AE
      BIOFUELS, INC.

    PARKASH
      P. AHUJA EXECUTIVE EMPLOYMENT AGREEMENT

    


    JUNE
      17, 2008

     

    This
      Agreement is made by and between AE Biofuels, Inc., a Nevada corporation (the
      “Company”), and Parkash P. Ahuja (“Executive”) to be effective as of June 17,
      2008 (the “Effective Date”).

     

    1. Duties
      and Scope of Employment.

     

     

    (a) Position;
      Employment Commencement Date; Duties.
      Executive’s employment with the Company pursuant to this Agreement is effective
      as of June 17, 2008 (the “Employment Commencement Date”). On and after the
      Employment Commencement Date, the Company shall retain the Executive as
Chief
      Operating Officer
      reporting to the Chief Executive Officer and President of the Company.
 During
      the Employment Term (as defined in section 2 herein), Executive shall render
      such business and professional services in the performance of his duties as
      are
      consistent with Executive’s position within the Company, and as shall reasonably
      be assigned to him by the Chief Executive Officer and President.

     

    (b) Obligations.
      During
      the Employment Term and as consideration for the compensation set forth herein,
      Executive shall devote his full business efforts and time during normal business
      hours to the Company. During the Employment Term the Executive agrees not to
      engage in any other employment, occupation or consulting activity for any direct
      or indirect remuneration without the prior approval of the Chief Executive
      Officer; provided, however, that Executive may serve in any capacity with any
      civic, educational or charitable organization.

     

    2. Employment
      Term.
      It is
      intended that the employment arrangement contemplated by this Agreement shall
      continue until the third anniversary of the Effective Date (such period being
      referred to herein as the “Employment Term”). Notwithstanding the foregoing, the
      parties agree that neither this Agreement nor any provision herein is intended
      to guarantee the continuation of Executive’s employment for the duration of the
      Employment Term. In the event that Executive’s employment with the Company
      terminates prior to the expiration of the Employment Term for any reason, the
      parties agree that Executive shall be entitled to receive only those benefits
      that are expressly provided by this Agreement in such circumstances. Subject
      to
      Section 6(d)(ix), Executive may terminate his employment for any reason without
      notice and without penalty.

     

    3. Employee
      Benefits.
      During
      the Employment Term, Executive shall be eligible to participate in all employee
      and fringe benefit plans maintained by the Company (both currently and as may
      be
      made available from time to time) that are applicable to other senior management
      to the full extent provided for under those plans for the position held by
      the
      Executive.

     

    4. Vacation/Personal
      Days.
      During
      the Employment Term, Executive shall have four weeks of combined paid vacation
      and personal days per year. Accrual and use of vacation time shall be governed
      by the Company’s employee handbook as in effect from time to time. In the event
      of termination for any reason, any accrued unused vacation time shall be paid
      in
      accordance with the Company’s employee handbook.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    5. Expenses.
      While
      Executive is employed during the Employment Term, the Company will reimburse
      Executive for reasonable travel, entertainment or other expenses incurred by
      Executive in the furtherance of or in connection with the performance of
      Executive's duties hereunder, in accordance with the Company's expense
      reimbursement policy as in effect from time to time.

     

    6. Compensation.

     

    (a) Base
      Salary.
      While
      employed by the Company, the Company shall pay the Executive as compensation
      for
      his services a base salary at the annualized rate of One Hundred Eighty Thousand
      Dollars ($180,000) per year (the “Base Salary”). Such salary shall be paid
      periodically in accordance with normal Company payroll practices and subject
      to
      required withholding.

     

    (b) Bonus.
      Executive shall receive a signing bonus of $30,000, and shall be entitled to
      receive an annual bonus (the “Bonus”) of up to $120,000 based upon Executive’s
      performance and the Company’s attainment of objectives established by the
      Compensation Committee of the Board. The Bonus for year 2008 shall be 50% of
      the
      annual Bonus thereafter. The Bonus shall be paid 50% at March 31st
      and 50%
      at June 30th of the year following the year in which the Bonus is earned. Except
      as permitted under Section 7, Executive must be employed by the Company during
      the entire applicable bonus period for the payment of the Bonus. With respect
      to
      any subjective milestones, the determination of whether Executive has attained
      the milestones for the Bonus shall be reasonably determined by the Compensation
      Committee.

     

    (c) Options.
      The
      Company shall recommend to the Compensation Committee of the Board of Directors
      of the Company that it grant Executive an option to purchase shares of common
      stock of the Company in accordance with the Company’s policies and procedures as
      they exist from time to time. The terms, including vesting, of any stock option
      granted to Executive shall be determined by the Compensation Committee of the
      Company’s Board of Directors and shall be governed by the relevant Stock Plan
      and Stock Option Agreement entered into between the Company and the
      Executive.

     

    (d) Severance.
      During
      the first ninety days after the date hereof, the terms of this section 6(d)
      shall not apply.

     

    (i) Involuntary
      Termination Other Than for Cause; Constructive Termination on or Following
      Change of Control.
      If, on
      or following a Change of Control of the Company (as defined in Section 6(v)
      below), Executive’s employment with the Company is Constructively Terminated or
      involuntarily terminated by the Company other than for Cause, Executive’s death,
      or Executive’s Total Disability, then, subject to Executive executing and not
      revoking a standard form of mutual release of claims with the Company, the
      Executive shall receive, in addition to any other amounts due and owing
      hereunder: a) continued salary payments for three months of Base Salary; b)
      immediate vesting of 50% of any remaining unvested Option; and c) the medical
      benefits described in subsection 6(d)(iii) below.

     

    
      
        
        

      

      
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    (ii) Involuntary
      Termination Other Than for Cause; Constructive Termination Prior to Change
      of
      Control.
      If,
      prior to a Change of Control, Executive’s employment with the Company is
      Constructively Terminated or involuntarily terminated by the Company other
      than
      for Cause (as defined below), Executive’s death, or Executive’s Total
      Disability, then, subject to Executive executing and not revoking a standard
      form of mutual release of claims with the Company,
      the
      Executive shall receive, in addition to any other amounts due and owing
      hereunder: a) continued salary payments for three month’s of base salary after
      termination, less applicable withholding; b) immediate vesting of 25% of any
      remaining unvested option; and c) the medical benefits described in subsection
      6(d)(iii) below.

     

    (iii) In
      addition to the severance payments and vesting acceleration set forth in
      subsections 6(d)(i) and 6(d)(ii) above, Executive shall receive at the Company’s
      expense 100% of Company-paid health, dental and vision insurance benefits at
      the
      same level of coverage as was provided to Executive immediately prior to the
      termination of Executive’s employment with the Company (“Company-Paid
      Coverage”). If such coverage included Executive’s dependents immediately prior
      to Executive’s termination, such dependents shall also be covered at the
      Company’s expense. Company-Paid Coverage shall continue until the earlier of (i)
      3 months following the date of the termination of Executive’s employment (the
“Benefits Termination Date”), or (ii) the date upon which Executive or
      Executive’s dependents become covered under another employer’s group health,
      dental and vision insurance benefit plans.

     

    (iv) Cause
      Definition.
      For the
      purposes of this Agreement, “Cause” means (1) 
      Executive’s material, willful and continuing breach of his obligations to the
      Company set forth in the employment agreement after thirty (30) days
      written notice from the Company specifying the nature of Executive’s breach and
      demanding that such breach be remedied (unless such breach by its nature cannot
      be cured, in which case notice and an opportunity to cure shall not be
      required); (2) Executive’s conviction of a felony that is injurious to the
      Company or its business; or (3) act or acts of dishonesty by Executive that
      are materially injurious to the Company or its business.

     

    (v) Constructive
      Termination Definition.
      For the
      purposes of this Agreement,
      “Constructive Termination” means, without Executive’s written consent, (1) a
      material reduction in Executive’s salary or benefits; provided, however, that a
      reduction in Executive’s salary or benefits will not constitute a Constructive
      Termination if it is a part of and proportional to a reduction in salary or
      benefits of the Company’s executive staff as a whole, (ii) a material diminution
      of Executive’s duties, authority or responsibilities as in effect immediately
      prior to such diminution.

     

    (vi) Change
      of Control Definition.
      For the
      purposes of this Agreement, “Change of Control” means, in one or a series of
      transactions: (1) a reorganization or merger of the Company with or into
      any other Company which will result in the Company’s shareholders immediately
      prior to such transaction not holding, as a result of such transaction, at
      least
      50% of the voting power of the surviving or continuing entity or the entity
      controlling the surviving or continuing entity; (2) a sale of all or
      substantially all of the assets of the Company which will result in the
      Company’s shareholders immediately prior to such sale not holding, as a result
      of such sale, at least 50% of the voting power of the purchasing entity;
      (3) a change in the majority of the Board not approved by at least
      two-thirds of the Company’s directors in office prior to such change; or
      (4) the adoption of any plan of liquidation providing for the distribution
      of all or substantially all of the Company’s assets.

     

    
      
        
        

      

      
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    (vii) Total
      Disability Definition.
      For the
      purposes of this Agreement, “Total Disability” shall mean Executive’s mental or
      physical impairment which has or is likely to prevent Executive from performing
      the responsibilities and duties of his position for three (3) months or more
      in
      the aggregate during any six (6) month period. Any question as to the existence
      or extent of Executive’s disability upon which the Executive and the Company
      cannot agree shall be resolved by a qualified independent physician who is
      an
      acknowledged expert in the area of the mental or physical impairment, selected
      in good faith by the Board and Executive (or his personal
      administrator).

     

    (viii) No
      Mitigation.
      Except
      as specifically provided herein, the Executive shall not be required to mitigate
      the value of any severance benefits contemplated by this Agreement, nor shall
      any such benefits be reduced by any earnings or benefits that the Executive may
      receive from any other source.

     

    (ix) Voluntary
      Termination other than pursuant to a Constructive Termination; Involuntary
      Termination for Cause.
      If
      during the Employment Term the Executive's employment is terminated by the
      Company for Cause, or by Executive for any reason other than death, Total
      Disability or pursuant to a Constructive Termination, then all further vesting
      of any share option, restricted share award or other Company equity compensation
      held by Executive will cease immediately (however, Executive shall be permitted
      to exercise vested options for the time period specified in his option
      agreements and he shall retain all vested restricted shares) and all payments
      of
      compensation by the Company to Executive hereunder will terminate immediately
      (except as to amounts already earned, including, without limitation, any amounts
      owed under Section 4).

     

    (x) Involuntary
      Termination on Death.
      If
      during the Employment Term the Executive's employment is terminated by the
      Company as a result of Executive’s death (specifically excluding suicide), then
      25% of unvested Options and other equity awards from the Company then held
      by
      Executive shall immediately accelerate, or if Executive is then holding unvested
      shares, the Company’s right to repurchase the then-unvested shares under each
      such equity award shall lapse, with respect to 25% of the shares under each
      such
      award.

     

    (xi) Assignment.
      This
      Agreement shall be binding upon and inure to the benefit of (a) the heirs,
      beneficiaries, executors and legal representatives of Executive upon Executive’s
      death and (b) any successor of the Company. Any such successor of the
      Company shall be deemed substituted for the Company under the terms of this
      Agreement for all purposes. As used herein, “successor” shall include any
      person, firm, corporation or other business entity which at any time, whether
      by
      purchase, merger or otherwise, directly or indirectly acquires all or
      substantially all of the assets or business of the Company.

     

    
      
        
        

      

      
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    7. Notices.
      All
      notices, requests, demands and other communications called for hereunder shall
      be in writing and shall be deemed given if (i) delivered personally or by
      facsimile, (ii) one (1) day after being sent by Federal Express or a
      similar commercial overnight service, or (iii) three (3) days after being
      mailed by registered or certified mail, return receipt requested, prepaid and
      addressed to the parties or their successors in interest at the following
      addresses, or at such other addresses as the parties may designate by written
      notice in the manner aforesaid: 

    


    
      	
            	If
              to the Company:	
              AE
                Biofuels, Inc.

              
                Attn:
                  Eric McAfee, Chairman/CEO

                20400
                  Stevens Creek Blvd., Suite 700

                Cupertino,
                  CA 95014

              

            


    

    
      
        


        
          	
                	If
                  to Executive: 	
                  Parkash
                    P. Ahuja

                  770
                    Jordan Ave.

                  Los
                    Altos, CA
                    94022

                


        

      

    

     

    or
      at the
      last residential address known by the Company.

    


    8. Proprietary
      Information Agreement.
      Executive agrees to enter into the Company’s standard Employment, Confidential
      Information and Invention Assignment Agreement (the “Proprietary Information
      Agreement”).

     

    9. Entire
      Agreement.
      This
      Agreement, the Option agreement, the Restricted Share Repurchase Agreement
      (if
      applicable), the employee benefit plans referred to herein and the Proprietary
      Information Agreement represent the entire agreement and understanding between
      the Company and Executive concerning Executive’s employment relationship with
      the Company, and supersede and replace any and all prior agreements and
      understandings concerning Executive’s employment relationship with the
      Company.

     

    10. No
      Oral Modification, Cancellation or Discharge.
      This
      Agreement may only be amended, canceled or discharged in writing signed by
      Executive and the Chief Executive Officer, the Chairman of the Board or a duly
      authorized representative of the majority of the members of the
      Board.

     

    11. Withholding.
      The
      Company shall be entitled to withhold, or cause to be withheld, from payment
      any
      amount of withholding taxes required by law with respect to payments made to
      Executive in connection with his employment hereunder.

     

    12. Governing
      Law.
      This
      Agreement shall be governed by the laws of the State of California without
      reference to rules relating to conflict of law.

     

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    IN
      WITNESS WHEREOF, the undersigned have executed this Agreement as of June 17,
      2008 at Cupertino, California:

     

    AE
      BIOFUELS, INC.:

    


    


    /s/
      Eric
      McAfee                         
               


    Eric
      McAfee

    Chairman/CEO

    


    Date:
      June 17, 2008

    


    EXECUTIVE:

    


    
      /s/
        Parkash
        Ahuja                                     


      Parkash
        Ahuja

    

    


    Date:
      June 17, 2008

    


    
      
        
          
          

        

        
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    ACKNOWLEDGEMENT
      OF RECEIPT OF STOCK OPTION

    


    On
      June
      17, 2008, the Compensation Committee of the Board of Directors of AE Biofuels,
      Inc. approved the grant to the undersigned of an option to purchase 480,000
      shares of common stock of AE Biofuels, Inc. (the “Option”) at the exercise price
      of $3.70 per share, which was equal to the last sale price of one share of
      the
      Company’s common stock as reported on the Over-the-Counter Bulletin Board on
      July 17, 2008.

    


    The
      Option is exercisable, in whole or in part, according to the following vesting
      schedule:

    


    40,000
      shares subject to the Option vest and become exercisable on September 30, 2008
      and an additional 40,000 shares subject to the Option vest and become
      exercisable on the last day of each calendar quarter thereafter until fully
      vested. The Option, to the extent not exercised, shall expire on June 16,
      2013.

    


    The
      undersigned hereby acknowledges receipt of the foregoing Option and hereby
      acknowledges that as of the date hereof there are no other agreements or
      understandings, whether oral or in writing, between the Executive and the
      Company with respect to the grant of any stock options, restricted stock awards,
      restricted stock units, stock appreciation rights, performance units,
      performance shares or any other similar right in or with respect to the shares
      of the Company.

    


    ACKNOWLEDGED
      AND AGREED

    


    


    /s/
      Parkash
      Ahuja                                     


    Parkash
      Ahuja

    


    Dated:
      June 17, 2008

     

    
      
        
        

      

      
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