AMENDED AND RESTATED EMPLOYMENT AGREEMENT

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

AND

GEORGE J. COATES , an individual having an address at

1811 Murray Drive

Wall Township, New Jersey 07719

“Employee ”)

WHEREAS, Executive is a research scientist in the field of design and development of power units and propulsion system of all types, including combustion engines, gas turbines, steam turbines and pulse detonation rocket engines; and

WHEREAS, Executive is the inventor and designer of the Coates Spherical Rotary Valve Combustion Engine and has been awarded eighteen U.S. patents and numerous corresponding patents in various countries throughout the world; and

WHEREAS, the Company and the Employee signed on October 23, 2006 (the “ Effective Date ”), an employment agreement (the “ Original Employment Agreement ”); and

WHEREAS,  the parties wish to amend and restate the terms of the Original Employment Agreement;

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, Employee and the Company hereby agree as follows:

Upon the effectiveness of this Agreement, the Original Employment Agreement shall become null and void and of no further effect.

1,.1   Employee shall continue to be employed with the Company and Employee hereby affirms and accepts such employment by Employer for the Term (as defined in Article 3 below), and further agrees that commencing on the date hereof Employee shall serve as the Chief Executive Officer and President of the Company, 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 Employee as a member of the Employer’s Board of Directors commencing on the date hereof throughout the Term.

During the Term, Employee 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. Employee 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. Employee shall have those duties and powers as are assigned to him from time to time by the Board of Directors.

The term of this Agreement (the “ Term ”) has commenced on the Effective Date, and will continue thereafter for a term of five (5) 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.

4.1   Governance. During the term of this Agreement, Employee agrees to vote all shares of the Company’s Common Stock owned by him or as to which he had voting power to elect to the Company’s Board of Directors at least two directors who qualify as “independent directors” under the rules of the Securities Exchange Commission and NASDAQ.

4.2   Compensation.

(a)   In consideration of Employee’s services to Employer, Employer shall pay to Employee an annual salary (the “ Salary ”) of Three Hundred Thousand Dollars ($300,000.00), 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, the salary shall be established at One Hundred Eighty Three Thousand Five Hundred Forty Nine Dollars ($183,549), until the point in time that Employer’s projected available working capital is sufficient to fund (x) the Company’s operations, and; (y) payment of the total amount of salary payments provided for in the Executive Employment Agreements as determined in the sole discretion of the Company’s Board of Directors (the “ Full Payment Date ”). For purposes of this provision, the term “Executive Employment Agreements” shall be the employment agreements in effect, as amended by and between the Employer and each of the following executives: George J. Coates and Gregory Coates.

(b)   In addition to the Salary, Employer shall issue to Employee a Stock Option to purchase 1,000,000 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 independent members of 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 April 30, 2007 and the balance in two equal installments on October 23, 2008 and 2009. Employee 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 Employee for a Good Reason, as defined in Article 10.1 and 10.2 below, or by the Employer without Cause, 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 Employee 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 Employee for Good Reason or by the Employer without Cause. 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.

(c)   Employee 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 Employee 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 there from, and; the Employee further acknowledges that he may be required to hold such securities for an indeterminable amount of time.

(d)   Employee shall not be entitled to any other compensation from the Company unless unanimously approved by the independent directors of the Board.

4.3   Benefits

Upon the Full Payment Date, and thereafter during the Term, Employee shall be entitled to participate in all medical, dental, life insurance and other executive benefit plans, including vacation, sick leave, retirement accounts and other executive benefits provided by Employer. Such participation shall be subject to the terms of the applicable plan documents and Employer’s generally applicable policies. In addition, upon Full Payment Date, Employer shall pay the premiums for: (A) Executive’s disability insurance; and (B) life insurance in the amount of $2,000,000. The beneficiary of the life insurance policy shall be Bernadette Coates, Employee’s spouse. Employee also agrees to cooperate with the Company in obtaining for the benefit of the Company “key man” life insurance on Employee’s life in the amount of at least $2,000,000. The amount of such insurance shall be approved by the independent directors of the Board.

4.4   Expense Reimbursement

Employer shall reimburse Employee 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.

4.5   Bonus

In addition to the compensation payable under Section 4.1, Employee shall be entitled to receive during the Term an annual bonus, the amount of which shall be determined by the unanimous vote of the independent members of the Board of Directors (“ Bonus ”). Each year’s Bonus shall be paid to the Employee within 110 days of the Employer’s calendar year end.

4.6   Other Compensation

Commencing upon the Full Payment Date, Employer shall provide Employee with an automobile for his exclusive use throughout the Term, including costs for gasoline, maintenance and comprehensive insurance including an “umbrella” policy.

During the Term, Employee 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 Employee’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 Employee. Nothing in this Agreement shall preclude Employee from:

6.1   Confidential Information

Employee 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 kno