Document:

Exhibit
        10.2

       

      

      FORM
        OF

       

      ADMINISTRATION
        AGREEMENT

       

      among

       

      TBW
        MORTGAGE TRUST [     ],

      as
        Issuer,

       

      [    
        ],

      as
        Indenture Trustee,

       

      [    
        ],
as
        Securities Administrator

       

      [    
        ],

      as
        Owner
        Trustee

       

      and

       

      TBALT
        CORP.,

      as
        Depositor

       

      Dated
        as
        of [     ]

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      This
        Administration Agreement (the “Agreement”) is entered into as of
        [     ], among TBW MORTGAGE TRUST [    
], a Delaware statutory trust (the “Issuer”), [     ], not
        in its individual capacity but solely as indenture trustee (the “Indenture
        Trustee”), [     ], not in its individual capacity but
        solely as securities administrator (the “Securities Administrator”),
        [     ], not in its individual capacity but solely as owner
        trustee of the Issuer (the “Owner Trustee”), and TBALT CORP., as depositor (the
“Depositor”).

       

      Capitalized
        terms used but not defined herein shall have the meanings assigned to such
        terms
        in the Indenture, the Trust Agreement or the Transfer and Servicing Agreement
        (each as defined herein).

       

      WITNESSETH:

       

      WHEREAS,
        the Issuer is a statutory trust under the Delaware Statutory Trust Act (12
        Del.C. § 3801 et seq.) created by a trust agreement relating to the Trust,
        dated as of [     ], among the Depositor, the Owner Trustee
        and the Securities Administrator (the “Trust Agreement”);

       

      WHEREAS,
        the Issuer will issue under an indenture its TBW Mortgage
        Trust [     ] Mortgage-Backed Notes (the “Notes”) and, under
        the Trust Agreement, the Ownership Certificate (the “Certificate” and
        collectively with the Notes, the “Securities”);

       

      WHEREAS,
        the Notes will be secured by certain collateral, as more particularly set
        forth
        in the Indenture dated as of [     ] (the “Indenture”),
        among the Issuer, the Securities Administrator and the Indenture
        Trustee;

       

      WHEREAS,
        the Certificate will be issued pursuant to the Trust Agreement and will
        represent the undivided beneficial ownership interest in the Trust;

       

      WHEREAS,
        the Issuer has entered into certain agreements in connection with the issuance
        of the Securities, including (i) a transfer and servicing agreement dated
        as of
        [     ] (the “Transfer and Servicing Agreement”), among the
        Issuer, as issuer, the Depositor, as depositor, [Taylor, Bean & Whitaker
        Mortgage Corp.], as seller and as [a] servicer (in such capacity, [the/a]
        “Servicer”), [     ], as master servicer (in such capacity,
        the “Master Servicer”), and as Securities Administrator[,
        [     ], as a servicer (in such capacity, a “Servicer”)] and
        the Indenture Trustee, (ii) the Letter of Representations dated
        [     ], between the Issuer and The Depository Trust Company
        relating to the Notes (the “Depository Agreement”), (iii) [the interest rate cap
        agreements dated as of [     ], between the Issuer and the
        Cap Counterparty (the “Cap Agreements”)], and (iv) the Indenture (the Transfer
        and Servicing Agreement, the Depository Agreement, the Indenture, [the Cap
        Agreements] and the Trust Agreement being hereinafter referred to collectively
        as the “Related Agreements”);

       

      WHEREAS,
        pursuant to the Related Agreements, the Issuer is required to perform certain
        duties in connection with (a) the Notes and the collateral therefor pledged
        pursuant to the Indenture (the “Collateral”) and (b) the undivided beneficial
        ownership interest in the Issuer represented by the Certificate (the registered
        holder of such interest being referred to herein as the
“Certificateholder”);

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      WHEREAS,
        the Issuer desires to have the Securities Administrator and the Depositor,
        respectively, perform certain of the duties of the Issuer referred to in
        the
        preceding clause, and to provide such additional services consistent with
        the
        terms of this Agreement and the Related Agreements as the Issuer or the Owner
        Trustee may from time to time reasonably request; and

       

      WHEREAS,
        the Securities Administrator and the Depositor have the capacity to provide
        the
        respective services required hereby and are willing to perform such services
        for
        the Issuer or the Owner Trustee on the terms set forth herein.

       

      NOW,
        THEREFORE, in consideration of the mutual covenants contained herein, and
        other
        good and valuable consideration, the receipt and adequacy of which are hereby
        acknowledged, the parties agree as follows:

       

      Section
        1.   Duties
        of the Securities Administrator.

       

      (a)  [The
        Securities Administrator agrees to perform all of the duties of the Issuer
        under
        the Depository Agreement. In addition, the Securities Administrator shall
        take
        all appropriate action that are the duties of the Issuer or the Owner Trustee
        to
        take with respect to the following matters under the Trust Agreement, the
        Transfer and Servicing Agreement and the Indenture:

       

      (i)  the
        duty
        to cause the Note Register to be kept if the Issuer assumes the duties of
        Note
        Registrar, and to give the Indenture Trustee notice of any appointment of
        a new
        Note Registrar and the location, or change in location, of the Note Register
        (Section [2.04] of the Indenture);

       

      (ii)  the
        duty
        to cause the Certificate Register to be kept if the Issuer assumes the duties
        of
        the Certificate Registrar, and to give the Owner Trustee notice of any
        appointment of a new Certificate Registrar and the location, or change in
        location of the Certificate Register (Section [3.03] of the Trust Agreement);
        

       

      (iii)  causing
        the preparation of Definitive Notes in accordance with the instructions of
        any
        Clearing Agency, the duty to attempt to locate a qualified successor to the
        Clearing Agency, if necessary, and the preparation of written notice to the
        Indenture Trustee of termination of the book-entry system through the Clearing
        Agency (Section [2.12] of the Indenture);

       

      (iv)  the
        maintenance of an office for registration of transfer or exchange of the
        Notes
        (Section [3.02] of the Indenture);

       

      (v)  the
        maintenance of an office for registration of transfer or exchange of the
        Ownership Certificate (Section [3.08] of the Trust Agreement); 

       

      (vi)  the
        preparation of an Issuer Order required to appoint a Paying Agent, the
        preparation of written notice to the Indenture Trustee and the duty to cause
        newly appointed Paying Agents, if any, to execute and deliver to the Indenture
        Trustee the instrument specified in the Indenture regarding funds held in
        trust
        (Section [3.03] of the Indenture);

       

      
        
          
          

        

        
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      (vii)  the
        preparation of an Issuer Order required to direct the Paying Agent to pay
        to the
        Indenture Trustee all sums held in trust by the Paying Agent (Section [3.03]
        of
        the Indenture); 

       

      (viii)  the
        calculation of accrual of original issue discount, market discount, and the
        amortization of premium on the Notes (Section [3.03(v)] of the
        Indenture);

       

      (ix)  upon
        receipt of written notice or actual knowledge thereof by a Responsible Officer
        of the Securities Administrator, the notification to the Indenture Trustee
        and
        each Rating Agency of an Event of Default under the Transfer Servicing Agreement
        (Section [3.07(d)] of the Indenture);

       

      (x)  upon
        receipt of written notice or actual knowledge thereof by a Responsible Officer
        of the Securities Administrator, the delivery of notice to the Indenture
        Trustee
        and each Rating Agency of each Event of Default under the Indenture and each
        default by the Securities Administrator, the Master Servicer, the [related]
        Servicer or the Depositor, as applicable, under the Transfer and Servicing
        Agreement (Section [3.17] of the Indenture);

       

      (xi)  the
        furnishing of the Indenture Trustee with the names and addresses of Holders
        of
        Notes during any period when the Indenture Trustee is not the Note Registrar
        (Section [7.01] of the Indenture); 

       

      (xii)  the
        mailing to the Noteholders of notices with respect to their consent to any
        supplemental indentures (Sections [9.01] and [9.02] of the Indenture);
        and

       

      (xiii)  any
        other
        duties expressly required to be performed by the Securities Administrator
        under
        the Indenture or the Trust Agreement.]

       

      (b)  [The
        Securities Administrator shall take all appropriate action with respect to
        the
        following matters under the Indenture:

       

      (i)  the
        duties of an authenticating agent for authentication of the Notes (Sections
        [2.01, 2.02, 2.05 and 2.10] of the Indenture);

       

      (ii)  the
        duties of Note Registrar to be kept (Sections [2.03, 2.04 and 2.07] of the
        Indenture);

       

      (iii)  to
        provide notices and instructions to the Clearing Agency (Section [2.11] of
        the
        Indenture); and

       

      (iv)  the
        duties of Paying Agent (Sections [3.03] and [4.02] of the
        Indenture).]

       

      (c)  [The
        Securities Administrator shall perform, or cause to be performed on behalf
        of
        the Issuer, any duties expressly required to be performed by it under the
        Trust
        Agreement, including its duties as Certificate Paying Agent and Certificate
        Registrar.]

       

      
        
          
          

        

        
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      (d)  In
        carrying out the foregoing duties or any of its other obligations under this
        Agreement, the Securities Administrator may enter into transactions with
        or
        otherwise deal with any of its Affiliates; provided,
        however,
        that
        the terms of any such transactions or dealings shall be in accordance with
        any
        directions received from the Issuer and shall be, in the Securities
        Administrator’s opinion, no less favorable to the Issuer than would be available
        from unaffiliated parties.

       

      In
        carrying out the foregoing duties and its duties under any other Operative
        Document, the Securities Administrator shall be subject to the same standard
        of
        care and have the same rights, indemnifications and immunities as the Indenture
        Trustee under the Indenture, including, without limitation, the right to
        reimbursement and indemnification. The Securities Administrator shall not
        be
        required to take notice or be deemed to have notice or knowledge of (a) any
        Event of Default or Default under the Indenture or (b) any Event of Default
        under the Transfer and Servicing Agreement, unless a Responsible Officer
        of the
        Securities Administrator assigned to and working in its corporate trust
        department obtains actual knowledge of any such event or default or shall
        have
        received written notice thereof. In the absence of such actual knowledge
        or
        written notice, the Securities Administrator is entitled to conclusively
        assume
        that no such event or default has occurred. The Securities Administrator
        shall
        have no responsibility to prepare or file any tax return with respect to
        the
        Issuer, but shall, pursuant to Section [6.06] of the Indenture and Section
        [2.11] of the Trust Agreement, deliver to each Noteholder such information
        with
        respect to the Notes as may be required to enable such holder to prepare
        its
        federal and state income tax returns and shall file such information returns
        with the Internal Revenue Service with respect to payments or accruals of
        interest on the Notes as are required to be filed under the Code or applicable
        Treasury Regulations.

       

      The
        Securities Administrator in its capacity as the Certificate Registrar, and
        upon
        a request received from the Owner Trustee, shall promptly notify the
        Certificateholder of (i) any change in the Corporate Trust Office of the
        Owner
        Trustee, (ii) any amendment to the Trust Agreement requiring notice be given
        to
        the Certificateholder and (iii) any other notice required to be given to
        the
        Certificateholder by the Owner Trustee under the Trust Agreement.

       

      Section
        2.   Duties
        of the Depositor With Respect to the Indenture.

       

      (a)  [The
        Depositor shall take all appropriate action that is the duty of the Issuer
        to
        take with respect to the following matters under the Transfer and Servicing
        Agreement and the Indenture (references are to sections of the
        Indenture):

       

      (i)  The
        Depositor shall consult with the Owner Trustee regarding the duties of the
        Issuer under the Transfer and Servicing Agreement and the Indenture. The
        Depositor shall monitor the performance of the Issuer and shall notify the
        Owner
        Trustee when action is necessary to comply with the Issuer’s duties under the
        Transfer and Servicing Agreement and the Indenture;

       

      (ii)  causing
        the preparation of the Notes for execution by the Owner Trustee upon their
        issuance and upon the registration of any transfer or exchange of the Notes
        (Sections [2.02, 2.04 and 2.05] of the Indenture);

       

      
        
          
          

        

        
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      (iii)  causing
        the preparation of an Issuer Order and related documents for authentication
        of
        the Notes, executing such Issuer Order on behalf of the Issuer and causing
        delivery of the same to the Indenture Trustee (Section [2.02] of the
        Indenture);

       

      (iv)  causing
        the preparation of any financing statements, continuation statements,
        instruments of further assurance and other instruments necessary to protect
        the
        Collateral (Section [3.05] of the Indenture);

       

      (v)  the
        monitoring of the Issuer’s compliance with its negative covenants (Section
        [3.08] of the Indenture);

       

      (vi)  the
        preparation and execution of the annual Officer’s Certificate regarding the
        Issuer’s compliance with the terms Indenture (Section [3.09] of the
        Indenture);

       

      (vii)  the
        delivery of notice to the Indenture Trustee and each Rating Agency of each
        Event
        of Default under the Indenture (Section [3.17] of the Indenture);

       

      (viii)  causing
        the preparation of an Officer’s Certificate (and executing the same on behalf of
        the Issuer) and the obtaining of the Opinion of Counsel with respect to any
        request by the Issuer to the Indenture Trustee to take any action under the
        Indenture (Sections [4.01] and [11.01] of the Indenture);

       

      (ix)  the
        compliance with any directive of the Indenture Trustee with respect to the
        sale
        of the Collateral in a commercially reasonable manner if an Event of Default
        shall have occurred and be continuing under the Indenture (Section [5.04]
        of the
        Indenture);

       

      (x)  causing
        the preparation of an Issuer Request and Officer’s Certificate (and executing
        the same on behalf of the Issuer) and the obtaining of an Opinion of Counsel,
        if
        necessary, for the release of the Collateral, as defined in the Indenture
        (Section [8.04]);

       

      (xi)  causing
        the preparation of Issuer Orders and Officer’s Certificate (and executing the
        same on behalf of the Issuer) and the obtaining of Opinions of Counsel with
        respect to the execution of supplemental indentures and, if necessary, the
        mailing to the Noteholders of notices with respect to their consent to such
        supplemental indentures (Sections [9.01, 9.02, 9.03 and 9.06] of the Indenture);
        and

       

      (xii)  obtaining
        and preserving the Issuer’s qualification to do business in each jurisdiction in
        which such qualification is or shall be necessary to protect the validity
        and
        enforceability of the Indenture, the Notes, the Collateral and each other
        instrument and agreement included in the Trust Estate.]

       

      (b)  The
        Issuer shall indemnify the Owner Trustee, the Indenture Trustee and the
        Securities Administrator, and their respective agents for, and hold them
        harmless against, any losses, liability or expense incurred without gross
        negligence or bad faith on their part, arising out of or in connection with
        the
        acceptance or administration of the transactions contemplated by the Trust
        Agreement or this Agreement, including the reasonable costs and expenses
        of
        defending themselves against any claim or liability in connection with the
        exercise or performance of any of their powers or duties under the Trust
        Agreement, the Indenture or this Agreement.

       

      
        
          
          

        

        
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      (c)  [In
        addition to the duties of the Depositor set forth above, the Depositor shall
        prepare for execution by the Issuer or shall cause the preparation by other
        appropriate persons of all such documents, reports, filings, instruments,
        certificates and opinions as it shall be the duty of the Issuer to prepare,
        file
        or deliver pursuant to the Related Agreements, and at the request of the
        Owner
        Trustee shall take all appropriate additional action that it is the duty
        of the
        Issuer to take pursuant to the Related Agreements. Subject to Section 6 of
        this
        Agreement, and in accordance with the directions of the Owner Trustee, the
        Depositor shall administer, perform or supervise the performance of such
        other
        activities in connection with the Collateral (including the Related Agreements)
        as are not covered by any of the foregoing provisions and as are expressly
        requested by the Owner Trustee and are reasonably within the capability of
        the
        Depositor.]

       

      (d)  [The
        Securities Administrator shall enter into the Cap Agreements on behalf of
        the
        Issuer (Section [2.03(d)] of the Trust Agreement).]

       

      Section
        3.   Duties
        of the Indenture Trustee.
        The
        Issuer hereby authorizes the Indenture Trustee to file in any filing office
        any
        financing statement, amendment to financing statement (to the extent a
        Responsible Officer of the Indenture Trustee has actual knowledge or receives
        written notice that an amendment is required to be filed) or continuation
        statement required to be executed pursuant to Section [3.05] of the Indenture;
        and the Indenture Trustee agrees that it shall file any continuation statement
        necessary to maintain the effectiveness of any financing statement filed
        with
        respect to the Collateral pursuant to the Indenture (provided that it has
        been
        furnished with a copy of the filed financing statement by the Issuer, Depositor
        or Securities Administrator with the related filing information, including
        the
        date, location and filing number of the filed financing statement, on a timely
        basis), and the Indenture Trustee agrees to file any amendment to any such
        filed
        financing statement to the extent a Responsible Officer of the Indenture
        Trustee
        receives written notice and instruction (including necessary information)
        from
        the Issuer, the Depositor or the Securities Administrator on a timely basis
        that
        such amendment is required to be filed. (Section [3.05] of the
        Indenture).

       

      Section
        4.   Records.
        The
        Securities Administrator shall maintain appropriate books of account and
        records
        relating to services performed hereunder, which books of account and records
        shall be accessible for inspection by the Issuer and the Depositor at any
        time
        during normal business hours.

       

      Section
        5.   Compensation.
        The
        Securities Administrator shall perform the duties and provide the services
        called for under Section 1 above for such compensation as shall be agreed
        upon
        between the Securities Administrator and the Master Servicer. [The fees and
        disbursements of the attorneys delivering any Opinion of Counsel, and any
        other
        amounts of out-of-pocket expenses reasonably incurred by the Securities
        Administrator pursuant to this Agreement shall be paid or reimbursed by the
        Trust.]

       

      
        
          
          

        

        
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      Section
        6.   Additional
        Information to be Furnished to the Issuer.
        The
        Depositor shall furnish to the Issuer from time to time such additional
        information regarding the Collateral as the Issuer shall reasonably
        request.

       

      Section
        7.   Independence
        of the Securities Administrator.
        For all
        purposes of this Agreement, the Securities Administrator shall be an independent
        contractor and shall not be subject to the supervision of the Issuer or the
        Owner Trustee with respect to the manner in which it accomplishes the
        performance of its obligations hereunder. Unless expressly authorized by
        the
        Issuer, the Securities Administrator shall have no authority to act for or
        represent the Issuer or the Owner Trustee in any way and shall not otherwise
        be
        deemed an agent of the Issuer or the Owner Trustee.

       

      Section
        8.   No
        Joint Venture.
        Nothing
        contained in this Agreement (i) shall constitute the Securities Administrator
        or
        the Depositor, respectively, and either of the Issuer or the Owner Trustee,
        as
        members of any partnership, joint venture, association, syndicate,
        unincorporated business or other separate entity, (ii) shall be construed
        to
        impose any liability as such on any of them or (iii) shall be deemed to confer
        on any of them any express, implied or apparent authority to incur any
        obligation or liability on behalf of the others.

       

      Section
        9.   Other
        Activities of Securities Administrator and the Depositor.
        Nothing
        herein shall prevent the Securities Administrator, the Depositor or their
        respective Affiliates from engaging in other businesses or, in its sole
        discretion, from acting in a similar capacity as a Securities Administrator
        for
        any other person or entity even though such person or entity may engage in
        business activities similar to those of the Issuer or the Owner
        Trustee.

       

      Section
        10.   Term
        of Agreement; Resignation and Removal of Securities
        Administrator.

       

      (a)  This
        Agreement shall continue in force until the termination of the Trust Agreement
        in accordance with its terms, upon which event this Agreement shall
        automatically terminate.

       

      (b)  Subject
        to Section 10(e) hereof, the Securities Administrator may resign its duties
        hereunder by providing the Issuer with at least [60] days’ prior written
        notice.

       

      (c)  Subject
        to Section 10(e) hereof, the Issuer may remove the Securities Administrator
        without cause by providing the Securities Administrator with at least [60]
        days’
prior written notice.

       

      (d)  Subject
        to Section 10(e) hereof, the Issuer may remove the Securities Administrator
        immediately upon written notice of termination from the Issuer to the Securities
        Administrator if any of the following events shall occur:

       

      (i)  [the
        Securities Administrator shall default in the performance of any of its duties
        under this Agreement and, after notice of such default, shall not cure such
        default within ten days (or, if such default cannot be cured in such time,
        shall
        not give within ten days such assurance of cure as shall be reasonably
        satisfactory to the Issuer); or

       

      
        
          
          

        

        
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      (ii)  a
        court
        having jurisdiction in the premises shall (x) enter a decree or order for
        relief, which decree or order shall not have been vacated within 60 days,
        in
        respect of the Securities Administrator in any involuntary case under any
        applicable bankruptcy, insolvency or other similar law now or hereafter in
        effect, or (y) appoint a receiver, liquidator, assignee, custodian, trustee,
        sequestrator or similar official for the Securities Administrator or any
        substantial part of its property, or (z) order the winding-up or liquidation
        of
        the Securities Administrator’s affairs; or

       

      (iii)  the
        Securities Administrator shall commence a voluntary case under any applicable
        bankruptcy, insolvency or other similar law now or hereafter in effect, shall
        consent to the entry of an order for relief in an involuntary case under
        any
        such law, or shall consent to the appointment of a receiver, liquidator,
        assignee, trustee, custodian, sequestrator or similar official for the
        Securities Administrator or any substantial part of its property, shall consent
        to the taking of possession by any such official of any substantial part
        of its
        property, shall make any general assignment for the benefit of creditors
        or
        shall fail generally to pay its debts as they become due.]

       

      The
        Securities Administrator agrees that if any of the events specified in clauses
        (ii) or (iii) of this Section 10(d) shall occur, it shall give written notice
        thereof to the Issuer and the Indenture Trustee within [seven ]days after
        the
        occurrence of such event.

       

      (e)  No
        resignation or removal of the Securities Administrator pursuant to this Section
        shall be effective until (i) a successor Securities Administrator shall have
        been appointed by the Issuer in accordance with the Trust Agreement and (ii)
        such successor Securities Administrator shall have agreed in writing to be
        bound
        by the terms of this Agreement in the same manner as the Securities
        Administrator is bound hereunder.

       

      If
        a
        successor Securities Administrator does not take office within [60] days
        after
        the retiring Securities Administrator resigns or is removed, the resigning
        or
        removed Securities Administrator or the Issuer may petition any court of
        competent jurisdiction for the appointment of a successor Securities
        Administrator.

       

      (f)  The
        appointment of any successor Securities Administrator shall be effective
        only
        after receipt of a letter from each Rating Agency to the effect that such
        proposed appointment will not cause a reduction or withdrawal of the then
        current ratings of the Notes.

       

      (g)  Subject
        to Sections 10(e) and 10(f), the Securities Administrator acknowledges that
        upon
        the appointment of a successor Master Servicer pursuant to Section [8.01]
        of the
        Transfer and Servicing Agreement, the Securities Administrator shall immediately
        resign and such successor Master Servicer shall automatically become the
        Securities Administrator under this Agreement. Any such successor Master
        Servicer shall be required to agree to assume the duties of the Securities
        Administrator under the terms and conditions of this Agreement in its acceptance
        of appointment as successor Master Servicer.

       

      Section
        11.   Action
        upon Termination, Resignation or Removal of the Securities
        Administrator.
        Promptly upon the effective date of termination of this Agreement or the
        resignation or removal of the Securities Administrator pursuant to Section
        10
        hereof, the Securities Administrator shall be entitled to be paid all fees
        and
        reimbursable expenses, including any reasonable out-of-pocket attorneys’ fees,
        accruing to it to the date of such termination, resignation or removal. The
        Securities Administrator shall forthwith upon such termination pursuant to
        Section 10 deliver to the successor Securities Administrator all property
        and
        documents of or relating to the Collateral then in the custody of the Securities
        Administrator, or if this Agreement has been terminated, to the Depositor.
        In
        the event of the resignation or removal of the Securities Administrator pursuant
        to Section 10, the Securities Administrator shall cooperate with the Issuer
        and
        take all reasonable steps requested to assist the Issuer in making an orderly
        transfer of the duties of the Securities Administrator.

       

      
        
          
          

        

        
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      Section
        12.   Notices.
        Any
        notice, report or other communication given hereunder shall be in writing,
        delivered by mail, overnight courier or facsimile and addressed as
        follows:

       

      (a)  if
        to the
        Issuer, to:

       

      [TBW
        Mortgage Trust [    
        ]]

      [                                       
        ]

       

      (b)  if
        to the
        Securities Administrator, to:

       

      [                                       
        ]

      [                                       
        ]

       

      (c)  if
        to the
        Owner Trustee, to:

       

      [                                       
        ]

      [                                       
        ]

       

      (d)  if
        to the
        Depositor, to:

       

      TBALT
        Corp.

      1690
        Stone Village Lane

      No.
        102

      Kennesaw,
        Georgia 30152

      (770)
        499-8222

      Attention:
        General Counsel

       

      (e)     
         if
        to the
        Indenture Trustee, to:

       

      [                                       
        ]

      [                                       
        ]

       

      or
        to
        such other address as any party shall have provided to the other parties
        in
        writing. Any notice required to be in writing hereunder shall be deemed given
        if
        such notice is mailed by certified mail, postage prepaid, hand delivered
        or
        faxed to the address of such party as provided above.

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      Section
        13.   Amendments.

       

      (a)  This
        Agreement may be amended from time to time by the parties hereto, without
        notice
        to or the consent of any of the Holders, (i) to cure any ambiguity, (ii)
        to
        cause the provisions herein to conform to or be consistent with or in
        furtherance of the statements made with respect to the Securities, the Trust
        or
        this Agreement in any Offering Document, or to correct or supplement any
        provision herein which may be inconsistent with any other provisions herein,
        (iii) to make any other provisions with respect to matters or questions arising
        under this Agreement or (iv) to add, delete, or amend any provisions to the
        extent necessary or desirable to comply with any requirements imposed by
        the
        Code. No such amendment effected pursuant to clause (iii) of the preceding
        sentence shall adversely affect in any material respect the interests of
        any
        Holder. Prior to entering into any amendment without the consent of Holders
        pursuant to this paragraph, the Securities Administrator may require an Opinion
        of Counsel (at the expense of the party requesting such amendment) to the
        effect
        that such amendment is permitted under this paragraph. Any such amendment
        shall
        be deemed not to adversely affect in any material respect any Holder if the
        Securities Administrator receives (i) written confirmation from the Rating
        Agencies that such amendment will not cause the Rating Agencies to withdraw,
        qualify or reduce the then current rating assigned to the Notes or (ii) an
        Opinion of Counsel to such effect.

       

      (b)  [This
        Agreement may also be amended from time to time by the parties hereto with
        the
        consent of the Holders of not less than 66-2/3% of the Class Principal Amount
        (or Class Notional Amount) of each Class of Notes and the consent of the
        Holder
        of the Ownership Certificate for the purpose of adding any provisions to
        or
        changing in any manner or eliminating any of the provisions of this Agreement
        or
        of modifying in any manner the rights of the Holders; provided,
        however,
        that no
        such amendment may (i) increase or reduce in any manner the amount of, or
        accelerate or delay the timing of, collections of payments on the Collateral
        or
        distributions that shall be required to be made for the benefit of the
        Noteholders or the Certificateholder or (ii) reduce the aforesaid
        percentage of the Class Principal Amount (or Class Notional Amount) of the
        Notes
        of any Class required to consent to any such amendment, in the case of
        clause (i) without the consent of the holders of all the outstanding Notes
        and the Certificate, and in the case of clause (ii) without the consent of
        the
        holders of all the outstanding Notes. For purposes of this paragraph, references
        to “Holder” or “Holders” shall be deemed to include, in the case of Book-Entry
        Notes, the related Note Owners.]

       

      (c)  Promptly
        after the execution of any such amendment, the Securities Administrator shall
        furnish a copy of such amendment to each Holder, the Depositor and to each
        Rating Agency.

       

      (d)  It
        shall
        not be necessary for the consent of Holders under this Section 12 to approve
        the
        particular form of any proposed amendment, but it shall be sufficient if
        such
        consent shall approve the substance thereof. The manner of obtaining such
        consents and of evidencing the authorization of the execution thereof by
        Holders
        shall be subject to such reasonable regulations as the Securities Administrator
        may prescribe.

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      (e)  The
        Owner
        Trustee and the Securities Administrator may, but shall not be obligated
        to,
        enter into any amendment which affects the Owner Trustee’s or the Securities
        Administrator’s rights, duties or immunities under this Agreement or
        otherwise.

       

      Section
        14.   Successors
        and Assigns.
        This
        Agreement may not be assigned by the Securities Administrator unless such
        assignment is previously consented to in writing by the Owner Trustee and
        the
        Depositor, and the Rating Agency Condition in respect thereof has been
        satisfied. An assignment with such consent and satisfaction, if accepted
        by the
        assignee, shall bind the assignee hereunder in the same manner as the Securities
        Administrator is bound hereunder. Notwithstanding the foregoing, this Agreement
        may be assigned by the Securities Administrator without the consent of the
        Owner
        Trustee or the Depositor to a corporation or other organization that is a
        successor (by merger, consolidation or purchase of assets) to the Securities
        Administrator, provided that such successor organization executes and delivers
        to the Issuer, the Owner Trustee and the Depositor an agreement in which
        such
        corporation or other organization agrees to be bound hereunder by the terms
        of
        said assignment in the same manner as the Securities Administrator is bound
        hereunder. Subject to the foregoing, this Agreement shall bind any successors
        or
        assigns of the parties hereto.

       

      Section
        15.   Governing
        Law.
        THIS
        AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
        OF THE
        STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS (OTHER
        THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW), AND THE OBLIGATIONS,
        RIGHTS
        AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
        SUCH LAWS.

       

      Section
        16.   Headings.
        The
        section headings hereof have been inserted for convenience of reference only
        and
        shall not be construed to affect the meaning, construction or effect of this
        Agreement.

       

      Section
        17.   Counterparts.
        This
        Agreement may be executed in counterparts, each of which when so executed
        shall
        together constitute one and the same agreement.

       

      Section
        18.   Severability.
        Any
        provision of this Agreement that is prohibited or unenforceable in any
        jurisdiction shall be ineffective to the extent of such prohibition or
        unenforceability without invalidating the remaining provisions hereof and
        any
        such prohibition or unenforceability in any jurisdiction shall not invalidate
        or
        render unenforceable such provision in any other jurisdiction.

       

      Section
        19.   Not
        Applicable to [     ] in Other Capacities.
        Nothing
        in this Agreement shall affect any obligation [     ] may
        have in any other capacity.

       

      Section
        20.   Limitation
        of Liability of Owner Trustee.
        Notwithstanding anything contained herein to the contrary, this Agreement
        has
        been executed by [     ] not in its individual capacity but
        solely in its capacity as Owner Trustee of the Issuer and in no event shall
        [     ] in its individual capacity or any beneficial owner
        of the Issuer have any liability for the representations, warranties, covenants,
        agreements or other obligations of the Issuer hereunder, as to all of which
        recourse shall be had solely to the assets of the Issuer. For all purposes
        of
        this Agreement, in the performance of any duties or obligations of the Issuer
        hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
        of, the terms and provisions of Articles VI, VII and VIII of the Trust
        Agreement.

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      Section
        21.   Limitation
        of Liability of the Securities Administrator; Indemnification.
        Notwithstanding anything herein to the contrary, this Agreement has been
        signed
        by [     ] not in its individual capacity but solely in its
        capacity as Securities Administrator and in no event shall the Securities
        Administrator in its individual capacity have any liability for the
        representations, warranties, covenants, agreements or other obligations of
        the
        Issuer hereunder, as to all of which recourse shall be had solely to the
        assets
        of the Issuer. The Securities Administrator shall not have any duties or
        obligations other than those expressly set forth in this Agreement, and no
        implied duties on its part shall be read into this Agreement. In acting as
        Securities Administrator, [     ] shall be entitled to the
        same benefits, rights, immunities, protections and rights to indemnification
        as
        are afforded to the Indenture Trustee under Article Six (including without
        limitation Section [6.07]) of the Indenture.

       

      Section
        22.   Benefit
        of Agreement.
        It is
        expressly agreed that in performing its duties under this Agreement, the
        Securities Administrator will act for the benefit of holders of the Securities
        as well as for the benefit of the Issuer, and that such obligations on the
        part
        of the Securities Administrator shall be enforceable at the instance of the
        Indenture Trustee and the Issuer.

       

      Section
        23.   Bankruptcy
        Matters.
        No party
        to this Agreement shall take any action to cause the Depositor or the Issuer
        to
        dissolve in whole or in part or file a voluntary petition or otherwise initiate
        proceedings to have the Depositor or the Issuer adjudicated bankrupt or
        insolvent, or consent to the institution of bankruptcy or insolvency proceedings
        against the Depositor or the Issuer, or file a petition seeking or consenting
        to
        reorganization or relief of the Depositor or the Issuer as debtor under any
        applicable federal or state law relating to bankruptcy, insolvency, or other
        relief for debtors with respect to the Depositor or the Issuer; or seek or
        consent to the appointment of any trustee, receiver, conservator, assignee,
        sequestrator, custodian, liquidator (or other similar official) of the Depositor
        or the Issuer or of all or any substantial part of the properties and assets
        of
        the Depositor or the Issuer, or cause the Issuer to make any general assignment
        for the benefit of creditors of the Depositor or the Issuer, or take any
        action
        in furtherance of any of the above actions. 

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

      IN
        WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
        and
        delivered as of the day and year first above written.

       

      
        	 	 	 
	 	TBW
                MORTGAGE TRUST
                [     ]
	 
 	 
 	 
 
	 	By:  	[                                    
                ],
	 	
                

                not
                  in its individual capacity

                but
                  solely as Owner Trustee

              

      
        
          	 	 	 
	 
 	 
 	 
 
	 	By:  	 
	 	
                  

                  Name: [                  
                     ]

                  Title:  
                    [                  
                     ]

                
	 	 
	 	[                      
                  ],
not in its individual capacity but solely as Securities
                  Administrator

        

        
          	 	 	 
	 
 	 
 	 
 
	 	By:  	 
	 	
                  

                  Name: [                  
                     ]

                  Title:  
                    [                  
                     ]

                

        

      

      
        	 	 	 
	 	
                [                      
                  ],
not in its individual capacity but solely as
                  Owner Trustee

              
	 
 	 
 	 
 
	 	By:  	 
	 	
                

                Name: [                  
                   ]

                Title:  
                  [                  
                   ]

              

      

      
        	 	 	 
	 	
                TBALT
                  CORP.,

                as
                  Depositor

              
	 
 	 
 	 
 
	 	By:  	 
	 	
                

                Name: [                  
                   ]

                Title:  
                  [                  
                   ]

              

      
         

         

        
          
             

          

          
             

            
              

            

          

          
             

          

        

         

         

        
          	 	 	 
	 	[                      
                  ],
not in its individual capacity but solely as Indenture
                  Trustee
	 
 	 
 	 
 
	 	By:  	 
	 	
                  

                  Name: [                  
                     ]

                  Title:  
                    [                  
                     ]Exhibit 10.16

                              EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated October 18, 2006

By and Between:

      COATES INTERNATIONAL, LTD., a Delaware corporation (the "Company" or the
      "Employer"),

                                       AND

      MARK D. GOLDSMITH, an individual having an address at 34 Luchon Street
      Lido Beach, New York 11561 ("Executive")

WHEREAS, the Company desires to hire the Executive and employ him in the
position of Chief Executive Officer and Vice President; and

WHEREAS, Executive has agreed to serve as the Company's Chief Executive Officer
and Vice President, pursuant to the terms and conditions set forth herein.

NOW THEREFORE THIS AGREEMENT WITNESSETH THAT in consideration of the premises
and the mutual covenants, agreements, representations and warranties contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Executive and the Company hereby agree as
follows:

                                    ARTICLE 1

                                   EMPLOYMENT

1.1 Employer hereby hires the Executive as the Chief Executive Officer and Vice
President of the Company and Executive hereby affirms and accepts such positions
and employment by Employer for the Term (as defined in Article 3 below), upon
the terms and conditions set forth herein.

1.2 The Employer shall utilize its best efforts to cause its Board of Directors
to appoint the Executive as a member of the Employer's Board of Directors
throughout the Term.

                                    ARTICLE 2

                                     DUTIES

During the Term, Executive shall serve Employer faithfully, diligently and to
the best of his ability, under the direction and supervision of the Board of
Directors of Employer ("Board of Directors") and shall use his best efforts to
promote the interests and goodwill of Employer and any affiliates, successors,
assigns, parent corporations, subsidiaries, and/or future purchasers of
Employer. Executive shall render such services during the Term at Employer's
principal place of business or at such other place of business as may be
determined by the Board of Directors, as Employer may from time to time
reasonably require of him, and shall devote all of his business time to the
performance thereof. Executive shall have those duties and powers as generally
pertain to each of the offices of which he holds, as the case may be, subject to
the control of the Board of Directors. Employer and Executive also agree that
Executive shall serve as a member of the Employer's Board of Directors during
the Term.

<PAGE>

                                    ARTICLE 3

                                      TERM

The term of this Agreement (the "Term") shall commence on the date hereof (the
"Effective Date"), and continue thereafter for a term of three (3) years, as may
be extended or earlier terminated pursuant to the terms and conditions of this
Agreement. The Term is renewable upon the agreement of the parties hereto.

                                    ARTICLE 4

                                  COMPENSATION

4.1 Salary and Equity Compensation

      (a) In consideration of Executive's services to Employer, Employer shall
pay to Executive an annual salary (the "Salary") of Two Hundred Thousand Dollars
($200,000.00), payable in equal installments at the end of each regular payroll
accounting period as established by Employer, or in such other installments upon
which the parties hereto shall mutually agree, and in accordance with Employer's
usual payroll procedures, but no less frequently than monthly. Notwithstanding
the above, payment of the Salary will be deferred until the earlier to occur of:
(I) the closing by the Company of an equity investment of at least $10,000,000;
or (II) December 31, 2006.

      (b) In addition to the Salary, Employer shall issue to Executive a Stock
Option to purchase 1,500,000 shares of the Employer's common stock, at an
exercise price equal to Employer's common stock fair market value as of the date
of issuance, as determined by the Board (the "Stock Option"). The Stock Option
shall vest (i.e., become exercisable) in three equal installments, as follows:
One third of the Stock Options shall vest on the Effective Date; an additional
third of the Stock Option shall vest on each of the first and second
anniversaries of the Effective Date. Executive must be continuously a full-time
employee of the Company through the time he exercises part or all of the Stock
Option, except, however, in the event this Agreement is terminated by the
Executive for a Good Reason, as defined in Article 10.1 and 10.2 below, or by
the Employer without Cause, as defined in Article 10.3 below, in which cases the
Stock Option shall immediately and fully vest upon such termination provided
further that the events surrounding any such termination have not been the
subject of any claim, proceeding or lawsuit by either the Executive or the
Company in which further case the Stock Option shall only vest upon final
adjudication, determining that such termination was a valid termination by the
Executive for Good Reason or by the Employer without Cause pursuant to the
applicable above referenced articles of this Agreement. The Stock Option shall
be deemed a non-qualified stock option (i.e., not an ISO). The Stock Option will
be issued out of the Employer's stock incentive plan, and subject to such
incentive plan.

                                       2
<PAGE>

      (c) Executive hereby acknowledges that the Stock Option and the shares
issuable upon the exercise thereof shall be "restricted securities" as such term
is defined under Rule 144, unless and until an effective registration covering
these shares takes place, promulgated under the Securities Act of 1933, as
amended (the "1933 Act"); that the Executive hereby represents that he shall
accept such compensation and has no present intent to distribute or transfer
such securities; that such securities shall bear the appropriate restrictive
legend providing that they may not be transferred except pursuant to the
registration requirements of the 1933 Act or pursuant to exemptions therefrom,
and; the Executive further acknowledges that he may be required to hold such
securities for an indeterminable amount of time.

Benefits

4.2 Upon the earlier to occur of: (I) the closing by the Company of an equity
investment of at least $10,000,000; or (II) December 31, 2006, and thereafter
during the Term, Executive shall be entitled to participate in all medical and
other executive benefit plans, including vacation, sick leave, retirement
accounts and other executive benefits provided by Employer to any of the other
senior officers of the Employer on terms and conditions no less favorable than
those offered to such senior officers. Such participation shall be subject to
the terms of the applicable plan documents and Employer's generally applicable
policies.

4.3 Expense Reimbursement

Employer shall reimburse Executive for reasonable and necessary expenses
incurred by him on behalf of Employer in the performance of his duties hereunder
during the Term, including any and all travel and entertainment expenses related
to the Employer's business in accordance with Employer's then customary
policies, provided that such expenses are adequately documented.

4.4 Bonus

In addition to the compensation payable under Section 4.1, Executive shall be
entitled to receive during the Term an annual bonus, the amount of which shall
be determined by the Board of Directors ("Bonus"). Each year's Bonus shall be
paid to the Executive within 110 days of the Employer's calendar year end.

4.5 Other Compensation

Employer shall provide Executive with a leased automobile for his exclusive use
throughout the Term, including costs for gasoline, maintenance and comprehensive
insurance including an "umbrella" policy.

                                    ARTICLE 5

                                OTHER EMPLOYMENT

During the Term, Executive shall devote all of his business and professional
time and effort, attention, knowledge, and skill to the management, supervision
and direction of Employer's business and affairs as Executive's highest
professional priority. Employer shall be entitled to all benefits, profits or
other remuneration arising from or incidental to all work, services and advice
performed or provided by Executive. Nothing in this Agreement shall preclude
Executive from:

                                       3
<PAGE>

      (a)   serving as a director or member of a committee of any organization
            or corporation involving no conflict of interest with the interests
            of Employer, provided that Executive must obtain the prior written
            approval of the independent members of the Board;

      (b)   serving as a consultant in his area of expertise (in areas other
            than in connection with the business of Employer), to government,
            industrial, and academic panels provided that only de minimis time
            shall be devoted thereto and Executive must obtain the prior written
            approval of the independent members of the Board of Employer and
            where it does not conflict with the interests of Employer, provided
            that such written consent shall not be unreasonably withheld,
            delayed or conditioned; and

      (c)   managing his personal investments or engaging in any other
            non-competing business; provided that such activities do not
            materially interfere with the regular performance of his duties and
            responsibilities under this Agreement.

                                    ARTICLE 6

                       CONFIDENTIAL INFORMATION/INVENTIONS

Confidential Information

6.1 Executive shall not, in any manner, for any reasons, either directly or
indirectly, divulge or communicate to any person, firm or corporation, any
confidential information concerning any matters not generally known in the
internal combustion engine industry (the "Engine Industry") or otherwise made
public by Employer which affects or relates to Employer's business, finances,
marketing and/or operations, research, development, inventions, products,
designs, plans, procedures, or other data (collectively, "Confidential
Information") except in the ordinary course of business or as required by
applicable law. Without regard to whether any item of Confidential Information
is deemed or considered confidential, material, or important, the parties hereto
stipulate that as between them, to the extent such item is not generally known
in the Engine Industry, such item is important, material, and confidential and
affects the successful conduct of Employer's business and goodwill, and that any
breach of the terms of this Section 6.1 shall be a material and incurable breach
of this Agreement. Confidential Information shall not include: information in
the public domain other than because of a breach of this Agreement.

Documents

6.2 Executive further agrees that all documents and materials furnished to
Executive by Employer and relating to Employer's business or prospective
business are and shall remain the exclusive property of Employer. Executive
shall deliver all such documents and materials, and all copies thereof and
extracts therefrom, to Employer upon demand therefor and in any event upon
expiration or earlier termination of this Agreement.

Inventions and Intellectual Property

6.3 All ideas, inventions, and other developments or improvements conceived or
reduced to practice by Executive, alone or with others, during the Term of this
Agreement, whether or not during working hours, that are within the scope of the
business of Employer or that relate to or result from any of Employer's work or
projects or the services provided by Executive to Employer pursuant to this
Agreement, shall be the exclusive property of Employer. Executive agrees to
assist Employer, at Employer's expense, to obtain patents and copyrights on any
such ideas, inventions, writings, and other developments, and agrees to execute
all documents necessary to obtain such patents and copyrights in the name of
Employer.

                                       4
<PAGE>

Disclosure

6.4 During the Term, Executive will promptly disclose to the Board of Directors
full information concerning any interest, direct or indirect, of Executive (as
owner, shareholder, partner, lender or other investor, director, officer,
executive, consultant or otherwise) or any member of his immediate family in any
business that is reasonably known to Executive to purchase or otherwise obtain
services or products from, or to sell or otherwise provide services or products
to, Employer or any of their suppliers or customers.

                                    ARTICLE 7

                             COVENANT NOT TO COMPETE

7.1 No Competitive Activities. Except as expressly permitted in Article 5 above,
during the Term, Executive shall not engage in any activates that are
competitive with the actual or prospective business of the Company, including
without limitation: (a) engaging directly or indirectly in any business
substantially similar to any business or activity engaged in (or proposed to be
engaged in) by Employer, including and not limited to business that relates to
internal combustion engines; (b) engaging directly or indirectly in any business
or activity competitive with any business or activity engaged in (or proposed to
be engaged in) by Employer; (c) soliciting or taking away any executive,
employee, agent, representative, contractor, supplier, vendor, customer,
franchisee, lender or investor of Employer, or attempting to so solicit or take
away; (d) interfering with any contractual or other relationship between
Employer and any executive, employee, agent, representative, contractor,
supplier, vendor, customer, franchisee, lender or investor; or (e) using, for
the benefit of any person or entity other than Employer any Confidential
Information of Employer.

7.2 The foregoing covenant prohibiting competitive activities shall survive the
termination of this Agreement, and shall extend, and shall remain enforceable
against Executive, for the period of two (2) years following the date this
Agreement is terminated. In addition, during the two-year period following such
expiration or earlier termination, neither Executive nor Employer shall make or
permit the making of any negative statement of any kind concerning Employer or
their affiliates, or their directors, officers or agents or Executive.

                                    ARTICLE 8

                                    SURVIVAL

Except as otherwise provided, Executive agrees that the provisions of Articles
6, 7, 8 and 9 shall survive expiration or earlier termination of this Agreement
for any reasons whether voluntary or involuntary, with or without Cause, and
shall remain in full force and effect thereafter.

                                       5
<PAGE>

                                    ARTICLE 9

                                INJUNCTIVE RELIEF

Executive acknowledges and agrees that the covenants and obligations of
Executive set forth in Articles 6 and 7 with respect to non-competition,
non-solicitation, confidentiality and Employer's property relate to special,
unique and extraordinary matters and that a violation of any of the terms of
such covenants and obligations will cause Employer irreparable injury for which
adequate remedies are not available at law. Therefore, Executive agrees thatif
Executive breaches this Agreement than Employer shall be entitled to apply for
an injunction, restraining order or such other equitable relief as a court of
competent jurisdiction as limited by Section 13.3 may deem necessary or
appropriate to restrain Executive from committing any violation of the covenants
and obligations referred to in this Article 9. Executive shall have the right to
appeal from such injunction or order and to seek reconsideration. These
injunctive remedies are cumulative and in addition to any other rights and
remedies Employer may have at law or in equity.

                                   ARTICLE 10

                                   TERMINATION

Termination by Executive

10.1 Executive may terminate this Agreement for Good Reason at any time upon 30
days' written notice to Employer, provided the Good Reason has not been cured
within such period of time. In addition, Executive may terminate this agreement
anytime, upon providing a 60 days' written notice.

Good Reason

10.2 In this Agreement, "Good Reason" means, without Executive's prior written
consent, the occurrence of any of the following events, unless Employer shall
have fully cured all grounds for such termination within thirty (30) days after
Executive gives notice thereof:

      (i) any reduction in his then-current Salary or benefits, other than in
connection with a percentage pay cut that is applicable to all senior executives
and which is the same percentage for all such persons or in connection with a
general reduction in benefits;

      (ii) any material failure to timely grant, or timely honor, the Stock
Option set forth in Article 4.1;

      (iii) failure to pay or provide required expenses;

      (iv) Any diminution in authority or responsibility to a non-executive
position;

      The written notice given for Good Reason by Executive to Employer shall
      specify in reasonable detail the cause for termination, and such
      termination notice shall not be effective until thirty (30) days after
      Employer's receipt of such notice, during which time Employer shall have
      the right to respond to Executive's notice and cure the breach or other
      event giving rise to the termination.

                                       6
<PAGE>

Termination by Employer

10.3 Employer may terminate its employment of Executive under this Agreement
with or without Cause at any time by written notice to Executive. For purposes
of this Agreement, the term Cause for termination by Employer shall be (a) a
conviction of or plea of guilty or nolo contendere by Executive to a felony, or
any crime involving fraud, securities laws violations, embezzlement or moral
turpitude; (b) the refusal by Executive to perform his material duties and
obligations hereunder or to follow the proper instructions of the Board of
Directors; (c) Executive's willful or intentional misconduct in the performance
of his duties and obligations; (d) conduct that is known or that should have
been known by Executive to be detrimental to the best interests of the Company,
as determined by the independent members of the board; (e) if Executive or any
member of his family makes any personal profit arising out of or in connection
with a transaction to which Employer is a party or with which it is associated
without making disclosure to and obtaining the prior written consent of the
independent members of the Board; or (f) the entry by the Securities and
Exchange Commission or a self-regulatory organization of a consent decree
relating to a securities law violation by Executive. The written notice given
hereunder by Employer to Executive shall specify that it is without Cause or if
it is with Cause shall specify in reasonable detail the cause for termination.
For purposes of this Agreement, "family" shall mean "immediate family" as
defined in the rules of the Securities and Exchange Commission. In the case of a
termination for the causes described in (a), (d) and (e) above, such termination
shall be effective upon receipt of the written notice. In the case of the causes
described in (b) and (c) above, such termination notice shall not be effective
until thirty (30) days after Executive's receipt of such notice, during which
time Executive shall have the right to respond to Employer's notice and cure (if
curable) the breach or other event giving rise to the termination. In the case
of termination without Cause, such termination notice shall not be effective
until thirty (30) days after Executive's receipt of such notice.

Severance

10.4 Upon a termination of this Agreement with Good Reason by Executive or
without cause by Employer, Employer shall pay to Executive all accrued and
unpaid compensation and expense reimbursement, as of the date of such
termination and the "Severance Payment." The Severance Payment shall be payable
in a lump sum, subject to Employer's statutory and customary withholdings. The
Severance Payment shall be paid by Employer within thirty (30) business days of
the expiration of any applicable cure period. The "Severance Payment" shall
equal the total amount of the Salary payable to Executive under Section 4.1 of
this Agreement for a period of one (1) year.

Termination Upon Death

10.5 If Executive dies during the Term , this Agreement shall terminate, except
that Executive's legal representatives shall be entitled to receive any earned
but unpaid compensation or expense reimbursement due hereunder through the date
of death.

Termination Upon Disability

10.6 If, during the Term , Executive suffers and continues to suffer from a
"Disability" (as defined below), then Employer may terminate this Agreement by
delivering to Executive ten (10) calendar days' prior written notice of
termination based on such Disability, setting forth with specificity the nature
of such Disability and the determination of Disability by Employer. For purposes
hereof, "Disability" means "permanent and total disability" as defined in
Section 22(e)(3) of the Internal Revenue Code. Upon any such termination for
Disability, Executive shall be entitled to receive any earned but unpaid
compensation or expense reimbursement due hereunder through the date of
termination and the Severance Payment.

                                       7
<PAGE>

                                   ARTICLE 11

                  PERSONNEL POLICIES, CONDITIONS, AND BENEFITS

      Except as otherwise provided herein, Executive's employment shall be
subject to the personnel policies and benefit plans which apply generally to
Employer's Executives as the same may be interpreted, adopted, revised or
deleted from time to time, during the Term of this Agreement, by Employer in its
sole discretion. During the Term hereof, Executive shall be entitled to vacation
during each year of the Term at the rate of four (4) weeks per year. Within 30
days after the end of each year of the Term, Employer shall elect to (a) carry
over and allow Executive the right to use any accrued and unused vacation of
Executive, or (ii) pay Executive for such vacation in a lump sum in accordance
with its standard payroll practices. Executive shall take such vacation at a
time approved in advance by the Board of Directors of Employer, which approval
will not be unreasonably withheld but will take into account the staffing
requirements of Employer and the need for the timely performance of Executive's
responsibilities.

                                   ARTICLE 12

                           BENEFICIARIES OF AGREEMENT

This Agreement shall inure to the benefit of the parties hereto, their
respective heirs, successors and permitted assigns.

                                   ARTICLE 13

                               GENERAL PROVISIONS

No Waiver

13.1 No failure by either party to declare a default based on any breach by the
other party of any provisions of this Agreement, nor failure of such party to
act quickly with regard thereto, shall be considered to be a waiver of any such
breach, or of any future breach.

Modification

13.2 No waiver or modification of this Agreement or of any covenant, condition,
or limitation herein contained shall be valid unless in writing and duly
executed by the parties to be charged therewith.

Submission to Jurisdiction; Consent to Service of Process.

                                       8
<PAGE>

13.3 Submission to Jurisdiction; Consent to Service of Process. This Agreement
shall be governed in all respects, by the laws of the State of New York,
including validity, interpretation and effect, without regard to principles of
conflicts of law. The parties hereto irrevocably and unconditionally consent to
submit to the exclusive jurisdiction of the state and federal courts in the
State of New Jersey for any lawsuits, actions or other proceedings arising out
of or related to this Agreement and agree not to commence any lawsuit, action or
other proceeding except in such courts. The parties hereto further agree that
service of process, summons, notice or document by mail to their addresses set
forth above shall be effective service of process for any lawsuit, action or
other proceeding brought against them in any such court. The parties hereto
irrevocably and unconditionally waive any objection to the laying of venue of
any lawsuit, action or other proceeding arising out of or related to this
Agreement in such courts, and hereby further irrevocably and unconditionally
waive and agree not to plead or claim in any such court that any such lawsuit,
action or proceeding brought in any such court has been brought in an
inconvenient forum.

Entire Agreement

13.4 This Agreement embodies the whole agreement between the parties hereto
regarding the subject matter hereof and there are no inducements, promises,
terms, conditions, or obligations made or entered into by Employer or Executive
other than contained herein.

Severability

13.5 In the event a court of competent jurisdiction determines that a term or
provisions contained in this Agreement is overly broad in scope, time
geographical location or otherwise, the parties hereto authorize such Court to
modify and reduce any such term or provision deemed overly broad in scope, time,
geographic location or otherwise so that it complies with then applicable law.

Headings

13.6 The headings contained herein are for the convenience of reference and are
not to be used in interpreting this Agreement.

Independent Legal Advice

13.7 Employer and Executive each acknowledge that he or it has obtained legal
advice concerning this Agreement.

No Assignment

13.8 No party may pledge or encumber its respective interests in this Agreement
nor assign any of its rights or duties under this Agreement without the prior
written consent of the other party.

      IN WITNESS WHEREOF the parties have executed this Agreement as of the day
and year first above written.

                                        --------------------------------
COATES INTERNATIONAL, LTD.              Mark D. Goldsmith

By: __________________________

Name: _______________________

Title: ________________________

                                       9

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