<SEC-DOCUMENT>0001354488-11-000851.txt : 20110316
<SEC-HEADER>0001354488-11-000851.hdr.sgml : 20110316
<ACCEPTANCE-DATETIME>20110316170115
ACCESSION NUMBER:		0001354488-11-000851
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		5
CONFORMED PERIOD OF REPORT:	20110309
ITEM INFORMATION:		Entry into a Material Definitive Agreement
ITEM INFORMATION:		Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
ITEM INFORMATION:		Regulation FD Disclosure
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20110316
DATE AS OF CHANGE:		20110316

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			AE Biofuels, Inc.
		CENTRAL INDEX KEY:			0000738214
		STANDARD INDUSTRIAL CLASSIFICATION:	INDUSTRIAL ORGANIC CHEMICALS [2860]
		IRS NUMBER:				261407544
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-51354
		FILM NUMBER:		11692587

	BUSINESS ADDRESS:	
		STREET 1:		20400 STEVENS CREEK BLVD
		STREET 2:		SUITE 700
		CITY:			CUPERTINO
		STATE:			CA
		ZIP:			95014
		BUSINESS PHONE:		561-798-2907

	MAIL ADDRESS:	
		STREET 1:		20400 STEVENS CREEK BLVD
		STREET 2:		SUITE 700
		CITY:			CUPERTINO
		STATE:			CA
		ZIP:			95014

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	MARWICH II LTD
		DATE OF NAME CHANGE:	19840123
</SEC-HEADER>
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<DESCRIPTION>CURRENT REPORT
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">CURRENT REPORT</font></div>

<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Pursuant to Section&#160;13 or 15(d) of the Securities Exchange Act of 1934</font></font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Date of Report (Date of earliest event reported): March 9, 2011</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 14pt; FONT-WEIGHT: bold; TEXT-DECORATION: underline">AE BIOFUELS, INC.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Third Eye Capital Corporation Amendment No. 1 to Note Purchase Agreement</font></div>

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<div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On October 29, 2010, AE Advanced Fuels Keyes, Inc., a subsidiary of AE Biofuels, Inc. completed the conditions precedent and entered into Amendment No. 1 (&#8220;Amendment&#8221;) to the Note Purchase Agreement dated as of November 18, 2010 with Third Eye Capital Corporation. The Term Note had an original principal amount of $4,500,000 of 12% Senior Secured Term Notes (&#8220;Term Notes&#8221;) due and payable on October 17, 2011. On March 10, 2010, the principal amount was increased through the sale of an additional aggregate principal amount of $3,500,000 (&#8220;Additional Notes&#8221;). As of the effective date of the Amendment, the principal balance and all accrued and unpaid interest and fees outstanding on the Note was $4,517,078.</font></div>

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<div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">This description of the Additional Notes is not complete and is qualified in its entirety by reference to the text of the agreement which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.&#160;&#160;See the disclosure under Item 2.03, which is incorporated by reference into this Item 1.01.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Amendment to Project and Lease Agreement</font></div>

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<div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On March 9, 2011, AE Advanced Fuels Keyes, Inc., a subsidiary of AE Biofuels, Inc. entered into Amendment No. 2 to Lease Agreement for Keyes, California Ethanol Production Facility and Amendment No. 2 to Project Agreement for Keyes, California Ethanol Production Facility (&#8220;Amendments&#8221;) by and between Cilion, Inc., a Delaware corporation ( &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Owner</font>&#8221;), AE Advanced Fuels Keyes, Inc., a Delaware corporation ( &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Tenant</font>&#8221;) and AE Advanced Fuels, Inc., a Delaware corporation.&#160;&#160;Pursuant to the Amendments, the term of the lease was extended to five (5) years and the period for early termination extended to year three (3).&#160;&#160;In the event of early termination, Owner agrees to reimburse tenant for 100% of the capital costs up to a maximum of $2,350,945 plus startup losses in an amount not to exceed $2,000,000.&#160;&#160;Progress payments due of January 1, February 1, and March 1, 2011 in the amount of $750,000 were deferred and will be payable in fifteen monthly payments of $50,000 commencing April 1, 2011.&#160;&#160;Each party to the agreement provided release for prior events.&#160;&#160;Owner may termination agreement in the event Substantial Completion has not occurred on or prior to March 31, 2011.</font></div>

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<div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">This description of the Amendments&#160;is not complete and&#160;is qualified in&#160;its entirety by reference to the text of the agreements which are attached hereto as Exhibit 10.2 and 10.3 and incorporated herein by reference.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Entry into a Corn Supply, Working Capital and Purchasing Agreement</font></div>

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<div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In conjuction with the Additional Notes, AE Advanced Fuels Keyes, Inc., entered into a Purchasing Agreement&#160;&#160;and Corn Procurement and Working Capital Agreement by and between J.D. Heiskell Holdings, LLC, a California limited liability company doing business as J.D. Heiskell &amp; Co. (&#8220;Heiskell&#8221;) and, AE Advanced Fuels Keyes, Inc., a Delaware Corporation (&#8220;AE Keyes&#8221;).&#160;&#160;Pursuant to the terms of the agreement, Heiskell agrees to supply AE Keyes and AE Keyes agrees to procure from Heiskell all the requirements for whole yellow corn for the Ethanol Plant commencing with the first delivery of corn to the Gilbert facility and ending December 31, 2011 with a one year renewal term. </font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Heiskell further agrees to sell all ethanol to Kinergy Marketing, LLC, an Oregon limited liability company (&#8220;Kinergy&#8221;) or other marketing purchaser designated by the Company.&#160;&#160;Heiskell agrees to sell all WDGS and Syrup to A.L. Gilbert as the primary customer and exclusive marketer for the WDGS.</font></div>

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<div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">These Corn Supply, Working Capital and Purchasing agreements are ordinary purchase and sale agency agreements for an ethanol plant, and as such are exempt from exhibit disclosure pursuant to Regulation S-K, Item 601(b)(10)(iii)(C)(i).</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION</font></div>

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<div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On October 29, 2010, Third Eye Capital Corporation, as agent, (&#8220;Purchaser&#8221;) entered into a Note Purchase Agreement for the purchase of $4,500,000 of 12% Senior Secured Term Notes ( &#8220;Term Notes&#8221;) of AE Advanced Fuels Keyes, Inc., a subsidiary of AE Biofuels, Inc.&#160;&#160;On March 10, 2011, Third Eye Capital Corporation, as agent, (&#8220;Purchaser&#8221;) entered into Amendment No. 1 to Note Purchase Agreement for the purchase of $3,500,000 additional 12% Senior Secured Term Notes (&#8220;Additional Notes&#8221;) of AE Advanced Fuels Keyes, Inc., a subsidiary of AE Biofuels, Inc.&#160;&#160;The Additional Notes are secured by first-lien deeds of trust on all real and personal property, an assignment of proceeds of all government grants, and guarantee of AE Biofuels, Inc., and an unconditional guarantee from McAfee Capital in the principal amount of $2,400,000 plus all interest and fees thereon, up to a principal amount of $5,000,000 enforceable on 2,000,000 shares of Solargen Energy stock.</font></div>

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<div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Interest on the Term Note and Additional Notes accrues on the unpaid principal balance and is payable monthly in arrears.&#160;&#160;Payment of principal begins upon substantial completion and commencement of the lease of the Cilion Plant on a monthly basis equal to the greater of $200,000, $0.05 per gallon produced from the Cilion plant, or 50% of free cash flow. Prepayment of all or any portion of the outstanding principal amount of the Term Note may occur upon 60 days written notice.&#160;&#160;Upon substantial completion and commencement of the lease of the Cilion plant, the Purchaser will receive 4% of total sales until repayment of the Term Note, after which the Purchaser will receive 2% of total sales for a period of seven (7) years from the date the Notes are paid in full. The Purchaser receives a placement fee of three (3) percent of the the Additional Notes, a commitment fee of three (3) percent of the Additional Notes, an amendment fee of $100,000&#160;&#160;plus the payment of a monthly monitoring fee in the amount of $10,000 until Substantial Completion of the retrofit and restart.&#160;&#160;The Purchaser also receives one share of stock in AE Biofuels, Inc. for every $2 of Term Note purchased.</font></div>

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<div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The Purchaser may accelerate the unpaid principal amount of the Term Note and Additional Notes, together with accrued and unpaid interest, upon the occurrence of certain Events of Default (as defined in the Note Purchase Agreement and Amendment No. 1 to the Note Purchase Agreement), and the Purchaser may exercise remedies provided for in each of the deeds of trust and security agreement securing the Term Note and Additional Notes during the continuance of an Event of Default.<a name="item_1_31_1"><!--EFPlaceholder--></a><a name="part_1_2_2"><!--EFPlaceholder--></a></font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">This description of the Additional Notes is not complete and is qualified in its entirety by reference to the text of the agreements which are attached hereto as Exhibit 10.1 and are incorporated herein by reference.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">ITEM 7.01 REGULATION FD DISCLOSURE</font></div>

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<div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On November 2, 2010, the Company issued a press release announcing the transaction completed by the the Amendment No. 1 to Note Purchase Agreement, as disclosed under Item 1.01 and 2.03 of this Current Report.&#160;&#160;A copy of the press release is attached hereto as Exhibit 99.1 to this Current Report and is incorporated herein by reference. The information contained herein and the attached exhibit are furnished under this Item 7.01 of this Current Report and are furnished to, but for purposes of Section 18 of the Securities Exchange Act of 1934 shall not be deemed filed with, the Securities and Exchange Commission. The information contained herein and in the accompanying exhibit shall not be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing, unless expressly incorporated therein.</font></div>

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<TYPE>EX-10.1
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<DESCRIPTION>AMENDMENT NO. 1 TO NOTE PURCHASE AGREEMENT
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<div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">This Amendment No. 1 to Note Purchase Agreement (the "<font style="DISPLAY: inline; FONT-WEIGHT: bold">Amendment</font>"), dated as of March 10, 2011 is between <font style="DISPLAY: inline; FONT-WEIGHT: bold">AE ADVANCED FUELS KEYES, INC.</font>, a Delaware corporation (the &#8220;<font style="DISPLAY: inline; FONT-WEIGHT: bold">Company</font>&#8221;) and <font style="DISPLAY: inline; FONT-WEIGHT: bold">THIRD EYE CAPITAL CORPORATION</font>, an Ontario corporation, as agent (&#8220;<font style="DISPLAY: inline; FONT-WEIGHT: bold">Agent</font>&#8221;).</font></div>

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<div style="TEXT-ALIGN: center; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"><font style="DISPLAY: inline; TEXT-DECORATION: underline">RECITALS</font></font></div>

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<div style="TEXT-INDENT: 36pt; MARGIN-LEFT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">A.</font><font id="TAB2" style="LETTER-SPACING: 9pt; COLOR: black">&#160;</font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The Company, Agent and the Purchasers named therein entered into a certain Note Purchase Agreement, dated as of October 18, 2010 (as the same may be further amended, restated, supplemented, revised or replaced from time to time, the &#8220;<font style="DISPLAY: inline; FONT-WEIGHT: bold">Agreement</font>&#8221;).&#160;&#160;Capitalized terms used but not defined in this Amendment shall have the meaning given to them in the Agreement.</font></div>

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<div style="TEXT-INDENT: 36pt; MARGIN-LEFT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">B.</font><font id="TAB2" style="LETTER-SPACING: 9pt; COLOR: black">&#160;</font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The Company has requested and the Agent and Purchasers have agreed to, among other things, provide for the issuance of additional Notes in the aggregate principal amount of $3,500,000, on the terms and conditions contained herein.</font></div>

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<div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">SECTION 1.&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Reaffirmation of Indebtedness</font>.&#160;&#160;The Company hereby confirms that as of the date of this Amendment the outstanding principal balance of the Original Notes and all accrued and unpaid interest thereon is $4,517,078.37.</font></div>

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<div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">SECTION 2.&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Amendments</font>.&#160;&#160;As of the date hereof, the following sections of the Agreement shall be and hereby are amended as follows:</font></div>

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<div style="TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(A)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Recitals Part of Agreement</font>.&#160;&#160;The foregoing recitals are hereby incorporated into and made a part of this Agreement, including all defined terms referenced therein.</font></div>

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<div style="TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(B)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Section 1.1 (Definitions)</font>. The definitions of &#8220;Budget,&#8221; &#8220;Fee Letter,&#8221; &#8220;Guaranties,&#8221; &#8220;Notes&#8221; and &#8220;Security Documents&#8221; are deleted in their entirety and replaced with the following:</font></div>

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<div style="TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#8220;<font style="DISPLAY: inline; FONT-WEIGHT: bold">Budget</font>&#8221; means the weekly budget for the Project prepared by the Company attached hereto as <font style="DISPLAY: inline; TEXT-DECORATION: underline">Schedule B</font>, together with any amendments, modifications or updates to such budget, including as revised in connection with the issuance of the Additional Notes, but only to the extent the same have been approved by Agent.</font></div>

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<div style="TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#8220;<font style="DISPLAY: inline; FONT-WEIGHT: bold">Fee Letter</font>&#8221; means, collectively, (i) the fee letter dated October 18, 2010 from Agent to the Company and AE Biofuels and (ii) the fee letter dated March 10, 2011 from Agent to the Company and AE Biofuels, as the same may be amended, modified or restated from time to time.</font></div>

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<div style="TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#8220;<font style="DISPLAY: inline; FONT-WEIGHT: bold">Guaranties</font>&#8221; mean, collectively, (i) that certain Limited Recourse Guaranty, dated October 18, 2010 from McAfee Capital, LLC in favor of the Agent for the benefit of the Purchasers, (ii) that certain Continuing and Unconditional Guaranty dated October 18, 2010 from AE Biofuels in favor of the Agent for the benefit of the Purchasers and (ii) that certain Unconditional Personal Guaranty dated March 10, 2011 from Eric McAfee in favor of the Agent for the benefit of the Purchasers, as any of the foregoing may be amended, modified or restated from time to time.</font></div>

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<div style="TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#8220;<font style="DISPLAY: inline; FONT-WEIGHT: bold">Notes</font>&#8221; mean, collectively, (i) the Original Notes issued and purchased on the Closing Date pursuant to Section 2.1 in the aggregate principal amount of $4,500,000 and (ii) the Additional Notes issued and purchased on March 10, 2011 pursuant to Section 2.1 in the aggregate principal amount of $3,500,000 as the same may be amended, restated or modified from time to time.</font></div>

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<div style="TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#8220;<font style="DISPLAY: inline; FONT-WEIGHT: bold">Security Documents</font>&#8221; shall mean, collectively, all Security Agreements, the Guaranties, all Account Control Agreements, all pledge agreements, all UCC financing statements and all other agreements, documents and instruments that create or perfect the Liens in the Collateral, as the same may be modified, amended or supplemented from time to time.</font></div>

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<div style="TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(C)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Section 2 (Authorization and Closing)</font>.&#160;&#160;Sections 2.1, 2.2 and 2.3 of the Agreement are hereby deleted in their entirety and amended by inserting the following in their place:</font></div>

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<div style="TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">2.1&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Authorization of the Note</font>.&#160;&#160;The Company has authorized the issuance and sale to Purchaser of its Senior Secured Notes (i) in an aggregate principal amount of up to $4,500,000 on the Original Closing Date (defined below), in form and substance as set forth in Exhibit A attached hereto (collectively, if more than one, the &#8220;<font style="DISPLAY: inline; FONT-WEIGHT: bold">Original Notes</font>&#8221;, and individually, the &#8220;<font style="DISPLAY: inline; FONT-WEIGHT: bold">Original Note</font>&#8221;) and (ii) in an aggregate principal amount of up to $3,500,000 on the Additional Closing Date (defined below), in form and substance as set forth in Exhibit A attached hereto (collectively, if more than one, the &#8220;<font style="DISPLAY: inline; FONT-WEIGHT: bold">Additional Notes</font>&#8221;, and individually, the &#8220;<font style="DISPLAY: inline; FONT-WEIGHT: bold">Additional Note</font>&#8221;).&#160;&#160;The Notes are sometimes collectively referred to herein as the &#8220;<font style="DISPLAY: inline; FONT-WEIGHT: bold">Securities</font>.&#8221;</font></div>

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<div style="TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">2.2&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Purchase and Sale of the Notes</font>.&#160;&#160;At the Original Closing (defined below), the Company sold to Purchaser and, subject to the terms and conditions set forth herein, Purchaser purchased from the Company one or more Original Notes in the aggregate principal amount of $4,500,000.&#160;&#160;At the Additional Closing (defined below), the Company shall sell to Purchaser and, subject to the terms and conditions set forth herein, Purchaser shall purchase from the Company one or more Additional Notes in the aggregate principal amount of $3,500,000.</font></div>

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<div style="TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">2.3&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">The Closing</font>.</font></div>

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<div style="TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font id="TAB1" style="MARGIN-LEFT: 35pt"></font>(a)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Subject to Section 3 below, the closing of the purchase and sale of the Original Notes (the &#8220;<font style="DISPLAY: inline; FONT-WEIGHT: bold">Original Closing</font>&#8221;) took place on October 18, 2010 (the &#8220;<font style="DISPLAY: inline; FONT-WEIGHT: bold">Original Closing Date</font>&#8221;).&#160;&#160;At the Original Closing, the Company delivered to Purchasers one or more instruments evidencing the Original Notes purchased by Purchasers, issued in the name of Purchaser or its nominee, upon payment of the purchase price thereof by wire transfer of immediately available funds as directed by the Company, in the aggregate amount equal to $4,500,000.</font></div>

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<div style="TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font id="TAB1" style="MARGIN-LEFT: 35pt"></font>(b)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Subject to Section 3 below, the closing of the purchase and sale of the Additional Notes (the &#8220;<font style="DISPLAY: inline; FONT-WEIGHT: bold">Additional Closing</font>&#8221;) shall take place on March 10, 2011 (the &#8220;<font style="DISPLAY: inline; FONT-WEIGHT: bold">Additional Closing Date</font>&#8221;); provided that the Additional Notes shall be deemed purchased by Purchasers on March 10, 2011.&#160;&#160;At the Additional Closing, the Company shall deliver to Purchasers one or more instruments evidencing the Additional Notes to be purchased by Purchasers, issued in the name of Purchaser or its nominee, upon payment of the purchase price thereof by wire transfer of immediately available funds as directed by the Company, in the aggregate amount up to $3,500,000.&#160;&#160;Proceeds of the Additional Notes shall be deposited into an account under the sole dominion and control of Agent (the &#8220;<font style="DISPLAY: inline; FONT-WEIGHT: bold">Additional Notes Disbursement Account</font>&#8221;) from which such proceeds shall be disbursed from time to time in accordance with the Budget or as otherwise approved by Agent to finance the Project.</font></div>

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<div style="TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(D)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Section 3 (Obligations of the Company at Closing)</font>.&#160;&#160;Section 3 of the Agreement is amended by inserting the following Section 3.10 after Section 3.9:</font></div>

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<div style="TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">3.10&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Obligations of the Company for Additional Notes</font>. The obligation of any Purchaser to purchase and pay for the Securities at the Additional Closing is subject to the fulfillment as of the Additional Closing of the following conditions to Agent&#8217;s and Purchaser&#8217;s satisfaction in their sole discretion:</font></div>

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<div style="TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font id="TAB1" style="MARGIN-LEFT: 35pt"></font>(a)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Representations and Warranties; Covenants; No Event of Default</font>.&#160;&#160;The representations and warranties contained in Section 6 hereof shall be true and correct at and as of the Additional Closing as though then made, the Company shall have performed all of the covenants required to be performed by it hereunder and under the other documents, agreements and instruments executed in connection herewith that are to be complied with or performed by the Company and/or any of its Significant Affiliates on or prior to the Additional Closing and there does not exist any state of facts that would constitute an Event of Default.</font></div>

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<div style="TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font id="TAB1" style="MARGIN-LEFT: 35pt"></font>(b)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Closing Documents</font>.&#160;&#160;The Company shall have delivered or caused to be delivered to Agent and Purchaser all of the following documents, each in form and content acceptable to Agent:</font></div>

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<div style="TEXT-ALIGN: left; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 72pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(iii)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;the Fee Letter from Agent to the Company and AE Biofuels, duly executed by the Company and AE Biofuels;</font></div>

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<div style="TEXT-ALIGN: left; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 72pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(iv)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;the Unconditional Personal Guaranty, duly executed by Eric McAfee;</font></div>

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<div style="TEXT-ALIGN: left; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 72pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(v)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;a Pledge Agreement duly executed by McAfee Capital LLC pledging in favor of Agent for the benefit of Purchasers 2,000,0000 shares of Solargen Energy, Inc. (OTCBBO:SLGE), together with a duly signed and undated stock power and all original stock certificates evidencing such shares;</font></div>

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<div style="TEXT-ALIGN: left; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 72pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(vi)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;an Officer&#8217;s Certificate, dated the date of the Additional Closing, stating that the conditions specified in this Section 3 have been fully satisfied;</font></div>

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<div style="TEXT-ALIGN: left; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 72pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(vii)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;certified copies of the resolutions duly adopted by the Company&#8217;s board of directors authorizing the execution, delivery and performance of the Transaction Documents in connection with the Additional Closing to which such entity is a party and each of the other agreements contemplated hereby and thereby, the issuance and sale of the Additional Notes, and the consummation of all other transactions contemplated in connection therewith;</font></div>

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<div style="TEXT-ALIGN: left; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 72pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(viii)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;a certificate of the secretary of the Company certifying the names and the signatures of the officers of such entity authorized to sign the Additional Notes and each of the other agreements, documents and instruments contemplated hereby to which such entity is a party;</font></div>

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<div style="TEXT-ALIGN: left; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 72pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(ix)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;a waiver from Cilion, Inc. in favor of Agent permitting Agent to access the Cilion Plant and/or inspect the Collateral, together with copies of all third party and governmental consents, approvals and filings required in connection with the consummation of the transactions hereunder (including, without limitation, all blue sky law filings and waivers of all preemptive rights (except for preemptive rights granted in the Transaction Documents) and rights of first refusal;</font></div>

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<div style="TEXT-ALIGN: left; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 72pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(x)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;insurance certificates naming Agent as additional insured and first loss payee on all property and liability insurance policies of the Company pertaining to the Collateral; and</font></div>

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<div style="TEXT-ALIGN: left; TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 72pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(xi)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;such other documents relating to the transactions as Agent or its special counsel may reasonably request in connection with the Additional Closing, including, without limitation, each of the conditions set forth on the Additional Closing Schedule attached hereto and made a part hereof.</font></div>

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<div style="TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font id="TAB1" style="MARGIN-LEFT: 35pt"></font>(c)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Material Adverse Change</font>.&#160;&#160;(i) no material damage or destruction to any of the Collateral or material depreciation thereof shall have occurred and (ii) no material adverse change in the operation, financial condition or business prospects of the Company or AE Biofuels shall have occurred.</font></div>

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<div style="TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font id="TAB1" style="MARGIN-LEFT: 35pt"></font>(d)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Closing Fees and Expenses</font>.&#160;&#160;The Company shall have (i) paid to Agent and Purchaser the fees set forth in a Additional Notes Fee Letter, and (ii) reimbursed Purchaser for fees and expenses as provided in Section 8.1 hereof.</font></div>

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<div style="TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font id="TAB1" style="MARGIN-LEFT: 35pt"></font>(e)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Compliance with Applicable Laws</font>.&#160;&#160;The purchase of the Additional Notes by Purchasers hereunder shall not be prohibited by any applicable law or governmental rule or regulation and shall not subject any Purchaser to any penalty, liability or, in any Purchaser&#8217;s sole judgment, other onerous condition under or pursuant to any applicable law or governmental rule or regulation, and the purchase of the Additional Notes by Purchasers hereunder shall be permitted by laws, rules and regulations of the jurisdictions and Governmental Authorities and agencies to which any Purchaser is subject.</font></div>

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<div style="TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(E)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Sections 4.3 (Payment of Interest) and 4.3 (Payment of Principal)</font>.&#160;&#160;Sections 4.2 and 4.3 of the Agreement are deleted in their entirety and amended by inserting the following in their place:</font></div>

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<div style="TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">4.2&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Payment of Interest</font>.&#160;&#160;The Company shall pay to the holder of the Notes accrued interest on the first Business Day of each month (each an &#8220;Interest Payment Date&#8221;), beginning November 1, 2010, at the Interest Rate.&#160;&#160;On the Maturity Date (defined below) interest on the principal balance of the Note outstanding from the immediately preceding Interest Payment Date through and including the Maturity Date shall be payable at the Interest Rate.&#160;&#160;Interest shall accrue on any principal payment due under this Notes and, to the extent permitted by applicable law, on any interest that has not been paid on the date on which it is due and payable until such time as payment therefore is actually delivered to the holder of the Notes.&#160;&#160;Notwithstanding the foregoing, interest on the Notes shall not accrue or be payable on the principal amount of the Notes or any portion thereof deposited into the Additional Notes Disbursement Account (as defined in Section 2.3(b)) until such principal, or any portion thereof, is disbursed by Agent to the Company in accordance with Section 2.3(b).</font></div>

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<div style="TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">4.3&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Payment of Principal; Waterfall on Notes</font>.&#160;&#160;On the first Business Day of the month immediately following the substantial completion and commencement of the Lease of the Cilion Plant and on the first Business Day of each month thereafter, the Company shall pay to the holder of the Notes an amount equal to the greater of (i) $200,000, (ii) $0.05 per gallon of ethanol produced from the Cilion Plant and (iii) 50% of the Free Cash Flow of the Company.&#160;&#160;Additionally, all payments received by the Company on account of or in connection with the Program shall be applied first to the repayment of principal and interest outstanding on the Additional Notes.</font></div>

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<div style="TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">For the avoidance of doubt and notwithstanding anything to the contrary contained in this Agreement, except with respect to proceeds received by the Company by or in connection with the Program which shall be applied first to repay the Additional Notes in full, the Notes shall be pari passu and all other amounts received by Agent or any Purchaser for the payment of principal and interest on the Notes shall be applied pari passu among the Notes.</font></div>

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<div style="TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(F)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Section 4.6 (Mandatory Payment)</font>.&#160;&#160;Section 4.6 of the Agreement is amended by deleting the last paragraph in its entirety and inserting the following in its place:</font></div>

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<div style="TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Notwithstanding anything to the contrary contained herein but except as otherwise provided in Section 4.3 above, all prepayments pursuant to this Section 4.6 shall be applied in the following order of priority to the payment of: (i) all then unpaid fees and expenses of Agent and Purchasers under the Notes and other Transaction Documents; (ii) accrued and unpaid interest on the Notes (in such order as Agent shall determine in its sole discretion); and (iii) the unpaid principal balance of the Notes.</font></div>

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<div style="TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(G)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Section 5.5(p) (Affirmative Covenants)</font>.&#160;&#160;Section 5.4(p) of the Agreement is deleted in its entirety and amended by inserting the following in its place</font></div>

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<div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font>(p)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Governmental and other Programs</font>. Cause the proceeds of all government grants, credits or programs that the Company or any Significant Affiliate may enter into with, directly or indirectly, any Governmental Authority, including, without limitation, the Program and the annual California Energy Commission grant provided under the California Producer Incentive Program to be applied to the repayment of the Notes in accordance with Section 4.6 of this Agreement and, immediately upon the Company&#8217;s notice thereof, notify the Agent in writing of receipt of any such proceeds.&#160;&#160;The Company shall cause all amounts received from time to time (or as a result of) the Program, into an account with Heritage Bank subject to a first priority lien in favor of Agent pursuant to a duly executed and delivered Account Control Agreement, and amounts so deposited shall be applied to the repayment of the Notes in accordance with Section 4.6 of this Agreement.</font></div>

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<div style="TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(H)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Section 5.5 (Financial Covenants)</font>.&#160;&#160;Sections 5.5(a) and 5.5(b) of the Agreement are deleted in their entirety and amended by inserting the following in their place:</font></div>

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<div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(a)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Minimum Quarterly Free Cash Flow</font>.&#160;&#160;The Company shall at all times maintain Free Cash Flow for the periods indicated below in the minimum amounts indicated below for such periods:</font></div>

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<div style="TEXT-ALIGN: left; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"><font style="DISPLAY: inline">Quarterly Period</font></font></div>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"><font style="DISPLAY: inline">Minimum Free Cash Flow Amount</font></font></div>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Quarter ending June 30, 2011</font></div>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$1,000,000</font></div>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Quarter ending September 30, 2011</font></div>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$2,000,000</font></div>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Quarter ending December 31, 2011 and each quarter thereafter</font></div>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$1,400,000</font></div>
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<div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(b)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Cilion Plant Minimum Quarterly Production</font>.&#160;&#160;Minimum quarterly production of ethanol at the Cilion Plant for any quarter shall not be less than the amounts indicated below for the quarterly periods indicated below:</font></div>

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<div style="TEXT-ALIGN: left; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"><font style="DISPLAY: inline">Quarterly Period</font></font></div>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"><font style="DISPLAY: inline">Cilion Plant Minimum Quarterly Production (in millions of gallons)</font></font></div>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Quarter ending June 30, 2011</font></div>
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<div style="TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(I)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Section 7.1(xi) (Events of Default)</font>.&#160;&#160;Section 7.1(xi) of the Agreement is deleted in its entirety and amended by inserting the following in its place:</font></div>

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<div style="TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(xi)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Eric McAfee, AE Biofuels or McAfee Capital LLC shall fail to observe or perform any covenant, condition or agreement in their respective Guaranties or the Guaranties shall be revoked by Eric McAfee, AE Biofuels or McAfee Capital LLC; or</font></div>

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<div style="TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(J)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; &#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Section 7 (Events of Default)</font>.&#160;&#160;Section 7 of the Agreement is amended by inserting new Section 7.1(xiii) after Section 7.1(xii) as follows:</font></div>

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<div style="TEXT-INDENT: 72pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(xiii)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Company fails to receive proceeds from the Program and/or the annual California Energy Commission grant in accordance in the amounts to be made thereunder or fails to pay any such proceeds received by the Company to TEC as required by this Agreement.</font></div>

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<div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">SECTION 3.&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Conditions to Effectiveness</font>.&#160;&#160;This Amendment, and the consents and amendments contained herein, shall be effective only upon and subject to satisfaction of the following conditions precedent (the date of satisfaction of all such conditions being referred to herein as the &#8220;<font style="DISPLAY: inline; FONT-WEIGHT: bold">Effective Date</font>&#8221;):</font></div>

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<div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font>(A)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Agent shall have received and accepted an original of this Amendment duly executed by the parties hereto and all other deliverables and conditions set forth in new Section 3.10 of the Agreement as set forth above shall have been received and accepted by Agent.</font></div>

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<div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The Company acknowledges and agrees that the failure to perform, or cause the performance, of the foregoing covenants and agreements will constitute an Event of Default under the Agreement and Agent and Purchasers shall have the right to demand the immediate repayment in full in cash of all outstanding Indebtedness owing to Agent and Purchaser under the Agreement, the Note and the other Transaction Documents.&#160;&#160;In consideration of the foregoing and the transactions contemplated by this Amendment, the Company hereby (a) ratifies and confirms all of the obligations and liabilities of the Company owing pursuant to the Agreement and the other Transaction Documents and (b) agrees to pay all costs and expenses of Agent and Purchasers in connection with this Amendment.&#160;&#160;Except as expressly set forth herein, (a) the Agreement and the other Transaction Documents remain in full force and effect, (b) this Amendment shall not be deemed to be a waiver, amendment or modification of, or consent to or departure from, any provisions of the Agreement or the other Transaction Documents or to be a waiver of any provision or Event of Default under the Agreement or the other Transaction Documents whether arising before or after the date hereof or as a result of the transactions contemplated hereby (except for the specific waiver referenced above), and (c) this Amendment shall not preclude the future exercise of any right, remedy, power or privilege available to Agent and/or Purchasers whether under the Transaction Documents or otherwise.</font></div>

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<div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">SECTION 4.&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Limited Waiver</font>.&#160;&#160;&#160;Agent waives the requirement contained in the McAfee Capital LLC Limited Recourse Guaranty or any other Transaction Document that the EPM Shares be transferred into an account with Morgan Stanley in the name of Agent. Except as expressly provided herein, nothing contained herein shall be construed as a waiver by Agent or Purchasers of any covenant or provision of the Agreement, the McAfee Capital LLC Limited Recourse Guaranty, the other Transaction Documents, this Amendment, or of any other contract or instrument among the Company, any of its Subsidiaries, Purchasers and Agent, and the failure of Agent or Purchasers at any time or times hereafter to require strict performance by the Company or any of its Subsidiaries of any provision thereof shall not waive, affect or diminish any right of Agent or Purchasers to thereafter demand strict compliance therewith.&#160;&#160;Agent and Purchasers hereby reserve all rights granted under the Agreement, the Transaction Documents, this Amendment and any other contract or instrument among the Company and/or any of its Subsidiaries, Purchasers and Agent.</font></div>

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<div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">SECTION 6.&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Agreement in Full Force and Effect as Amended</font>.&#160;&#160;Except as specifically amended, consented and/or waived hereby, the Agreement and other Transaction Documents shall remain in full force and effect and are hereby ratified and confirmed as so amended.&#160;&#160;Except as expressly set forth herein, this Amendment shall not be deemed to be a waiver, amendment or modification of any provisions of the Agreement or any other Transaction Document or any right, power or remedy of Agent or Purchasers, nor constitute a waiver of any provision of the Agreement or any other Transaction Document, or any other document, instrument and/or agreement executed or delivered in connection therewith or of any Default or Event of Default under any of the foregoing, in each case whether arising before or after the date hereof or as a result of performance hereunder or thereunder.&#160;&#160;This Amendment also shall not preclude the future exercise of any right, remedy, power, or privilege available to Agent and/or Purchasers whether under the Agreement, the other Transaction Documents, at law or otherwise.&#160;&#160;All references to the Agreement shall be deemed to mean the Agreement as modified hereby.&#160;&#160;This Amendment shall not constitute a novation or satisfaction and accord of the Agreement and/or other Transaction Documents, but shall constitute an amendment thereof.&#160;&#160;The parties hereto agree to be bound by the terms and conditions of the Agreement and Transaction Documents as amended by this Amendment, as though such terms and conditions were set forth herein.&#160;&#160;Each reference in the Agreement to &#8220;this Agreement,&#8221; &#8220;hereunder,&#8221; &#8220;hereof,&#8221; &#8220;herein&#8221; or words of similar import shall mean and be a reference to the Agreement as amended by this Amendment, and each reference herein or in any other Transaction Document to the &#8220;Agreement&#8221; shall mean and be a reference to the Agreement as amended and modified by this Amendment.</font></div>

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<div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">SECTION 7.&#160;&#160; <font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Representations</font>.&#160;&#160;The Company hereby represents and warrants to Agent and Purchasers as of the date of this Amendment and as of the date hereof as follows:&#160;&#160;(A) it is duly incorporated or organized, validly existing and in good standing under the laws of its jurisdiction of organization; (B) the execution, delivery and performance by it of this Amendment and all other Transaction Documents executed and/or delivered in connection herewith are within its powers, have been duly authorized, and do not contravene (i) its articles of organization, operating agreement, or other organizational documents, or (ii) any applicable law; (C) no consent, license, permit, approval or authorization of, or registration, filing or declaration with any Governmental Authority or other Person, is required in connection with the execution, delivery, performance, validity or enforceability of this Amendment or any other Transaction Documents executed and/or delivered in connection herewith by or against it; (D) this Amendment and all other Transaction Documents executed and/or delivered in connection herewith have been duly executed and delivered by it; (E) this Amendment and all other Transaction Documents executed and/or delivered in connection herewith constitute its legal, valid and binding obligation enforceable against it in accordance with their terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors&#8217; rights generally or by general principles of equity; (F) after giving effect to this Amendment, it is not in default under the Transaction Documents and no Event of Default exists, has occurred and is continuing or would result by the execution, delivery or performance of this Amendment; and (G) the representations and warranties contained in the Transaction Documents are true and correct in all material respects as of the date hereof as if then made, except for such representations and warranties limited by their terms to a specific date.</font></div>

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<div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">SECTION 8.&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Miscellaneous</font>.</font></div>

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<div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(A)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;This Amendment may be executed in any number of counterparts (including by facsimile), and by the different parties hereto on the same or separate counterparts, each of which shall be deemed to be an original instrument but all of which together shall constitute one and the same agreement.&#160;&#160;Each party agrees that it will be bound by its own facsimile signature and that it accepts the facsimile signature of each other party.&#160;&#160;The descriptive headings of the various sections of this Amendment are inserted for convenience of reference only and shall not be deemed to affect the meaning or construction of any of the provisions hereof or thereof.&#160;&#160;Whenever the context and construction so require, all words herein in the singular number herein shall be deemed to have been used in the plural, and vice versa, and the masculine gender shall include the feminine and neuter and the neuter shall include the masculine and feminine.</font></div>

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<div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(B)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;This Amendment may not be changed, amended, restated, waived, supplemented, discharged, canceled, terminated or otherwise modified without the written consent of the Company and Agent.&#160;&#160;This Amendment shall be considered part of the Agreement and shall be a Transaction Document for all purposes under the Agreement and other Transaction Documents.</font></div>

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<div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(C)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;This Amendment, the Agreement and the Transaction Documents constitute the final, entire agreement and understanding between the parties with respect to the subject matter hereof and thereof and may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements between the parties, and shall be binding upon and inure to the benefit of the successors and assigns of the parties hereto and thereto.&#160;&#160;There are no unwritten oral agreements between the parties with respect to the subject matter hereof and thereof.</font></div>

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<div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(D)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE CHOICE OF LAW PROVISIONS SET FORTH IN THE AGREEMENT AND SHALL BE SUBJECT TO THE WAIVER OF JURY TRIAL AND NOTICE PROVISIONS OF THE AGREEMENT.</font></div>

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<div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(E)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Company may not assign, delegate or transfer this Amendment or any of its rights or obligations hereunder.&#160;&#160;No rights are intended to be created under this Amendment for the benefit of any third party done, creditor or incidental beneficiary of the Company or any of its Subsidiaries.&#160;&#160;Nothing contained in this Amendment shall be construed as a delegation to Agent or Purchasers of the Company&#8217;s or any of its Subsidiaries&#8217; duty of performance, including, without limitation, any duties under any account or contract in which Agent or Purchasers have a security interest or lien.&#160;&#160;This Amendment shall be binding upon the Company and its respective successors and assigns.</font></div>

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<div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(F)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;All representations and warranties made in this Amendment shall survive the execution and delivery of this Amendment and no investigation by Agent or Purchasers shall affect such representations or warranties or the right of Agent or Purchasers to rely upon them.</font></div>

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<div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(G)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;THE COMPANY HEREBY ACKNOWLEDGES THAT THE COMPANY&#8217;S PAYMENT OBLIGATIONS ARE ABSOLUTE AND UNCONDITIONAL WITHOUT ANY RIGHT OF RECISSION, SETOFF, COUNTERCLAIM, DEFENSE, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS LIABILITY TO REPAY THE &#8220;OBLIGATIONS&#8221; OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM AGENT OR ANY PURCHASER.&#160;&#160;THE COMPANY HEREBY VOLUNTARILY AND KNOWINGLY RELEASES AND FOREVER DISCHARGES AGENT AND EACH PURCHASER AND THEIR RESPECTIVE PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS (COLLECTIVELY, THE &#8220;RELEASED PARTIES&#8221;), FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS EXECUTED, WHICH THE COMPANY MAY NOW OR HEREAFTER HAVE AGAINST THE RELEASED PARTIES, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY &#8220;LOANS&#8221;, INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE AGREEMENT OR OTHER TRANSACTION DOCUMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT.</font></div>

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<td width="4%" style="PADDING-BOTTOM: 2px"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">By:&#160;</font></td>
<td width="33%" style="BORDER-BOTTOM: black 2px solid"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">/s/ Eric A. McAfee</font></td>
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<td width="33%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Eric A. McAfee</font></font></td>
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<DOCUMENT>
<TYPE>EX-10.2
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<FILENAME>aebf_ex102.htm
<DESCRIPTION>AMENDMENT NO. 2 TO PROJECT AGREEMENT
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<div style="TEXT-ALIGN: right; TEXT-INDENT: 0pt; DISPLAY: block"><font style="FONT-WEIGHT: bold">Exhibit 10.2<br>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">AMENDMENT NO. 2 TO PROJECT AGREEMENT</font></div>

<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">FOR</font></div>

<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">KEYES, CALIFORNIA</font></div>

<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">ETHANOL PRODUCTION FACILITY</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">This Amendment No. 2 to Project Agreement (&#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Amendment</font>&#8221;) is entered into as of this 9th day of March, 2011, by and between Cilion, Inc., a Delaware corporation (hereinafter &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Landlord</font>&#8221;), AE Advanced Fuels Keyes, Inc., a Delaware corporation (hereinafter &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Project Company</font>&#8221; or &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Tenant</font>&#8221;) and AE Advanced Fuels, Inc., a Delaware corporation (&#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Parent &#8220;Sub</font>&#8221;), each of which are wholly-owned subsidiaries of AE Biofuels, Inc., a Nevada corporation (&#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Parent</font>&#8221;).</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>

<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">RECITALS</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">A.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Landlord, Tenant and Parent entered into a Project Agreement dated December 1, 2009 (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Project Agreement</font>&#8221;) and entered into Amendment No. 1 to the Project Agreement on October 29, 2010.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">B.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Landlord, Tenant and Parent entered into a Lease Agreement dated December 1, 2009 (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Lease Agreement</font>&#8221;), which was made a part of the Project Agreement, and entered into Amendment No. 1 to the Lease Agreement on October 29, 2010.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">C.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In accordance with the Project Agreement, Parent (on behalf of Tenant) has agreed to complete certain Repair and Retrofit Activities with respect to the Keyes Plant.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">D.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In order to finance the Repair and Retrofit Activities, Project Company has consummated a senior debt financing in the principal amount of four million five hundred thousand dollars ($4,500,000) with Third Eye Capital Corporation or its affiliates (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Third Party Financing&#8221;</font>).&#160;&#160;Additional financing from Third Eye Capital and other parties is planned to fund additional Repair and Retrofit Activities and the restart of the plant.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font>NOW, THEREFORE, in consideration of the mutual covenants set forth herein and other good and valuable consideration, the receipt of which is hereby acknowledged by each party, the parties hereby agree to the amendment of the Project Agreement as follows:</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">RECITALS</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The 8<font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: text-top">th</font> Whereas paragraph shall be amended as follows:</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Line 3:&#160;&#160;&#8220;thirty-six (36) months&#8221; shall be restated as &#8220;sixty (60) months&#8221;.</font></div>

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<div style="TEXT-ALIGN: center; TEXT-INDENT: 0pt; DISPLAY: block"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">PLANT OPERATIONS</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Section 5.3 shall be restated in full as follows:</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#8220;5.3&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Lease of Keyes Plant.&#160;&#160;Concurrently with the execution of this Amendment, the Project Company and Owner shall enter into an amendment to the Lease Agreement to extend the term of the Lease Agreement to sixty (60) months (the &#8220;Lease&#8221;).&#8221;</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">TERM AND TERMINATION</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Section 9.4 shall be amended as follows:</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Section 9.4(c) shall be amended and restated in full as follows:</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#8220;(c)&#160;&#160;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Purchase Price</font>.&#160;&#160;The purchase price (the &#8220;Purchase Price&#8221;) for the Owner or Keyes Plant Assets, as applicable, purchased by AE under this Section shall be the Offered Price, and the terms and conditions of the transferee shall be identical in all material respects to the Offer Terms (except that the Purchase Price shall be payable solely in cash).&#160;&#160;If the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash consideration shall be determined as follows: (i)&#160;&#160;for securities traded on a securities exchange or the NASDAQ Stock Market, the value shall be deemed to be the average of the closing price of the securities on such exchange or market over the 30 day period ending on the execution of an agreement with respect to such Change of Control or transfer of Keyes Plant Assets; (ii) for securities actively traded over the counter, the value shall be deemed to be the average of the closing bid prices over the 30 day period ending on the execution of an agreement with respect to such Change of Control or transfer of Keyes Plant Assets; or (iii) if there is no active public market , as determined in good faith by the Board of Directors of each of AE and Owner; provided such determination shall be made as expeditiously as possible.&#8221;</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Section 9.4(h) shall be amended and restated in full as follows:</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#8220;(h)&#160;&#160;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Reimbursement by Owner</font>.&#160;&#160;&#160;In the event that AE does not exercise the rights of&#160;&#160;first refusal set forth in Section 9.4 above after receipt of notice under Section 9.4(a), and Owner consummates a Change of Control or transfers the Keyes Plant Assets described in the ROFR Notice, then to the extent the Lease has not expired or has otherwise been terminated, Owner shall pay to AE an amount equal to: (i) one hundred percent (100%) of the Capital Expenditures, which amount shall in no event exceed $2,350,945, plus (ii) actual documented Startup Losses in an amount not to exceed two million dollars ($2,000,000), if any, plus (iii) an amount equal to eight percent (8%) of the total amounts set forth in (i) and (ii) above multiplied the actual number of years (or pro rated for any partial years) that have elapsed since the Lease Commencement Date to the date of the consummation of the Change of Control or the transfer of the Keyes Plant Assets.&#160;&#160;Upon such payment, this Agreement and the Lease shall terminate and be null and void and the applicable provisions of Section 12.7 shall apply.&#8221;</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Section 12.3 shall be restated in full as follows:</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#8220;12.3&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Substantial Completion</font>.&#160;&#160;Owner may terminate this Agreement immediately by providing written notice to AE in the event that Substantial Completion has not occurred on or prior to March 31, 2011.&#8221;</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The last sentence of Section 12.7 shall be amended by restating &#8220;one million six hundred thousand dollars&#8221; as &#8220;$2,350,945&#8221;.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">REPAIR PLAN</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The parties acknowledge and agree that the new Plant Repair Plan is attached hereto as Exhibit A.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">NO MODIFICATION</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Except as expressly provided herein, nothing contained herein shall be construed as a waiver, amendment, alteration or modification by Landlord of any covenant, term or provision of the Lease Agreement, the Project Agreement, or of any other contract or instrument among the parties hereto, and the failure of Landlord at any time or times hereafter to require strict performance by the Tenant, Parent-Sub or Parent of any provision thereof shall not waive, affect or diminish any right of Landlord to thereafter demand strict compliance therewith.&#160;&#160;Landlord hereby reserve all rights granted under the Project Agreement and any other contract or instrument between the Landlord and the Tenant, Parent-Sub and Parent.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Release</font>.&#160;&#160;Although both Landlord, as a party to this Amendment, and the Tenant, Parent Sub or Parent, or any of their affiliates (collectively, the &#8220;AE Entities&#8221;), as a party to this Amendment,&#160;&#160;regard their conduct as proper and do not believe that the other party has any claim, right, cause of action, offset or defense against the other party in connection with the execution, delivery, performance and administration of, or the transactions contemplated by, the Lease Agreement or the Project Agreement (collectively, the Transaction Agreements&#8221;), both parties as an inducement to enter into this Amendment and as consideration therefor, desire to eliminate any possibility that any past conduct, conditions, acts, omissions, events, circumstances or matters of any kind whatsoever could impair or otherwise affect any rights, interests, contracts or remedies of either party.&#160;&#160;Therefore, the Landlord and each AE Entity unconditionally, freely, voluntarily and, after consultation with counsel and becoming fully and adequately informed as to the relevant facts, circumstances and consequences, jointly and severally releases, waives and forever discharges Landlord and each AE Entity, their respective officers, directors and employees from and against (a) any and all liabilities, indebtedness and obligations, whether known or unknown, of any kind whatsoever, (b) any legal, equitable or other obligations of any kind whatsoever, whether known or unknown, (c) any and all claims, whether known or unknown, under any oral or implied agreement with (or obligation or undertaking of any kind whatsoever of) which is different from or in addition to the express terms of the Transaction Agreements and (d) all other claims, rights, causes of action, counterclaims or defenses of any kind whatsoever, in contract or in tort, in law or in equity, whether known or unknown, direct or derivative, which such Landlord or any AE Entity or any predecessor, successor or assign might otherwise have against Landlord or any AE Entity or their respective officers, directors or employees on account of any conduct, condition, act, omission, event, contract, liability, obligation, demand, covenant, promise, indebtedness, claim, right, cause of action, suit, damage, defense, circumstance or matter of any kind whatsoever which existed, arose or occurred at any time prior to the Effective Date (as hereinafter defined).</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Obligor Waiver and Indemnity</font>.&#160;&#160;To the extent any statute, doctrine or principle of law of any applicable jurisdiction might limit or restrict the effectiveness or scope of its release,&#160;&#160;the Landlord and each AE Entity waives and releases (to the maximum extent permitted by law) any right or defense which it might otherwise have under any such statute, doctrine or principle of law restricting the right of any entity to release claims which such entity does not know or suspect to exist at the time of granting such release, which claims, if known, may have materially affected such entity&#8217;s decision to give such a release</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">This Amendment shall become effective (the &#8220;Effective Date&#8221;) only upon satisfaction of the following conditions on or prior to March 18, 2011.&#160;&#160;If any of the conditions set forth herein are not satisfied in full by March 18, 2011, this Amendment shall be null and void and no longer in force or effect.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font>1.&#160;&#160;Tenant shall have paid or cause to have been to Landlord the sum of $268,677.83 representing the insurance and other expenses due to Landlord;</font></div>

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<div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">2.&#160;&#160;Tenant shall have paid or cause to have been to various vendors as outlined in the attached <font style="DISPLAY: inline; TEXT-DECORATION: underline">Exhibit B</font> the sum of $478,137.67 representing invoiced services provided to the Project Company;</font></div>

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<div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">3.&#160;&#160;Tenant shall have provided evidence reasonably satisfactory to Landlord that all outstanding payments and invoices owed to vendors, contractors and others providing services or repairs to the Leased Premises have been paid in full.</font></div>

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<div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">4.&#160;&#160;The conditions to the effectiveness of Amendment No. 2 to the Lease Agreement dated as of the date hereof shall have been satisfied in full.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 2 to Project Agreement the day and year first above written.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Cilion, Inc.,</font></div>

<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">a Delaware corporation</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">AE Biofuels, Inc.,</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">a Delaware corporation</font></div>

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<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>4
<FILENAME>aebf_ex103.htm
<DESCRIPTION>AMENDMENT NO. 2 TO LEASE AGREEMENT
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<div style="TEXT-ALIGN: right; TEXT-INDENT: 0pt; DISPLAY: block"><font style="FONT-WEIGHT: bold">Exhibit 10.3</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">This Amendment No. 2 to Lease Agreement (&#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Amendment</font>&#8221;) is entered into as of this 9th day of March, 2011, by and between Cilion, Inc., a Delaware corporation (hereinafter &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Landlord</font>&#8221;), AE Advanced Fuels Keyes, Inc., a Delaware corporation (hereinafter &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Tenant</font>&#8221;) and AE Advanced Fuels, Inc., a Delaware corporation (&#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Parent &#8220;Sub</font>&#8221;), each of which are wholly-owned subsidiaries of AE Biofuels, Inc., a Nevada corporation (&#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Parent</font>&#8221;).</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">A.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Landlord, Tenant and Parent entered into a Lease Agreement dated December 1, 2009 (the &#8220;Lease Agreement&#8221;) and entered into Amendment No. 1 to the Lease Agreement on October 29, 2010.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">B.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Landlord, Tenant and Parent entered into a Project Agreement dated December 1, 2009 (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Project Agreement</font>&#8221;), of which the Lease Agreement is a part, and entered into an Amendment No. 1 to Project Agreement dated October 29, 2010.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">C.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In accordance with the Project Agreement, Parent (on behalf of Tenant) has agreed to complete certain Repair and Retrofit Activities with respect to the Keyes Plant.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">D.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In order to finance the Repair and Retrofit Activities, Project Company has consummated a senior debt financing in the principal amount of four million five hundred thousand dollars ($4,500,000) with Third Eye Capital Corporation or its affiliates (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Third Party Financing&#8221;</font>).&#160;&#160;Additional financing from Third Eye Capital and other parties is planned to fund additional Repair and Retrofit Activities and the restart of the plant.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font>NOW, THEREFORE, in consideration of the mutual covenants set forth herein and other good and valuable consideration, the receipt of which is hereby acknowledged by each party, the parties hereby agree to the amendment the of Lease Agreement as follows:</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">DEMISE; TERM</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Section 1.01 Demise of Leased Premises; Term of the Lease Agreement shall be amended in part as follows:</font></font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Lines 4, 5 and 6:&#160;&#160;&#8220;thirty-six (36) months&#8221; shall be restated as &#8220;sixty (60) months&#8221;.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Section 1.02 Early Termination of the Lease Agreement shall be amended and restated in its entirety to read as follows:</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Section 1.02 Early Termination</font>.&#160;&#160;Notwithstanding the foregoing, Landlord, in its sole and absolute discretion, shall have the right to terminate this Lease prior to the Expiration Date, which termination shall be effective on the last day of the thirty-six (36) month anniversary of the Lease Commencement Date (the &#8220;Early Termination Effective Date&#8221;).&#160;&#160;Landlord shall give Tenant prior written notice of Landlord&#8217;s intention to terminate this Lease pursuant to this Section 1.02 (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Early Termination Notice</font>&#8221;) no later than three (3) months prior to the Early Termination Effective Date.&#160;&#160;If Landlord terminates this lease pursuant to this Section 1.02 on the Early Termination Effective Date, Landlord shall, within sixty (60) days after the Early Termination Effective Date, pay to either Tenant or Parent, at Parent&#8217;s written request, an amount (such amount referred to herein as the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Early Termination Fee</font>&#8221;) in cash equal to (i) one hundred percent (100%) of the approved, documented costs actually incurred by Parent or Tenant for Capital Expenditures and Repair and Retrofit Activities as defined in the Project Agreement, which amount shall in no event exceed $2,350,945, plus (ii) actual documented Startup Losses in an amount not to exceed two million dollars ($2,000,000), if any, plus (iii) an amount equal to eight percent (8%) of the total amounts set forth in (i) and (ii) above multiplied the number of full twelve month periods (and with respect to any period less than twelve (12) months, a fraction based on the number of months remaining in such twelve (12) month period) from the Lease Commencement Date until the Early Termination Effective Date.&#160;&#160;Notwithstanding anything herein to the contrary, Landlord shall have the right to reduce and set-off against the amount of the Early Termination Fee payable by Landlord by the dollar amount of damages directly resulting from any uncured default by Tenant.&#160;&#160;Upon such termination, this Lease shall be null and void and neither party shall have any liability or obligations hereunder except as otherwise expressly set forth herein.&#160;&#160;In the event of a Change of Control (as said term is defined in the Project Agreement) of Landlord, or the Keyes Plant Assets (as said term is defined in the Project Agreement) are sold, and Landlord reimburses Tenant or Parent in accordance with Section 9.4(h) of the Project Agreement, then (x) no additional Early Termination Fee or any other amount shall be paid or payable by Landlord under this Section 1.02, and (y) this Lease shall terminate and be null and void simultaneously with the consummation or closing of such Change of Control of Landlord or sale of the Keyes Plant Assets.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Section 2.05 Progress Payment shall be amended and restated to read in its entirety as follows:</font></font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">&#8220;Section 2.05&#160;&#160;Progress Payment</font>.&#160;&#160;On or about October 29, 2010, Tenant paid Landlord as a progress payment the amount of Five Hundred Thousand Dollars ($500,000) via wire transfer.&#160;&#160;In addition, commencing January 1, 2011, Tenant was required to pay a monthly progress payment on the 1st day of each month of Two Hundred Fifty Thousand Dollars ($250,000) until the Lease Commencement Date has occurred (the foregoing payments being referred to herein as the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Progress Payments</font>&#8221;).&#160;&#160;Tenant, however, has not paid the Progress Payments for January 1, February 1 and March 1, of 2011, and a total amount of Seven Hundred Fifty Thousand Dollars ($750,000) is due and owing to Landlord.&#160;&#160;Starting April 1, 2011, Tenant shall pay Landlord the amount of Fifty Thousand Dollars ($50,000) on the first day of every month for fifteen months in order to repay such Seven Hundred Fifty Thousand Dollars ($750,000) in Progress Payments due to Landlord.&#160;&#160;Commencing April 1, 2011, in addition to the Fifty Thousand Dollar ($50,000) monthly payments due above, Tenant shall continue to pay to Landlord the monthly Progress Payments of Two Hundred Fifty Thousand Dollars ($250,000) until the Lease Commencement Date.&#160;&#160;In the month in which the Lease Commencement Date occurs, the Progress Payment paid to Landlord in such month shall be applied to the Base Rent for such month and no Base Rent shall be due for such month.&#160;&#160;The Progress Payment(s) are not a lease payment and are not deducted from future lease payments due under the Lease Agreement.&#160;&#160;The failure to pay any Progress Payment when due shall be deemed a material breach of this Agreement by Tenant.&#8221;</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Section 17.01(A) of the Lease Agreement shall be amended and restated to read in its entirety as follows:</font></font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Except as expressly provided herein, nothing contained herein shall be construed as a waiver by Landlord of any covenant or provision of the Lease Agreement, the Project Agreement, or of any other contract or instrument among the parties hereto, and the failure of Landlord at any time or times hereafter to require strict performance by the Tenant, Parent-Sub or Parent of any provision thereof shall not waive, affect or diminish any right of Landlord to thereafter demand strict compliance therewith.&#160;&#160;Landlord hereby reserves all rights granted under the Project Agreement and any other contract or instrument between the Landlord and the Tenant, Parent-Sub and Parent.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Release</font>.&#160;&#160;Although both Landlord, as a party to this Amendment, and Tenant, Parent Sub or Parent, or any of their affiliates (collectively, the &#8220;AE Entities&#8221;), as a party to this Amendment, regards their conduct as proper and do not believe that the other party has any claim, right, cause of action, offset or defense against the other party in connection with the execution, delivery, performance and administration of, or the transactions contemplated by, the Lease Agreement or the Project Agreement (collectively, the Transaction Agreements&#8221;), both parties as an inducement to enter into this Amendment and as consideration therefor, desire to eliminate any possibility that any past conduct, conditions, acts, omissions, events, circumstances or matters of any kind whatsoever could impair or otherwise affect any rights, interests, contracts or remedies of either party.&#160;&#160;Therefore, the Landlord and each AE Entity unconditionally, freely, voluntarily and, after consultation with counsel and becoming fully and adequately informed as to the relevant facts, circumstances and consequences, jointly and severally releases, waives and forever discharges Landlord and each AE Entity, their respective officers, directors and employees from and against (a) any and all liabilities, indebtedness and obligations, whether known or unknown, of any kind whatsoever, (b) any legal, equitable or other obligations of any kind whatsoever, whether known or unknown, (c) any and all claims, whether known or unknown, under any oral or implied agreement with (or obligation or undertaking of any kind whatsoever of) which is different from or in addition to the express terms of the Transaction Agreements and (d) all other claims, rights, causes of action, counterclaims or defenses of any kind whatsoever, in contract or in tort, in law or in equity, whether known or unknown, direct or derivative, which such Landlord or any AE Entity or any predecessor, successor or assign might otherwise have against Landlord or any AE Entity or their respective officers, directors or employees on account of any conduct, condition, act, omission, event, contract, liability, obligation, demand, covenant, promise, indebtedness, claim, right, cause of action, suit, damage, defense, circumstance or matter of any kind whatsoever which existed, arose or occurred at any time prior to the Effective Date (as hereinafter defined).</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Obligor Waiver and Indemnity</font>.&#160;&#160;To the extent any statute, doctrine or principle of law of any applicable jurisdiction might limit or restrict the effectiveness or scope of its release,&#160;&#160;the Landlord and each AE Entity waives and releases (to the maximum extent permitted by law) any right or defense which it might otherwise have under any such statute, doctrine or principle of law restricting the right of any entity to release claims which such entity does not know or suspect to exist at the time of granting such release, which claims, if known, may have materially affected such entity&#8217;s decision to give such a release.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">This Amendment shall become effective (the &#8220;Effective Date&#8221;) only upon satisfaction of the following conditions on or prior to March18, 2011.&#160;&#160;If any of the conditions set forth herein are not satisfied in full by March 18, 2011, this Amendment shall be null and void and no longer in force or effect.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font>1.&#160;&#160;Tenant shall have paid or cause to have been paid to Landlord the sum of $268,677.83 representing the insurance and other expenses due to Landlord;</font></div>

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<div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">2.&#160;&#160;Tenant shall have paid or cause to have been paid to various vendors outlined in Ehhibit A the sum of $478,137.67 representing invoiced services provided to the Project Company;</font></div>

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<div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">3.&#160;&#160;Tenant shall have provided evidence reasonably satisfactory to Landlord that all outstanding payments and invoices owed to vendors, contractors and others providing services or repairs to the Leased Premises have been paid in full.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 2 to Lease Agreement the day and year first above written.</font></div>

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<td width="29%" style="BORDER-BOTTOM: black 2px solid"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">/s/ Kevin H Kruse</font></td>
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<td width="3%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">By:&#160;</font></td>
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<td width="68%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
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<div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">TENANT</font>:</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">AE Advanced Fuels Keyes, Inc.,</font></div>

<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">a Delaware corporation</font></div>

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<td width="29%" style="BORDER-BOTTOM: black 2px solid"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;/s/ Eric A McAfee</font></td>
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<td width="29%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Eric A. McAfee</font></td>
<td width="68%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">AE Biofuels, Inc.,</font></div>

<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">a Nevada corporation</font></div>

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<td width="29%" style="BORDER-BOTTOM: black 2px solid">/s/ Eric A McAfee</td>
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<td width="3%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">By:</font></td>
<td width="29%">Eric A. McAfee</td>
<td width="68%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
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<td width="3%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Title:&#160;</font></td>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 216pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">PARENT SUB</font>:</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">AE Advanced Fuels, Inc.,</font></div>

<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">a Delaware corporation</font></div>

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<div style="TEXT-ALIGN: center">5</div>
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<TYPE>EX-99.1
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<div style="TEXT-ALIGN: right; TEXT-INDENT: 0pt; DISPLAY: block"><font style="FONT-WEIGHT: bold">Exhibit 99.1</font></div>

<div>&#160;</div>

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<td width="24%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Media Contact:</font></td>
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<td width="24%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Andy Foster</font></td>
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<td width="24%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">AE Biofuels, Inc.&#160;</font></td>
<td width="42%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">AE Biofuels, Inc.&#160;</font></td>
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<td width="24%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">(408) 213-0928&#160;</font></td>
<td width="42%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">(408) 213-0925</font></td>
<td width="33%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
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<td width="24%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">afoster@aebiofuels.com</font></font></td>
<td width="42%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">twaltz@aebiofuels.com</font></font></td>
<td width="33%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 12pt; FONT-WEIGHT: bold">AE Biofuels Secures Additional $3.5 Million Funding For Start-up of 55 Million Gallon Ethanol Plant and Extends Plant Lease to Five Years</font></div>

<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Company set to resume operations at Keyes, California ethanol facility</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">CUPERTINO, Calif. &#8211; March 16, 2011 &#8211; AE Biofuels, Inc. <font style="DISPLAY: inline; FONT-WEIGHT: bold">(OTC: AEBF)</font>, a global vertically integrated biofuels company, today announced its wholly-owned advanced ethanol subsidiary AE Advanced Fuels Keyes, Inc. (AE Keyes), closed a $3.5 million financing with Third Eye Capital Corporation.&#160;&#160;The funds will be used to restart and operate a 55 million gallon per year ethanol plant located in Keyes, California.&#160;&#160;In November 2010, AE Keyes received $4.5 million from Third Eye Capital to complete the repair and retrofit of the Keyes facility.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">AE Keyes expects to restart the Keyes plant and be fully operational by late April 2011. AE Keyes took possession of the facility under a project agreement with Cilion, Inc. in 2010. The revised project agreement extends the original lease from three to five years, with an early termination right at three years.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">AE Advanced Fuels Keyes also announced that it has signed a grain supply and services contract with J.D. Heiskell &amp; Co.&#160;&#160;AE Keyes will market its wet distillers grains (WDG) through an agreement with A.L. Gilbert, and the company previously announced its ethanol marketing agreement with Kinergy Marketing LLC.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The Keyes plant is a leader in environmentally responsible ethanol production with a 2.6:1 positive energy balance and near zero water discharge. In addition, the plant&#8217;s natural gas and steam powered turbine cogeneration unit generates nearly all of the operating electric needs of the plant (4.3 megawatts), thus eliminating dependence on the state&#8217;s electrical grid.</font></div>

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<td width="50%"><font style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt"><font style="FONT-STYLE: italic; DISPLAY: inline">AE Biofuels Secures Additional Financing for Ethanol Plant&#160;</font></font></td>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"><font style="DISPLAY: inline; TEXT-DECORATION: underline">About AE Biofuels</font></font></div>

<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">AE Biofuels, Inc. is a global vertically integrated biofuels company based in Cupertino, California, developing sustainable solutions to address the world's renewable energy needs.&#160;&#160;The company is working to commercialize its patent-pending next-generation cellulosic ethanol technology that enables the production of biofuels from both non-food and traditional feedstocks. Its wholly-owned Universal Biofuels subsidiary built and operates a nameplate 50 million gallon per year biodiesel production facility on the east coast of India. For additional information about AE Biofuels, please visit <font style="DISPLAY: inline; TEXT-DECORATION: underline">www.aebiofuels.com</font><font style="DISPLAY: inline; TEXT-DECORATION: underline">.</font></font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Forward Looking Statements</font></font></div>

<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The information contained herein includes forward-looking statements. These statements relate to future events.&#160;&#160;Statements regarding future events are based on the parties' current expectations and are necessarily subject to associated risks related to, among other things, the ability of AE Biofuels to successfully commercialize its cellulosic ethanol technology, changes in government policy regarding ethanol production, the reduction or elimination of federal tax incentives for ethanol production, and changes in environmental regulations. Actual results may differ materially from those in the projections or other forward-looking statements. For information regarding other related risks, please see the "Risk Factors" section of AE Biofuels&#8217; filings with the SEC, including its most recent filings on Form 8-K and Form 10-Q.</font></div>

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