EXHIBIT 10.1
LIMITED WAIVER
TO NOTE AND WARRANT PURCHASE AGREEMENT
 
This Limited Waiver to Note and Warrant Purchase Agreement (the "Waiver"), dated
as of May 24, 2011 is between AE BIOFUELS, INC., a Nevada corporation (the
“Company”) and THIRD EYE CAPITAL CORPORATION, an Ontario corporation, as agent
(“Agent”).
 
RECITALS
 
A. The Company, Agent and the Purchasers named therein entered into a certain
Note and Warrant Purchase Agreement, dated as of May 16, 2008 (the “Original
Agreement”), as amended by that certain Amendment No. 1 to Note and Warrant
Purchase Agreement, dated as of May 28, 2008 between the Company and Agent, and
as further amended by that certain Amendment No. 2 and Limited Waiver to Note
and Warrant Purchase Agreement, dated as of July 23, 2008 between the Company
and Agent, an Amendment No. 4 and Limited Waiver to Note and Warrant Purchase
Agreement, dated as of December 10, 2009 between the Company and Agent and an
Amendment No. 5 and Limited Waiver to Note and Warrant Purchase Agreement, dated
as of October 18, 2010 between the Company and Agent (as the same may be further
amended, restated, supplemented, revised or replaced from time to time, the
“Agreement”).  The Company executed an Amendment No. 3 and Limited Waiver to
Note and Warrant Purchase Agreement dated March 31, 2009; however, the Company
failed to satisfy the conditions precedent to the effectiveness of such
amendment and such amendment is hereby deemed null and void.  Capitalized terms
used but not defined in this Waiver shall have the meaning given to them in the
Agreement.
 
B. The Indebtedness of the Company to Agent and the Purchasers under the
Agreement and the Notes is secured by, among other things, certain real property
located in Vermilion County, Illinois (the “Danville Illinois Real Property”)
pursuant to a Mortgage, Security Agreement, Assignment of Rents and Leases and
Fixture Filing, dated as of May 16, 2008 between Danville Ethanol, Inc. and
Agent (as amended, the “Danville Mortgage”).
 
C. The Danville Mortgage prohibits the sale of the Danville Illinois Real
Property without the prior written consent of Agent, and Section 4.5(ii) of the
Agreement requires, among other things, that one hundred percent (100%) of the
net proceeds from the sale of the Danville Illinois Real Property be applied to
the prepayment of the Notes (the “Mandatory Prepayment”).
 
D. The Company and Danville have requested, and Agent, for itself and the
Purchasers, has agreed to permit the sale of the Danville Illinois Real Property
and to waive, in part, the Mandatory Prepayment requirement as to one hundred
percent (100%) of the net proceeds from the sale thereof, subject to the
covenants, terms and conditions set forth in this Waiver.
 
 
 

--------------------------------------------------------------------------------

 
 
AGREEMENT
 
SECTION 1.Reaffirmation of Indebtedness; Recitals.
 
(A)    
The Company hereby confirms that as of the date of this Waiver the outstanding
principal balance of the Notes and all accrued and unpaid interest thereon is
$7,503,128.02.

 
(B)    
The foregoing recitals are hereby incorporated into and made a part of this
Agreement, including all defined terms referenced therein.

 
SECTION 2.Limited Waiver and Covenant of the Company.
 
(A)    
Limited Waiver.  Subject to the terms, covenants and conditions of this Waiver,
including Section 2(B) below and the conditions precedent in Section 3 below,
and, notwithstanding anything to the contrary in the Agreement, the Danville
Mortgage or any of the Transaction Documents, Agent, for itself and the
Purchasers, hereby consents to the sale of the Danville Illinois Real Property
for an aggregate purchase price of $1,598,593.50 (the “Sale Proceeds”).

 
(B)    
Covenants of the Company.  The Company covenants and agrees with Agent and
Purchasers as follows:

 
(i)    
At the closing of the sale of the Danville Illinois Real Property, the Company
shall cause a portion of the Sale Proceeds in the amount of $900,000 to be paid
directly by Vermilion County Title Company (“Escrow Agent”) to Agent via wire
transfer to an account designated by Agent;

 
(ii)    
The balance of the Sale Proceeds shall be paid by Escrow Agent to the Company to
be used by the Company solely for completion of the construction of a glycerin
refining plant at the Company’s biodiesel operations in India; and

 
(iii)    
Within nine (9) months following the date of this Waiver, the Company shall pay
to Agent the amount of $700,000 to be applied by Agent to the outstanding
Indebtedness under the Notes.

 
Failure of the Company to comply with the terms and conditions of this Waiver,
including the terms and conditions of this Section 2(B), shall constitute an
Event of Default under the Agreement.
 
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 other Transaction Documents, this Waiver, 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.  Agent and
Purchasers hereby reserve all rights granted under the Agreement, the
Transaction Documents, this Waiver and any other contract or instrument among
the Company and/or any of its Subsidiaries, Purchasers and Agent.
 
 
2

--------------------------------------------------------------------------------

 
 
SECTION 3.  Conditions to Waiver. This Waiver, and the consents contained
herein, shall be effective only upon and subject to satisfaction of the
following conditions precedent:
 
(A)    
Agent shall have received an original of this Waiver duly executed by the
parties hereto.

 
(B)    
Agent shall have received cash proceeds from the sale of the Danville Illinois
Real Property via wire transfer to an account designated by Agent in the amount
of $900,000.

 
(C)    
Agent shall have received a waiver and consent fee of $10,000, which waiver and
consent fee shall be due and payable and shall be deemed fully earned on the
date of this Waiver.

 
(D)    
Agent shall have received 700,000 shares of the common stock of the Company in
form acceptable to Agent.

 
(E)    
Agent shall have received all other approvals, opinions, documents, agreements,
instruments, certificates, schedules and materials as Agent may reasonably
request.

 
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.  In consideration of the foregoing and the transactions
contemplated by this Waiver, 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 Waiver.  Except as expressly set
forth herein, (a) the Agreement and the other Transaction Documents remain in
full force and effect, (b) this Waiver 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 Waiver 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.
 
SECTION 4.  Release of Danville Mortgage.  Agent agrees to deliver to the Escrow
Agent an executed Mortgage Release substantially in the form attached hereto as
Exhibit A prior to the closing of the sale of the Danville Illinois Real
Property, to be held by Escrow Agent in escrow and not released without a
written email confirmation from Agent or its counsel, Jennifer Homer at DLA
Piper LLP (US).
 
SECTION 5.   Agreement in Full Force and Effect as Amended.  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.  Except as expressly set forth herein,
this Waiver 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.
 
 
3

--------------------------------------------------------------------------------

 
 
SECTION 6.  Representations.  The Company hereby represents and warrants to
Agent and Purchasers as of the date of this Waiver and as of the date hereof as
follows:  (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 Waiver 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 Waiver or any other Transaction
Documents executed and/or delivered in connection herewith by or against it; (D)
this Waiver and all other Transaction Documents executed and/or delivered in
connection herewith have been duly executed and delivered by it; (E) this Waiver
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’ rights generally or by general
principles of equity; (F) after giving effect to this Waiver, 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 Waiver; 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.
 
SECTION 7.  Miscellaneous.
 
       (A)        This Waiver 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.  Each party agrees that it will be bound by its own facsimile
signature and that it accepts the facsimile signature of each other party.  The
descriptive headings of the various sections of this Waiver 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.  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.
 
       (B)        This Waiver may not be changed, amended, restated, waived,
supplemented, discharged, canceled, terminated or otherwise modified without the
written consent of the Company and Agent.  This Waiver shall be considered part
of the Agreement and shall be a Transaction Document for all purposes under the
Agreement and other Transaction Documents.
 
       (C)        This Waiver, 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.  There are no
unwritten oral agreements between the parties with respect to the subject matter
hereof and thereof.
 
       (D)        THIS WAIVER AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
UNDER THIS WAIVER 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.
 
       (E)           The Company may not assign, delegate or transfer this
Waiver or any of its rights or obligations hereunder.  No rights are intended to
be created under this Waiver for the benefit of any third party donee, creditor
or incidental beneficiary of the Company or any of its Subsidiaries.  Nothing
contained in this Waiver shall be construed as a delegation to Agent or
Purchasers of the Company’s or any of its Subsidiaries’ duty of performance,
including, without limitation, any duties under any account or contract in which
Agent or Purchasers have a security interest or lien.  This Waiver shall be
binding upon the Company and its respective successors and assigns.
 
       (F)           THE COMPANY HEREBY ACKNOWLEDGES THAT THE COMPANY’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 “OBLIGATIONS” OR TO SEEK AFFIRMATIVE RELIEF
OR DAMAGES OF ANY KIND OR NATURE FROM AGENT OR ANY PURCHASER.  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 “RELEASED PARTIES”), 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 WAIVER 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 “LOANS”, 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 WAIVER.
 
 
 
4

--------------------------------------------------------------------------------

 
 
 
 
    This Waiver is executed as of the date stated at the beginning of this
Waiver.
 
 

  Agent:          
Third Eye Capital Corporation
         
 
By:
/s/ Arif Bhalwani       Name: Arif Bhalwani       Its: Managing Director        
            AE Biofuels, Inc.            
By:
/s/ Eric McAfee       Name: Eric McAfee       Its:  CEO  

 
 
 
 
5