Confidential treatment requested as to certain portions, which portions were omitted and filed separately with the Securities and Exchange Commission.
ASSIGNMENT OF PROCEEDS AGREEMENT
This Assignment of Proceeds Agreement (“ Assignment Agreement ”), dated as of December 10, 2009 is between AE BIOFUELS, INC. , a Nevada corporation (“ AEB ”), and THIRD EYE CAPITAL CORPORATION , an Ontario corporation (“ Third Eye ”), as agent for certain purchasers (“ Purchasers ”) of the Note (defined below) dated May 16, 2008.
AEB, Third Eye and the Purchasers named therein entered into a certain Note and Warrant Purchase Agreement, dated as of May 16, 2008, as amended by that certain Amendment No. 1 to Note and Warrant Purchase Agreement dated as of May 28, 2008 between the Company and Third Eye, 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 Third Eye and as further amended by that certain Amendment No. 4 and Limited Waiver to Note and Warrant Purchase Agreement dated as of December 10, 2009 between the Company and Third Eye (collectively, the “ Original Agreement ” or “ Note ”).
The Company and Third Eye signed 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. As of the date of this Assignment Agreement, the Note is currently in default.
AEB is the parent company of AE Advanced Fuels, Inc., a Delaware corporation (the “ Subsidiary ”), and AE Advanced Fuels Keyes, Inc., a Delaware corporation (the “ Project Company ”). AEB and the Project Company have entered into a project agreement and lease agreement with Cilion, Inc. in connection with the 55 million gallon per year ethanol plant owned by Cilion, Inc. located in Keyes, California. AEB plans to receive royalties and other payments from the Subsidiary as well as dividends from the Project Company resulting from the net cash flows provided from operating the leased ethanol plant (collectively with all cash dividends, cash royalties and all other proceeds thereof received by AEB from time to time from the Subsidiary or the Project Company, including, without limitation, from project financing* into the Subsidiary and/or the Project Company, the “ Proceeds ”). These Proceeds will be used for ordinary business expenses, including repayment of AEB’s outstanding debt and operating expenses.
AEB has agreed to assign to Third Eye, as agent for the Purchasers, and grant to Third Eye a first priority security interest in, fifty percent (50%) of all Proceeds (collectively, the “Assigned Proceeds”) to repay outstanding principal and interest on the Note.
NOW, THEREFORE, the parties hereby agree as follows:
1. ASSIGNMENT OF PROCEEDS . AEB hereby assigns to Third Eye, as agent for the Purchasers, and grants to Third Eye, as agent for the Purchasers, a first priority security interest in, the Assigned Proceeds.
DEPOSIT ACCOUNT . AEB has established account no. __________________(the " Account ") at the Heritage Bank (the " Bank ") located at ____________, San Jose, California in the name of AEB. AEB acknowledges that the Account is a deposit account denominated in dollars. AEB shall pay or cause to be paid all Assigned Proceeds directly to the Account in immediately available funds. Pursuant to a mutually acceptable deposit account control agreement among AEB, Third Eye, as agent for the Purchasers, and Bank (the “ Control Agreement ”), Third Eye, as agent for the Purchasers, shall have a first priority security interest in and control over the Assigned