subparagraph (a) above, then Company may at any time prior to Investor so designating the Proposed Arbitrators, identify the
names of three (3) arbitrators that are designated as “neutrals” or qualified arbitrators by Utah ADR Service by written
notice to Investor. Investor may then, within five (5) calendar days after Company has submitted notice of its Proposed Arbitrators
to Investor, select, by written notice to Company, one (1) of the Proposed Arbitrators to act as the arbitrator for the parties
under these Arbitration Provisions. If Investor fails to select in writing and within such 5-day period one (1) of the three (3)
Proposed Arbitrators selected by Company, then Company may select the arbitrator from its three (3) previously selected Proposed
Arbitrators by providing written notice of such selection to Investor.

 

(c)      If a Proposed Arbitrator chosen to serve as arbitrator declines or is otherwise unable to serve as arbitrator, then the party
that selected such Proposed Arbitrator may select one (1) of the other three (3) Proposed Arbitrators within three (3) calendar
days of the date the chosen Proposed Arbitrator declines or notifies the parties he or she is unable to serve as arbitrator. If
all three (3) Proposed Arbitrators decline or are otherwise unable to serve as arbitrator, then the arbitrator selection process
shall begin again in accordance with this Paragraph 4.2.

 

(d)      The date that the Proposed Arbitrator selected pursuant to this Paragraph 4.2 agrees in writing (including via email) delivered
to both parties to serve as the arbitrator hereunder is referred to herein as the “Arbitration Commencement Date”.
If an arbitrator resigns or is unable to act during the Arbitration, a replacement arbitrator shall be chosen in accordance with
this Paragraph 4.2 to continue the Arbitration. If Utah ADR Services ceases to exist or to provide a list of neutrals and there
is no successor thereto, then the arbitrator shall be selected under the then prevailing rules of the American Arbitration Association.

 

(e)      Subject to Paragraph 4.10 below, the cost of the arbitrator must be paid equally by both parties. Subject to Paragraph 4.10 below,
if one party refuses or fails to pay its portion of the arbitrator fee, then the other party can advance such unpaid amount (subject
to the accrual of Default Interest thereupon), with such amount being added to or subtracted from, as applicable, the Arbitration
Award.

 

4.3       Applicability
of Certain Utah Rules. The parties agree that the Arbitration shall be conducted generally in accordance with the Utah Rules
of Civil Procedure and the Utah Rules of Evidence. More specifically, the Utah Rules of Civil Procedure shall apply, without limitation,
to the filing of any pleadings, motions or memoranda, the conducting of discovery, and the taking of any depositions. The Utah
Rules of Evidence shall apply to any hearings, whether telephonic or in person, held by the arbitrator. Notwithstanding the foregoing,
it is the parties’ intent that the incorporation of such rules will in no event supersede these Arbitration Provisions.
In the event of any conflict between the Utah Rules of Civil Procedure or the Utah Rules of Evidence and these Arbitration Provisions,
these Arbitration Provisions shall control.

 

4.4       Answer
and Default. An answer and any counterclaims to the Arbitration Notice shall be required to be delivered to the party initiating
the Arbitration within twenty (20) calendar days after the Arbitration Commencement Date. If an answer is not delivered by the
required deadline, the arbitrator must provide written notice to the defaulting party stating that the arbitrator will enter a
default award against such party if such party does not file an answer within five (5) calendar days of receipt of such notice.
If an answer is not filed within the five (5) day extension period, the arbitrator must render a default award, consistent with
the relief requested in the Arbitration Notice, against a party that fails to submit an answer within such time period.

 

4.5       Related
Litigation. The party that delivers the Arbitration Notice to the other party shall have the option to also commence concurrent
legal proceedings with any state or federal court sitting in Salt Lake County, Utah (“Litigation Proceedings”),
subject to the following: (a) the complaint in the Litigation Proceedings is to be substantially similar to the claims set forth
in the Arbitration Notice, provided that an additional cause of action to compel arbitration will also be included therein, (b)
so long as the other party files an answer to the complaint in the Litigation Proceedings and an answer to the Arbitration Notice,
the Litigation Proceedings will be stayed pending an Arbitration Award (or Appeal Panel Award (defined below), as applicable)
hereunder, (c) if the other party fails to file an answer in the Litigation Proceedings or an answer in the Arbitration proceedings,
then the party initiating Arbitration shall be entitled to a default judgment consistent with the relief requested, to be entered
in the Litigation Proceedings, and (d) any legal or procedural issue arising under the Arbitration Act that requires a decision
of a court of competent jurisdiction may be determined in the Litigation Proceedings. Any award of the arbitrator (or of the Appeal
Panel (defined below)) may be entered in such Litigation Proceedings pursuant to the Arbitration Act.

 

    	 	11	 

     

    

 

4.6       Discovery.
Pursuant to Section 118(8) of the Arbitration Act, the parties agree that discovery shall be conducted as follows:

 

(a)      Written discovery will only be allowed if the likely benefits of the proposed written discovery outweigh the burden or expense
thereof, and the written discovery sought is likely to reveal information that will satisfy a specific element of a claim or defense
already pleaded in the Arbitration. The party seeking written discovery shall always have the burden of showing that all of the
standards and limitations set forth in these Arbitration Provisions are satisfied. The scope of discovery in the Arbitration proceedings
shall also be limited as follows:

 

(i)       To
facts directly connected with the transactions contemplated by the Agreement.

 

(ii)       To
facts and information that cannot be obtained from another source or in another manner that is more convenient, less burdensome
or less expensive than in the manner requested.

 

(b)      No party shall be allowed (i) more than fifteen (15) interrogatories (including discrete subparts), (ii) more than fifteen (15)
requests for admission (including discrete subparts), (iii) more than ten (10) document requests (including discrete subparts),
or (iv) more than three (3) depositions (excluding expert depositions) for a maximum of seven (7) hours per deposition. The costs
associated with depositions will be borne by the party taking the deposition. The party defending the deposition will submit a
notice to the party taking the deposition of the estimated attorneys’ fees that such party expects to incur in connection
with defending the deposition. If the party defending the deposition fails to submit an estimate of attorneys’ fees within
five (5) calendar days of its receipt of a deposition notice, then such party shall be deemed to have waived its right to the
estimated attorneys’ fees. The party taking the deposition must pay the party defending the deposition the estimated attorneys’
fees prior to taking the deposition, unless such obligation is deemed to be waived as set forth in the immediately preceding sentence.
If the party taking the deposition believes that the estimated attorneys’ fees are unreasonable, such party may submit the
issue to the arbitrator for a decision. All depositions will be taken in Utah.

 

(c)      All discovery requests (including document production requests included in deposition notices) must be submitted in writing to
the arbitrator and the other party. The party submitting the written discovery requests must include with such discovery requests
a detailed explanation of how the proposed discovery requests satisfy the requirements of these Arbitration Provisions and the
Utah Rules of Civil Procedure. The receiving party will then be allowed, within five (5) calendar days of receiving the proposed
discovery requests, to submit to the arbitrator an estimate of the attorneys’ fees and costs associated with responding
to such written discovery requests and a written challenge to each applicable discovery request. After receipt of an estimate
of attorneys’ fees and costs and/or challenge(s) to one or more discovery requests, consistent with subparagraph (c) above,
the arbitrator will within three (3) calendar days make a finding as to the likely attorneys’ fees and costs associated
with responding to the discovery requests and issue an order that (i) requires the requesting party to prepay the attorneys’
fees and costs associated with responding to the discovery requests, and (ii) requires the responding party to respond to the
discovery requests as limited by the arbitrator within twenty-five (25) calendar days of the arbitrator’s finding with respect
to such discovery requests. If a party entitled to submit an estimate of attorneys’ fees and costs and/or a challenge to
discovery requests fails to do so within such 5-day period, the arbitrator will make a finding that (A) there are no attorneys’
fees or costs associated with responding to such discovery requests, and (B) the responding party must respond to such discovery
requests (as may be limited by the arbitrator) within twenty-five (25) calendar days of the arbitrator’s finding with respect
to such discovery requests. Any party submitting any written discovery requests, including without limitation interrogatories,
requests for production subpoenas to a party or a third party, or requests for admissions, must prepay the estimated attorneys’
fees and costs, before the responding party has any obligation to produce or respond to the same, unless such obligation is deemed
waived as set forth above.

 

    	 	12	 

     

    

 

(d)      In order to allow a written discovery request, the arbitrator must find that the discovery request satisfies the standards set
forth in these Arbitration Provisions and the Utah Rules of Civil Procedure. The arbitrator must strictly enforce these standards.
If a discovery request does not satisfy any of the standards set forth in these Arbitration Provisions or the Utah Rules of Civil
Procedure, the arbitrator may modify such discovery request to satisfy the applicable standards, or strike such discovery request
in whole or in part.

 

(e)      Each party may submit expert reports (and rebuttals thereto), provided that such reports must be submitted within sixty (60) days
of the Arbitration Commencement Date. Each party will be allowed a maximum of two (2) experts. Expert reports must contain the
following: (i) a complete statement of all opinions the expert will offer at trial and the basis and reasons for them; (ii) the
expert’s name and qualifications, including a list of all the expert’s publications within the preceding ten (10)
years, and a list of any other cases in which the expert has testified at trial or in a deposition or prepared a report within
the preceding ten (10) years; and (iii) the compensation to be paid for the expert’s report and testimony. The parties are
entitled to depose any other party’s expert witness one (1) time for no more than four (4) hours. An expert may not testify
in a party’s case-in-chief concerning any matter not fairly disclosed in the expert report.

 

4.6       Dispositive
Motions. Each party shall have the right to submit dispositive motions pursuant Rule 12 or Rule 56 of the Utah Rules of Civil
Procedure (a “Dispositive Motion”). The party submitting the Dispositive Motion may, but is not required to,
deliver to the arbitrator and to the other party a memorandum in support (the “Memorandum in Support”) of the
Dispositive Motion. Within seven (7) calendar days of delivery of the Memorandum in Support, the other party shall deliver to
the arbitrator and to the other party a memorandum in opposition to the Memorandum in Support (the “Memorandum in Opposition”).
Within seven (7) calendar days of delivery of the Memorandum in Opposition, as applicable, the party that submitted the Memorandum
in Support shall deliver to the arbitrator and to the other party a reply memorandum to the Memorandum in Opposition (“Reply
Memorandum”). If the applicable party shall fail to deliver the Memorandum in Opposition as required above, or if the
other party fails to deliver the Reply Memorandum as required above, then the applicable party shall lose its right to so deliver
the same, and the Dispositive Motion shall proceed regardless.

 

4.7       Confidentiality.
All information disclosed by either party (or such party’s agents) during the Arbitration process (including without limitation
information disclosed during the discovery process or any Appeal (defined below)) shall be considered confidential in nature.
Each party agrees not to disclose any confidential information received from the other party (or its agents) during the Arbitration
process (including without limitation during the discovery process or any Appeal) unless (a) prior to or after the time of disclosure
such information becomes public knowledge or part of the public domain, not as a result of any inaction or action of the receiving
party or its agents, (b) such information is required by a court order, subpoena or similar legal duress to be disclosed if such
receiving party has notified the other party thereof in writing and given it a reasonable opportunity to obtain a protective order
from a court of competent jurisdiction prior to disclosure, or (c) such information is disclosed to the receiving party’s
agents, representatives and legal counsel on a need to know basis who each agree in writing not to disclose such information to
any third party. Pursuant to Section 118(5) of the Arbitration Act, the arbitrator is hereby authorized and directed to issue
a protective order to prevent the disclosure of privileged information and confidential information upon the written request of
either party.

 

4.8       Authorization;
Timing; Scheduling Order. Subject to all other portions of these Arbitration Provisions, the parties hereby authorize and
direct the arbitrator to take such actions and make such rulings as may be necessary to carry out the parties’ intent for
the Arbitration proceedings to be efficient and expeditious. Pursuant to Section 120 of the Arbitration Act, the parties hereby
agree that an Arbitration Award must be made within one hundred twenty (120) calendar days after the Arbitration Commencement
Date. The arbitrator is hereby authorized and directed to hold a scheduling conference within ten (10) calendar days after the
Arbitration Commencement Date in order to establish a scheduling order with various binding deadlines for discovery, expert testimony,
and the submission of documents by the parties to enable the arbitrator to render a decision prior to the end of such 120-day
period.

 

4.9       Relief.
The arbitrator shall have the right to award or include in the Arbitration Award (or in a preliminary ruling) any relief which
the arbitrator deems proper under the circumstances, including, without limitation, specific performance and injunctive relief,
provided that the arbitrator may not award exemplary or punitive damages.

 

    	 	13	 

     

    

 

4.10       Fees
and Costs. As part of the Arbitration Award, the arbitrator is hereby directed to require the losing party (the party being
awarded the least amount of money by the arbitrator, which, for the avoidance of doubt, shall be determined without regard to
any statutory fines, penalties, fees, or other charges awarded to any party) to (a) pay the full amount of any unpaid costs and
fees of the Arbitration, and (b) reimburse the prevailing party for all reasonable attorneys’ fees, arbitrator costs and
fees, deposition costs, other discovery costs, and other expenses, costs or fees paid or otherwise incurred by the prevailing
party in connection with the Arbitration.

 

5.       Arbitration
Appeal.

 

5.1       Initiation
of Appeal. Following the entry of the Arbitration Award, either party (the “Appellant”) shall have a period
of thirty (30) calendar days in which to notify the other party (the “Appellee”), in writing, that the Appellant
elects to appeal (the “Appeal”) the Arbitration Award (such notice, an “Appeal Notice”)
to a panel of arbitrators as provided in Paragraph 5.2 below. The date the Appellant delivers an Appeal Notice to the Appellee
is referred to herein as the “Appeal Date”. The Appeal Notice must be delivered to the Appellee in accordance
with the provisions of Paragraph 4.1 above with respect to delivery of an Arbitration Notice. In addition, together with delivery
of the Appeal Notice to the Appellee, the Appellant must also pay for (and provide proof of such payment to the Appellee together
with delivery of the Appeal Notice) a bond in the amount of 110% of the sum the Appellant owes to the Appellee as a result of
the Arbitration Award the Appellant is appealing. In the event an Appellant delivers an Appeal Notice to the Appellee (together
with proof of payment of the applicable bond) in compliance with the provisions of this Paragraph 5.1, the Appeal will occur as
a matter of right and, except as specifically set forth herein, will not be further conditioned. In the event a party does not
deliver an Appeal Notice (along with proof of payment of the applicable bond) to the other party within the deadline prescribed
in this Paragraph 5.1, such party shall lose its right to appeal the Arbitration Award. If no party delivers an Appeal Notice
(along with proof of payment of the applicable bond) to the other party within the deadline described in this Paragraph 5.1, the
Arbitration Award shall be final. The parties acknowledge and agree that any Appeal shall be deemed part of the parties’
agreement to arbitrate for purposes of these Arbitration Provisions and the Arbitration Act.

 

5.2       Selection
and Payment of Appeal Panel. In the event an Appellant delivers an Appeal Notice to the Appellee (together with proof of payment
of the applicable bond) in compliance with the provisions of Paragraph 5.1 above, the Appeal will be heard by a three (3) person
arbitration panel (the “Appeal Panel”).

 

(a)      Within
ten (10) calendar days after the Appeal Date, the Appellee shall select and submit to the Appellant the names of five (5) arbitrators
that are designated as “neutrals” or qualified arbitrators by Utah ADR Services (http://www.utahadrservices.com)
(such five (5) designated persons hereunder are referred to herein as the “Proposed Appeal Arbitrators”). For
the avoidance of doubt, each Proposed Appeal Arbitrator must be qualified as a “neutral” with Utah ADR Services, and
shall not be the arbitrator who rendered the Arbitration Award being appealed (the “Original Arbitrator”).
Within five (5) calendar days after the Appellee has submitted to the Appellant the names of the Proposed Appeal Arbitrators,
the Appellant must select, by written notice to the Appellee, three (3) of the Proposed Appeal Arbitrators to act as the members
of the Appeal Panel. If the Appellant fails to select three (3) of the Proposed Appeal Arbitrators in writing within such 5-day
period, then the Appellee may select such three (3) arbitrators from the Proposed Appeal Arbitrators by providing written notice
of such selection to the Appellant.

 

(b)      If the Appellee fails to submit to the Appellant the names of the Proposed Appeal Arbitrators within ten (10) calendar days
after the Appeal Date pursuant to subparagraph (a) above, then the Appellant may at any time prior to the Appellee so designating
the Proposed Appeal Arbitrators, identify the names of five (5) arbitrators that are designated as “neutrals” or qualified
arbitrators by Utah ADR Service (none of whom may be the Original Arbitrator) by written notice to the Appellee. The Appellee
may then, within five (5) calendar days after the Appellant has submitted notice of its selected arbitrators to the Appellee,
select, by written notice to the Appellant, three (3) of such selected arbitrators to serve on the Appeal Panel. If the Appellee
fails to select in writing within such 5-day period three (3) of the arbitrators selected by the Appellant to serve as the members
of the Appeal Panel, then the Appellant may select the three (3) members of the Appeal Panel from the Appellant’s list of
five (5) arbitrators by providing written notice of such selection to the Appellee.

 

(c)      If a selected Proposed Appeal Arbitrator declines or is otherwise unable to serve, then the party that selected such Proposed
Appeal Arbitrator may select one (1) of the other five (5) designated Proposed Appeal Arbitrators within three (3) calendar days
of the date a chosen Proposed Appeal Arbitrator declines or notifies the parties he or she is unable to serve as an arbitrator.
If at least three (3) of the five (5) designated Proposed Appeal Arbitrators decline or are otherwise unable to serve, then the
Proposed Appeal Arbitrator selection process shall begin again in accordance with this Paragraph 5.2; provided, however,
that any Proposed Appeal Arbitrators who have already agreed to serve shall remain on the Appeal Panel.

 

    	 	14	 

     

    

 

(d)      The
date that all three (3) Proposed Appeal Arbitrators selected pursuant to this Paragraph 5.2 agree in writing (including via email)
delivered to both the Appellant and the Appellee to serve as members of the Appeal Panel hereunder is referred to herein as the
“Appeal Commencement Date”. No later than five (5) calendar days after the Appeal Commencement Date, the Appellee
shall designate in writing (including via email) to the Appellant and the Appeal Panel the name of one (1) of the three (3) members
of the Appeal Panel to serve as the lead arbitrator in the Appeal proceedings. Each member of the Appeal Panel shall be deemed
an arbitrator for purposes of these Arbitration Provisions and the Arbitration Act, provided that, in conducting the Appeal, the
Appeal Panel may only act or make determinations upon the approval or vote of no less than the majority vote of its members, as
announced or communicated by the lead arbitrator on the Appeal Panel. If an arbitrator on
the Appeal Panel ceases or is unable to act during the Appeal proceedings, a replacement arbitrator shall be chosen in accordance
with Paragraph 5.2 above to continue the Appeal as a member of the Appeal Panel. If Utah ADR Services ceases to exist or
to provide a list of neutrals, then the arbitrators for the Appeal Panel shall be selected under the then prevailing rules of
the American Arbitration Association.

 

(d)      Subject to Paragraph 5.7 below, the cost of the Appeal Panel must be paid entirely by the Appellant.

 

5.3       Appeal
Procedure. The Appeal will be deemed an appeal of the entire Arbitration Award. In conducting the Appeal, the Appeal Panel
shall conduct a de novo review of all Claims described or otherwise set forth in the Arbitration Notice. Subject to the foregoing
and all other provisions of this Paragraph 5, the Appeal Panel shall conduct the Appeal in a manner the Appeal Panel considers
appropriate for a fair and expeditious disposition of the Appeal, may hold one or more hearings and permit oral argument, and
may review all previous evidence and discovery, together with all briefs, pleadings and other documents filed with the Original
Arbitrator (as well as any documents filed with the Appeal Panel pursuant to Paragraph 5.4(a) below). Notwithstanding the foregoing,
in connection with the Appeal, the Appeal Panel shall not permit the parties to conduct any additional discovery or raise any
new Claims to be arbitrated, shall not permit new witnesses or affidavits, and shall not base any of its findings or determinations
on the Original Arbitrator’s findings or the Arbitration Award.

 

5.4       Timing.

 

(a)       Within
seven (7) calendar days of the Appeal Commencement Date, the Appellant (i) shall deliver or cause to be delivered to the Appeal
Panel copies of the Appeal Notice, all discovery conducted in connection with the Arbitration, and all briefs, pleadings and other
documents filed with the Original Arbitrator (which material Appellee shall have the right to review and supplement if necessary),
and (ii) may, but is not required to, deliver to the Appeal Panel and to the Appellee a Memorandum in Support of the Appellant’s
arguments concerning or position with respect to all Claims, counterclaims, issues, or accountings presented or pleaded in the
Arbitration. Within seven (7) calendar days of the Appellant’s delivery of the Memorandum in Support, as applicable, the
Appellee shall deliver to the Appeal Panel and to the Appellant a Memorandum in Opposition to the Memorandum in Support. Within
seven (7) calendar days of the Appellee’s delivery of the Memorandum in Opposition, as applicable, the Appellant shall deliver
to the Appeal Panel and to the Appellee a Reply Memorandum to the Memorandum in Opposition. If the Appellant shall fail to substantially
comply with the requirements of clause (i) of this subparagraph (a), the Appellant shall lose its right to appeal the Arbitration
Award, and the Arbitration Award shall be final. If the Appellee shall fail to deliver the Memorandum in Opposition as required
above, or if the Appellant shall fail to deliver the Reply Memorandum as required above, then the Appellee or the Appellant, as
the case may be, shall lose its right to so deliver the same, and the Appeal shall proceed regardless.

 

(b)
       Subject to subparagraph (a) above, the parties hereby agree that the Appeal must be
heard by the Appeal Panel within thirty (30) calendar days of the Appeal Commencement Date, and that the Appeal Panel must render
its decision within thirty (30) calendar days after the Appeal is heard (and in no event later than sixty (60) calendar days after
the Appeal Commencement Date).

 

    	 	15	 

     

    

 

5.5       Appeal
Panel Award. The Appeal Panel shall issue its decision (the “Appeal Panel Award”) through the lead arbitrator
on the Appeal Panel. Notwithstanding any other provision contained herein, the Appeal Panel Award shall (a) supersede in its entirety
and make of no further force or effect the Arbitration Award (provided that any protective orders issued by the Original Arbitrator
shall remain in full force and effect), (b) be final and binding upon the parties, with no further rights of appeal, (c) be the
sole and exclusive remedy between the parties regarding any Claims, counterclaims, issues, or accountings presented or pleaded
in the Arbitration, and (d) be promptly payable in United States dollars free of any tax, deduction or offset (with respect to
monetary awards). Any costs or fees, including without limitation attorneys’ fees, incurred in connection with or incident
to enforcing the Appeal Panel Award shall, to the maximum extent permitted by law, be charged against the party resisting such
enforcement. The Appeal Panel Award shall include Default Interest (with respect to monetary awards) at the rate specified in
the Note for Default Interest both before and after the Arbitration Award. Judgment upon the Appeal Panel Award will be entered
and enforced by a state or federal court sitting in Salt Lake County, Utah.

 

5.6       Relief.
The Appeal Panel shall have the right to award or include in the Appeal Panel Award any relief which the Appeal Panel deems
proper under the circumstances, including, without limitation, specific performance and injunctive relief, provided that the Appeal
Panel may not award exemplary or punitive damages.

 

5.7       Fees
and Costs. As part of the Appeal Panel Award, the Appeal Panel is hereby directed to require the losing party (the party being
awarded the least amount of money by the arbitrator, which, for the avoidance of doubt, shall be determined without regard to
any statutory fines, penalties, fees, or other charges awarded to any party) to (a) pay the full amount of any unpaid costs and
fees of the Arbitration and the Appeal Panel, and (b) reimburse the prevailing party (the party being awarded the most amount
of money by the Appeal Panel, which, for the avoidance of doubt, shall be determined without regard to any statutory fines, penalties,
fees, or other charges awarded to any part) the reasonable attorneys’ fees, arbitrator and Appeal Panel costs and fees,
deposition costs, other discovery costs, and other expenses, costs or fees paid or otherwise incurred by the prevailing party
in connection with the Arbitration (including without limitation in connection with the Appeal).

 

6.
       Miscellaneous.

 

6.1       Severability.
If any part of these Arbitration Provisions is found to violate or be illegal under applicable law, then such provision shall
be modified to the minimum extent necessary to make such provision enforceable under applicable law, and the remainder of the
Arbitration Provisions shall remain unaffected and in full force and effect.

 

6.2       Governing
Law. These Arbitration Provisions shall be governed by the laws of the State of Utah without regard to the conflict of laws
principles therein.

 

6.3       Interpretation.
The headings of these Arbitration Provisions are for convenience of reference only and shall not form part of, or affect the interpretation
of, these Arbitration Provisions.

 

6.4       Waiver.
No waiver of any provision of these Arbitration Provisions shall be effective unless it is in the form of a writing signed by
the party granting the waiver.

 

6.5       Time
is of the Essence. Time is expressly made of the essence with respect to each and every provision of these Arbitration Provisions.

 

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