EXHIBIT 10.4
 
AMENDMENT NO. 1 TO LEASE AGREEMENT
FOR
KEYES, CALIFORNIA
ETHANOL PRODUCTION FACILITY

This Amendment No. 1 to Lease Agreement (“Amendment”) is entered into as of this
29th day of October, 2010, by and between Cilion, Inc., a Delaware corporation
(hereinafter “Landlord”), AE Advanced Fuels Keyes, Inc., a Delaware corporation
(hereinafter “Tenant”) and AE Advanced Fuels, Inc., a Delaware corporation
(“Parent “Sub”), each of which are wholly-owned subsidiaries of AE Biofuels,
Inc., a Nevada corporation (“Parent”).
 
RECITALS
 
A.   Landlord, Tenant and Parent entered into a Lease Agreement dated December
1, 2010 (the “Lease Agreement”).
 
B.    Landlord, Tenant and Parent entered into a Project Agreement dated
December 1, 2010 (the “Project Agreement”), of which the Lease Agreement is a
part.
 
C.    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.
 
D.    In order to finance the Repair and Retrofit Activities, Project Company
will need to consummate 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 “Third Party Financing”) and it is a
condition to the effectiveness of this Amendment, among other conditions set
forth herein, that such Third Party Financing is consummated, and Project
Company shall have received the proceeds therefrom, on or prior to October 29,
2010.
 
    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:
 
DEMISE; TERM
 
Section 1.01 of the Lease Agreement shall be amended in part as follows:
 
Line 19: “July 31, 2010” shall be restated as “January 31, 2011”.
 
 
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RENT
 
Section 2.05 shall be added as follows:
 
“Section 2.05  Progress Payment.  On or prior to October 29, 2010, Tenant shall
pay Landlord as a progress payment (the “Progress Payment”) the amount of Two
Hundred Fifty Thousand Dollars ($250,000) via wire transfer.  Starting January
1, 2011, Tenant shall pay Landlord additional Progress Payments in the amount of
Two Hundred Fifty Thousand Dollars ($250,000) on the first day of every month
until the Lease Commencement Date has occurred.  In the month in which the Lease
Commencement Date occurs, the Progress Payment shall be applied to the Base Rent
for the entire month and the first payment for the Base Rent for the partial
month in which the Progress Payment was made shall be waived by Landlord.  The
Progress Payment(s) are not a lease payment and are not deducted from future
lease payments due under the Lease Agreement.  The January 1, 2011 Progress
Payment will be amortized over a 5 month period beginning on the earlier of the
Lease Commencement Date or February 1, 2011.  The failure to pay any Progress
Payment when due shall be deemed a material breach of this Agreement by Tenant.”
 
DEFAULT
 
Section 17.01(A) of the Lease Agreement shall be amended AND RESTATED TO READ IN
ITS ENTIRETY AS FOLLOWS:
 
(a)  in the event Rent or any Progress Payment is not made when due hereunder”.
 
WAIVER OF DEFAULT
 
Upon: (i) the payment to Landlord of $170,000 as reimbursement of insurance and
other Keyes Plant-related expenses on or prior to October 21, 2010, and (ii) the
payment to Seabourn Industrial of $82,000 and the release of the mechanic lien
on the Keyes Plant on or prior to November 1, 2010, then Landlord hereby
acknowledges that the defaults set forth in that certain letter dated July 27,
2010 and attached hereto shall have been cured.  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.  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.”

 
 
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CONDITION OF EFFECTIVENESS

 
This Amendment shall become effective only upon satisfaction of the following
conditions on or prior to October 29, 2010.  If any of the conditions set forth
herein are not satisfied in full by October 29, 2010, this Amendment shall be
null and void and no longer in force or effect.
 
1.  The Third Party Financing shall have been consummated and the Project
Company shall have received the proceeds from such financing;
 
2.  Project Company shall have paid Landlord the sum of $500,000 representing
the First Progress Payment and a prepayment of the Base Rent for the second and
third month of the Term;
 
3.  The conditions to the effectiveness of Amendment No. 1 to the Project
Agreement dated as of the date hereof shall have been satisfied in full.
 
---- SIGNATURES ON NEXT PAGE ----
 
 
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1 to
Lease Agreement the day and year first above written.
 

LANDLORD:      
Cilion, Inc.,
  a Delaware corporation        
By:
/s/ Kevin H. Kruse     Kevin H. Kruse     Chairman and Chief Executive Officer  
           
TENANT:
        AE Advanced Fuels Keyes, Inc.,   a Delaware corporation         By: /s/
Eric A. McAfee     Eric A. McAfee     Chairman and Chief Executive Officer      
       
PARENT:
       
AE Biofuels, Inc.,
 
a Nevada corporation
        By: /s/ Eric A. McAfee     Eric A. McAfee     Chairman and Chief
Executive Officer              
PARENT SUB:
       
AE Advanced Fuels, Inc.,
 
a Delaware corporation
        By: /s/ Eric A. McAfee     Eric A. McAfee     Chairman and Chief
Executive Officer        

 
 
 
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