Document:

Exhibit 10.9
                                ESCROW AGREEMENT

      AGREEMENT dated this __ day of May, 2004, among Coates Motorcycle Company,
Ltd., a Delaware corporation,  having an address at 2100 Highway #34 & Ridgewood
Road,  Wall  Township,  New Jersey 07719 (the  "Company"),  Baird Patrick & Co.,
Inc.,  having an address at 20  Exchange  Place,  New York,  New York 10005 (the
"Underwriter")  and HSBC  Bank  USA,  a banking  corporation  and trust  company
organized and existing  under the laws of the State of New York,  having offices
at 452 Fifth  Avenue,  New York,  New York 10018,  as escrow  agent (the "Escrow
Agent").

                              W I T N E S S E T H

      WHEREAS,  the  Company  has  prepared  and filed a Form SB-2  registration
statement and amendments thereto  (Commission File No. 333-109119) with the U.S.
Securities and Exchange  Commission  (the "SEC") (such  registration  statement,
together with any amendments,  supplements  and exhibits  thereto is hereinafter
referred to collectively as the "Registration Statement") in connection with the
planned  initial  public  offering  of a minimum  550,000  "Units" and a maximum
2,000,000  Units,  at the  offering  price of $10.25  per Unit,  for sale to the
public  (the  "Investors"),  with each Unit being  comprised  of 2 shares of the
Company's common stock and 1 common stock purchase warrant; and

      WHEREAS,  the Company  desires to establish a non-interest  bearing escrow
account  with the Escrow  Agent into which the  Underwriter  shall  deposit  the
Investors' checks or wire transfers for the payment of money made payable to the
order of the Company's Escrow Account (as defined herein),  and the Escrow Agent
is willing to accept said  checks,  wire  transfers  for the payment of money in
accordance with the terms hereinafter set forth; and

      WHEREAS,  the Company  represents and warrants to the Escrow Agent that it
has not stated to any  individual or entity that the Escrow  Agent's duties will
include anything other than those duties stated in this Agreement; and

<PAGE>

      WHEREAS,  the  Company  warrants  to the  Escrow  Agent that a copy of the
Registration  Statement  and  amendments  thereto  as well  as the  Subscription
Agreements  to be entered  into between the Company and the  Investors,  and all
other  documents such party has delivered to prospective  Investors that include
the Escrow Agent's name and duties, have been attached hereto as Schedule 1;

      NOW, THEREFORE, IT IS AGREED AS FOLLOWS:

1.    Delivery Of Escrow Funds

      (a)(i) The  Underwriter  shall deliver to the Escrow Agent checks received
from each  prospective  Investor  made  payable  to the order of "  ____________
Escrow  Account." The checks shall be deposited into an account at HSBC Bank USA
entitled "___________________ Escrow Account"(the "Escrow Account"), or

      (ii) The Escrow  Agent  shall  receive  money  directly  from  prospective
Investors by means of check or wire transfer.  If by wire transfer,  money shall
be wired to HSBC Bank USA,  452 Fifth  Avenue,  New York,  New York  10018,  ABA
Number  021-001-088,  HSBC  Bank USA as the  Escrow  Agent  for .,  Account  No.
___________. All such money shall be deposited into the Escrow Account.

      (b) The collected  funds deposited into the Escrow Account are hereinafter
referred to as the "Escrow Funds".

      (c) ______  The  Escrow  Agent  shall  have no duty or  responsibility  to
enforce the collection or demand payment of any funds  deposited into the Escrow
Account.  If, for any reason,  any check deposited into the Escrow Account shall
be returned unpaid to the Escrow Agent,  the sole duty of the Escrow Agent shall
be to return the check to the Company.

      (d) Promptly  after checks and wire  transfers are delivered to the Escrow
Agent from the Underwriter,  the Underwriter shall provide the Escrow Agent with
the  Investor's  original  Subscription  Agreement,   which  shall  include  the
Investor's  name,  address and other  applicable  information  (social  security
number or employer  identification  number,  if  appropriate).  The Escrow Agent
shall hold the  Subscription  Agreements  pending release of the Escrow Funds as
provided in Section 2 below.

<PAGE>

2.    Release  of Escrow  Funds.  The Escrow  Funds  shall be paid by the Escrow
Agent in accordance with the following:

      (a)   In the event that the Company and the Underwriter  advise the Escrow
Agent  in  writing  that  the  public  offering  described  in the  Registration
Statement has been  withdrawn,  the Escrow Agent shall promptly return the funds
paid  by  each  prospective  Investor,  to said  prospective  Investor,  without
interest.

      (b)   If prior to 3:00 P.M. (local New York City time) on the day, 90 days
following the effective date of the  Registration  Statement  (the  "Termination
Date"), the Escrow Agent receives written  notification,  in the form of Exhibit
A,  attached  hereto and made a part  hereof,  and signed by the Company and the
Underwriter,  stating  that the  Termination  Date has been  extended  to a date
stated therein (the "Final Termination Date") the date shall be so extended.

      (c)   Provided  that the Escrow Agent does not receive a notice  stated in
accordance  with  Section  2(a)  above and there is at least  $5,637,500  in the
Escrow Account on or prior to the Termination Date or the Final Termination Date
(if the Escrow Agent has, prior to the  Termination  Date,  received a notice in
accordance with Section 2(b) hereof), the Escrow Agent shall promptly notify the
Company  and the  Underwriter  of such fact in writing.  The Escrow  Agent shall
promptly  disburse the Escrow Funds by wire transfer in accordance  with written
instructions  signed by the Company and the  Underwriter  and  delivered  by the
Company and the  Underwriter  to the Escrow Agent.  After any such  disbursement
that is effected prior to the Termination Date or the Final Termination Date (if
the  Escrow  Agent  has,  prior to the  Termination  Date,  received a notice in
accordance  with Section 2(b)  hereof),  deposits may continue to be made to the
Escrow  Account in  accordance  with Section 1 hereof and the Escrow Agent shall
make  additional  disbursements  of the  Escrow  Funds in  accordance  with this
Section 2(c).

      (d)   If by 3:00 P.M. (local New York City time) on the  Termination  Date
or the Final Termination Date (if the Escrow Agent has, prior to the Termination
Date,  received a notice in  accordance  with Section 2(b)  hereof),  the Escrow
Agent has not received written instructions from the Company and the Underwriter
in  accordance  with Section  2(c)  hereof,  or there is a balance in the Escrow
Account of less than  $5,637,500,  the Escrow  Agent shall  promptly  return the
Escrow Funds.

<PAGE>

      (e)   The Escrow Agent shall not be required to pay any uncollected  funds
or any funds which are not available for withdrawal.

3.    Acceptance by The Escrow Agent. The Escrow Agent hereby accepts and agrees
to perform its obligations hereunder, provided that:

      (a)   The Escrow Agent may act in reliance upon any signature  believed by
it to be genuine,  and may assume that any person who has been designated by the
Company  to give  any  written  instructions,  notice  or  receipt,  or make any
statements in connection with the provisions  hereof has been duly authorized to
do  so.  The  Escrow  Agent  shall  have  no  duty  to  make  inquiry  as to the
genuineness,  accuracy or  validity of any  statements  or  instructions  or any
signatures on statements or instructions.  The names and true signatures of each
individual authorized to act on behalf of the Company and are stated in Schedule
A, which is attached hereto and made a part hereof.

      (b)   The Escrow Agent may act relative  hereto in reliance upon advice of
counsel in deference to any matter  connected  herewith.  The Escrow Agent shall
not be liable for any mistake of fact or error of  judgement  or law, or for any
acts or omissions of any kind, unless caused by its willful  misconduct or gross
negligence.

      (c)   The Company  agrees to indemnify and hold the Escrow Agent  harmless
from and against any and all claims, losses, costs, liabilities, damages, suits,
demands,  judgements or actual out-of-pocket expenses (including but not limited
to reasonable  attorney's  fees) claimed against or incurred by the Escrow Agent
arising out of related, directly or indirectly, to this Agreement, unless caused
by the Escrow Agent's willful misconduct or gross negligence.

      (d)   In the event  that the Escrow  Agent  shall be  uncertain  as to its
duties or rights  hereunder,  the Escrow  Agent shall be entitled to (i) refrain
from  taking any action or other than to keep  safely the Escrow  Funds until it
shall be  directed  otherwise  by a court  of  competent  jurisdiction,  or (ii)
deliver the Escrow Funds to a court of competent jurisdiction.

      (e)   The Escrow Agent shall have no duty, responsibility or obligation to
interpret or enforce the terms of any  agreement  other than the Escrow  Agent's
obligations  hereunder,  and the Escrow  Agent  shall not be  required to make a
request that any monies be delivered to the Escrow Account, it being agreed that
the sole duties and  responsibilities of the Escrow Agent shall be (i) to accept
checks and wire  transfers  delivered to the Escrow Agent for the Escrow Account
and deposit  said checks and wire  transfers  into the Escrow  Account,  (ii) to
notify  the  Underwriter  and the  Company  of its  receipt  of funds,  (iii) to
disburse or refrain from  disbursing the Escrow Funds in accordance with Section
2 hereof,  provided  that the  checks  received  by the  Escrow  Agent have been
collected and are available for withdrawal.

<PAGE>

4.    Resignation and Termination of the Escrow Agent

      (a)   Resignation.  The  Escrow  Agent may resign at any time by giving 30
days' written  notice of such  resignation to the  Underwriter  and the Company.
Upon  providing such notice,  the Escrow Agent shall have no further  obligation
hereunder  except to hold the Escrow  Funds which it has received as of the date
on which it provided the notice of resignation as depositary. In such event, the
Escrow Agent shall not take any action until the Underwriter and the Company has
designated a banking  corporation,  trust  company,  attorney or other person as
successor  (the  "Successor  Escrow  Agent").   Upon  receipt  of  such  written
instructions  signed by the Underwriter and the Company and the Placement Agent,
the Escrow Agent shall promptly deliver the Escrow Funds, net of any outstanding
charges,  to such  successor and shall  thereafter  have no further  obligations
hereunder.  If such  instructions  are not received within 30 days following the
effective date of such resignation, then the Escrow Agent may deposit the Escrow
Funds and any other amounts held by it pursuant to this  Agreement  with a clerk
of a court of  competent  jurisdiction  pending the  appointment  of a Successor
Escrow  Agent.  In either case  provided for in this Section 4, the Escrow Agent
shall be relieved of all further  obligations  and released  from all  liability
thereafter  arising  with  respect  to the Escrow  Funds and all  income  earned
thereon.

      (b)   Termination. The Company may terminate the appointment of the Escrow
Agent  hereunder  upon  written  notice  specifying  the date  upon  which  such
termination  shall take effect.  In the event of such  termination,  the Company
shall,  within 30 days of such notice,  appoint a Successor Escrow Agent and the
Escrow Agent shall, upon receipt of written  instructions  signed by the Company
and the Underwriter  turn over to such Successor  Escrow Agent all of the Escrow
Funds;  provided,  however,  that if the  Company  fails to appoint a  Successor
Escrow Agent within such 30-day period,  such  termination  notice shall be null
and  void  and  the  Escrow  Agent  shall  continue  to be  bound  by all of the
provisions hereof.  Upon receipt of the Escrow Funds, the Successor Escrow Agent
shall  become  the  Escrow  Agent  hereunder  and  shall  be bound by all of the
provisions hereof and the original Escrow Agent shall be relieved of all further
obligations and released from all liability  thereafter  arising with respect to
the Escrow Funds.

<PAGE>

5.    Notices. All notices,  requests, demands and other communications required
or permitted to be given hereunder shall be in writing and shall be deemed to be
duly given when  received by hand  delivery,  by  facsimile  (when  confirmed by
return  facsimile)  followed  by  first-class  mail,  by  nationally  recognized
overnight  courier service or by prepaid  registered or certified  mail,  return
receipt requested to the addresses set forth below:

                  If to the Company:

                  Coates Motorcycle Company, Ltd.
                  c/o Coates International, Ltd.
                  2100 Highway #34 & Ridgewood Road
                  Wall Township, New Jersey 07719
                  Attention:  George J. Coates, Chief Executive Officer

                  If to the Placement Agent:

                  Baird Patrick & Co., Inc.
                  20 Exchange Place
                  New York, New York 10005
                  Attention:  Mr. Andrew Dorman
                              Mr. Kenneth Greenbaum

                  If to the Escrow Agent:
                  ----------------------

                           HSBC Bank USA

                           452 Fifth Avenue
                           New York, New York 10018
                           Attention: Issuer Services

6.    General

      (a)   This  Agreement  shall be governed by and  construed and enforced in
accordance  with the laws of the State of New York applicable to agreements made
and to be entirely performed within such State.

      (b)   This  Agreement,  together with the Exhibits and  Schedules  annexed
hereto,  sets forth the entire  agreement  and  understanding  of the parties in
respect to the matters  contained  herein and supersedes  all prior  agreements,
arrangements and understandings relating thereto

      (c)   All of the terms and conditions of this  Agreement  shall be binding
upon, and inure to the benefits of and be enforceable by, the parties hereto.

<PAGE>

      (d)   This Agreement may be amended, modified, superseded or canceled, and
any  of the  terms  or  conditions  hereof  may be  waived,  only  by a  written
instrument  executed  by each party  hereto or, in the case of a waiver,  by the
party  waiving  compliance.  The  failure  of any  party at any time or times to
require  performance of any provision hereof shall in no manner affect its right
at a later time to enforce the same. No waiver of any party of any condition, or
of the breach of any term  contained  in this  Agreement,  whether by conduct or
otherwise,  in any one or more instance  shall be deemed to be or construed as a
further or continuing  waiver of any such condition or breach or a waiver of any
other condition or of the breach of any other term of this  Agreement.  No party
may assign any rights,  duties or obligations hereunder unless all other parties
have given their prior written consent.

      (e)   Of any provision included in this Agreement shall be determined by a
court of competent  jurisdiction  to be invalid or  unenforceable,  it shall not
affect the validity of the remaining provisions.

      (f)   This  Agreement  may  be  executed  in  several  counterparts  or by
separate  instruments  and  all  of  such  counterparts  and  instruments  shall
constitute one agreement, binding on all of the parties hereto.

7.    Fees. At the time the Escrow Account is opened,  the Company shall pay the
Escrow Agent the fees stated in Exhibit B, attached hereto.

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date
first set forth above.

COATES MOTORCYCLE COMPANY, LTD.

By:
    ---------------------------------------------
       George J. Coates
       Chief Executive Officer

UNDERWRITER:
BAIRD PATRICK & CO., INC.

By:
    ---------------------------------------------
       Name:
       Title:

HSBC BANK USA, as Escrow Agent

By:
    ---------------------------------------------
       Name:
       Title:

<PAGE>

                                    Exhibit A

________ __, 200_

HSBC BANK USA
452 Fifth Avenue
New York, New York 10018
Attn: Issuer Services

Dear Sirs:

      In  accordance  with the  terms of  Section  2(b) of that  certain  Escrow
Agreement    dated    ______________    ,   200_    by   and    among   .   (the
"Company"),____________  (the "Placement Agent") and HSBC Bank, USA (the "Escrow
Agent"), the Company and the Placement Agent hereby notify the Escrow Agent that
the Final Termination Date shall be ___________ __, 200_.

COATES MOTORCYCLE COMPANY, LTD.

By:
    ---------------------------------------------
       George J. Coates
       Chief Executive Officer

BAIRD PATRICK & CO., INC.

By:
    ---------------------------------------------
       Name:
       Title:

<PAGE>

                                   Schedule A

The Escrow Agent is authorized to accept  instructions signed or believed by the
Escrow  Agent to be signed  by the  following  on  behalf  of COATES  MOTORCYCLE
COMPANY, LTD.

------------------------------
George J. Coates                    True Signature

------------------------------
Name                                True Signature

The Escrow Agent is authorized to accept  instructions signed or believed by the
Escrow  Agent to be signed by the  following  on behalf of BAIRD  PATRICK & CO.,
INC.

------------------------------      --------------------------------------------
Name                                True Signature

------------------------------      --------------------------------------------
Name                                True Signature

<PAGE>

                                   Exhibit B

                                     Fees:Exhibit 10.10

                                PROMISSORY NOTE

$100,000.00                                        October 23, 2003
                                                   Wall Township, New Jersey

      FOR  VALUE  RECEIVED,   COATES  MOTORCYCLE   COMPANY,   LTD.,  a  Delaware
corporation,  having  its  principal  offices  located  at  2100  Highway  #34 &
Ridgewood Road, Wall Township,  New Jersey 07719 (hereinafter sometimes referred
to as the  "Maker")  promises to pay to the order of PAUL M. DI LORENZO,  MD, an
individual having and address located at 1 Main Street, Suite 104, P.O. Box 954,
Eatontown,  New Jersey 07724 (hereinafter  sometimes referred to as the "Payee")
the  sum of ONE  HUNDREDTHOUSAND  AND  00/100  ($100,000.00)  Dollars,  accruing
interest at the rate of five percent (5%) per annum, which outstanding principal
balance and accrued  interest shall be due and payable on the first  anniversary
date hereof.  This Note may, at the option of the Maker,  be prepaid in whole or
in part without penalty.

            Notwithstanding  the foregoing,  the unpaid balance of the principal
sum of this note and interest hereon shall  immediately  become due and payable,
at the election of the Payee hereof, in the event of:

                  (a) 15 days default in any payment due hereunder; or

                  (b) the  appointment  of a receiver of the  property,  rights,
credits, assets or any part thereof, of the Maker; or

                  (c) the  filing  of a  petition  by or  against  the Maker for
relief under any bankruptcy or insolvency law; or

                  (d) an  assignment  by the Maker of assets for the  benefit of
creditors.

            The Maker and all other parties who at any time may be liable hereon
in any  capacity,  jointly and  severally,  waive  presentment  and diligence in
collecting, demand for payment, protest and notice of dishonor of this note, and
authorize the Payee hereof,  without notice,  to grant extensions in the time of
payment or any  reductions  in the rate of interest on any monies  owing on this
Note without notice to the Maker or any endorsers hereof.

            In the  event  Payee is  obligated  to  employ  the  services  of an
attorney to enforce any of the obligations set forth herein, Maker hereby agrees
to pay any and all such reasonable attorneys fees utilized in any enforcement or
collection proceeding.

                                          MAKER:

                                          COATES MOTORCYCLE COMPANY, LTD.

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

Prom Note - COATES MOTO - DiLorenzo

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