Document:

Exhibit 10.4

                     AMENDMENT NO. 1 TO SUBLICENSE AGREEMENT

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

                                   BACKGROUND

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

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

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

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

<PAGE>

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

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

      I. AMENDMENT OF SUBLICENSE AGREEMENT.

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

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

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

                  (B) Sold Unit shall mean a Licensed Product that has been sold
            by SUBLICENSEE under the terms of this Agreement and the sales price
            from such sale has been received or collected by the SUBLICENSEE and
            as a result,  is included in the  DETERMINATION  OF ROYALTY PAYMENTS
            DUE  AND  OWING  TO  SUBLICENSOR  pursuant  to  the  terms  of  this
            Agreement.

            2. Article 2.1,  LICENSES  GRANTED TO LICENSEE,  shall be amended by
deleting  Article 2.1 in its entirety and substituting the following new Article
2.1 in lieu thereof:

            2.1 SUBLICENSES GRANTED TO SUBLICENSEE

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

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

<PAGE>

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

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

            5.1 - Sublicensing Fee and Undertakings.

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

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

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

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

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

<PAGE>

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

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

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

            5.2 - Royalties.

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

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

<PAGE>

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

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

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

            5.7 - Books and Records.

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

II.  RATIFICATION  AND  CONFIRMATION  OF  BALANCE  OF TERMS  AND  PROVISIONS  OF
SUBLICENSE AGREEMENT

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

<PAGE>

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

                                  SUBLICENSOR:

                                  COATES INTERNATIONAL, LTD.

                                  By: /s/ George J. Coates
                                      ----------------------------------
                                      George J. Coates, President

                                  SUBLICENSEE:

                                  COATES MOTORCYCLE COMPANY, LTD.

                                  By:  /s/. Gregory G. Coates
                                      ----------------------------------
                                       Gregory G. Coates, PresidentExhibit 10.5

                      AMENDMENT NO. 1 TO LICENSE AGREEMENT

THIS AMENDMENT NO.1 TO LICENSE AGREEMENT, (the "Amendment"),  is made as of this
5th day of March,  2004,  by and  between  THE COATES  TRUST,  having a business
address at Katherina  Court, 101 East Hill Place,  Market Street North,  Nassau,
the Bahamas,  GEORGE J. COATES AND GREGORY G. COATES,  having a business address
c/o  Coates  International,  Ltd.,  2100  Highway  #34 &  Ridgewood  Road,  Wall
Township,  New Jersey  07719-9738 (  collectively,  the  "LICENSOR")  and COATES
MOTORCYCLE  COMPANY,  LTD.,  having  its  principal  offices  located at Central
Avenue, Building 3 Farmingdale, New Jersey 07727 ( the " LICENSEE").

                                   BACKGROUND

      WHEREAS,  LICENSOR and LICENSEE entered into a certain License  Agreement,
dated April 30, 2003 (the "License  Agreement") pursuant to the general terms of
which  LICENSOR  granted  LICENSEE  a  non-exclusive  license  to use  and  sell
motorcycles  utilizing  the CSRV Valve System in all of the  countries and their
territories  and  possessions of the World except all of the countries and their
territories  comprising  North America,  Central  America and South America (the
"Territory"),  for a period equal to the duration of the patents,  including the
periods  covering  any  continuations  and  reissuances  thereof  as well as any
additional patents that may be issued and that relate to the CSRV Valve System;

      WHEREAS,  LICENSEE  is engaged  in the  preparation  of an initial  public
offering of its securities  and LICENSEE has determined  that it would be in the
best interests of the LICENSEE and its present and future  shareholders to amend
the  License  Agreement  to seek an  expansion  of its rights  under the License
Agreement by modifying the license from a  non-exclusive  license to utilize the
CSRV Valve System in the Territory to an exclusive  license as well as to expand
LICENSEE'S  rights under the original License Agreement to include the rights to
manufacture, sublicense and franchise the technology;

      WHEREAS,  LICENSOR  has agreed to so expand  LICENSEE'S  rights  under the
License  Agreement,  provided LICENSEE pays to LICENSOR an additional  licensing
fee payment, all as more fully described in this Amendment; and

      WHEREAS,  LICENSOR  and  LICENSEE  desire  and intend to set forth in this
Amendment all of the express  modifications to the License  Agreement that shall
govern their business relationship.

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

<PAGE>

I. AMENDMENT OF LICENSE AGREEMENT.

      Subject  to the  terms  and  conditions  set forth  herein,  LICENSOR  and
LICENSEE agree to amend the License Agreement in the following manner:

      1. Article 1.5, Field of Use, shall be amended by deleting  Article 1.5 in
its entirety and substituting the following new Article 1.5 in lieu thereof:

      1.5 Field of Use shall  mean  utilizing  in the  Territory  the CSRV Valve
      System solely, and for no purpose other than, the  manufacturing,  use and
      sale of motorcycles and gasoline-powered internal combustion engines, used
      in motorcycles. This License and Field of Use shall also include the right
      to sublicense and/or make franchise agreements with third parties.

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

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

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

      3. Article 2.1, LICENSES GRANTED TO LICENSEE, shall be amended by deleting
Article 2.1 in its entirety and  substituting  the  following new Article 2.1 in
lieu thereof:

      2.1 LICENSES GRANTED TO LICENSEE

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

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

<PAGE>

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

      4. Article 2.6,  Acknowledgement of License., shall be amended by deleting
Article 2.6 in its entirety and  substituting  the  following new Article 2.6 in
lieu thereof:

      2.6 - Acknowledgement of License.

      On all  CSRV  Valve  Systems,  LICENSEE,  as  well as any  sublicensee  or
      franchisee of LICENSEE,  shall  acknowledge that the same are manufactured
      under license from LICENSOR.  Unless  otherwise  agreed to by the parties,
      the  following  notice shall be used by LICENSEE on an exposed  surface of
      all Licensed Products: "Manufactured under license from Coates Trust" Such
      notice shall also be used in all descriptive materials and instruction and
      service manuals relating to the Coates Spherical Rotary Valve System

      5. Articles 5.1,  Licensing Fee, 5.2,  Royalties,  5.3, and 5.7, Books and
Records, shall be deleted in their entirety and the following new articles shall
be substituted in lieu thereof:

      5.1 -  Licensing  Fee. . In  consideration  of the  rights  granted in the
      License Agreement,  LICENSEE issued to LICENSOR a licensing fee payment of
      2,500,000 shares of its common stock and such common shares were issued to
      the LICENSOR as follows:  500,000  shares to the Coates  Trust,  1,000,000
      common shares to Gregory G. Coates and  1,000,000  common shares to George
      J.  Coates.  In further  consideration  of the  expansion  of the  license
      granted to  LICENSEE  pursuant to Article II of this  Amendment,  LICENSEE
      hereby agrees to pay to the LICENSOR an additional licensing fee comprised
      of 5,924,000  shares of its common stock,  to be issued to the LICENSOR as
      follows: 2,500,000 shares, to the Coates Trust, 1,424,000 common shares To
      Gregory G. Coates and 2,000,000  common  shares to George J. Coates,  with
      such  additional  licensing  fee shares to be issued on the date  LICENSEE
      executes  this  Amendment  or as  soon  thereafter  as  practicable  (both
      licensing fee payments of shares shall be collectively  referred to as the
      "Licensing  Fee").  LICENSOR and LICENSEE  acknowledge  and agree that the
      LICENSEE'S  common  stock  issued and  delivered  pursuant  to the License
      Agreement and this  Amendment to LICENSOR  shall not have any  pre-emptive
      rights of any nature whatsoever and shall be subject to future dilution in
      the sole  and  exclusive  discretion  of  LICENSEE  for  proper  corporate
      purposes.

<PAGE>

      5.2 - Royalties.

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

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

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

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

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

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

<PAGE>

      6. Article  7.3,  Obligations  of LICENSEE,  sections (a) and (b) shall be
      deleted in their  entirety and the following new Article 7.3,  section (a)
      and (b) shall be substituted in lieu thereof:

      7.3 -  Obligations  of  LICENSEE.  LICENSEE  will,  and on  behalf  of its
      sublicensees and franchisees, cause them to:

      (a) execute all such tasks as may be  necessary  to bring about the speedy
manufacture,  sale and use of Licensed  Products  consistent  with good business
practice;

            (b) ensure that all steps within its power are  undertaken  with all
      reasonable  speed  to  ensure  that  Licensed  Products  made  and sold by
      LICENSEE and its  sublicensees  and  franchisees  comply with all relevant
      governmental regulations in the Territory; and

II.  RATIFICATION AND CONFIRMATION OF BALANCE OF TERMS AND PROVISIONS OF LICENSE
AGREEMENT.

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

<PAGE>

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

                                   LICENSORS:

                                   THE COATES TRUST

                                   By: /s/ George J. Coates
                                       --------------------------------
                                       GEORGE J. COATES
                                       Trustee

                                   /s/ George J. Coates
                                   ------------------------------------
                                   George J. Coates, Individually

                                   GREGORY G. COATES

                                   /s/ Gregory G. Coates
                                   ------------------------------------
                                   Gregory G. Coates

                                   LICENSEE:

                                   COATES MOTORCYCLE COMPANY, LTD.

                                   By: /s/ Gregory G. Coates
                                       --------------------------------
                                       Gregory G. Coates, President

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