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Merger And Reorganization Agreement

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Sectors: Chemicals
Governing Law: California , View California State Laws
Effective Date: February 28, 2007
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EXHIBIT 10.1



MERGER AND REORGANIZATION AGREEMENT



BY AND AMONG



AMERICAN ETHANOL, INC.,

A NEVADA CORPORATION,



CLIFFORD BRADLEY AND BOB KEARNS,



AND



RENEWABLE TECHNOLOGY CORPORATION,

A DELAWARE CORPORATION

















1. Definitions. 1
2. Plan of Reorganization. 5
3. Terms of Merger. 5
4. Exchange of Certificates. 7
5. Representations and Warranties of RTC. 9
6. Representations and Warranties of AE. 12
7. Closing. 13
8. Actions Prior to Closing. 13
9. Conditions Precedent to the Obligations of RTC. 14
10. Conditions Precedent to the Obligations of AE. 15
11. Survival and Indemnification. 16
12. Nature of Representations. 16
13. Documents at Closing. 16
14. Finder's Fees. 17
15. Post-Closing Covenants. 17
16. Miscellaneous. 18




Exhibit A Certificate of Merger
Exhibit B Merger Milestones and AE Earnout Shares
Exhibit C Consulting Agreement with MMP
Exhibit D RTC Technology Assignment Agreement to RTC
Exhibit E EET Technology Assignment Agreement to EEI
Exhibit F Shareholders Agreement
Exhibit G Indemnification Provisions
Exhibit H Escrow Agreement


& #160;
















This Agreement and Plan of Reorganization (hereinafter this " Agreement ") is entered into on this 28 day of February, 2007, by and among American Ethanol, Inc., a Nevada corporation (hereinafter " AE ") on one hand; and Renewable Technology Corporation, a Delaware corporation (hereinafter " RTC "); Clifford Bradley and Bob Kearns (hereinafter, Clifford Bradley and Bob Kearns shall be known collectively as the " Minority Stockholders "), on the other hand.



RECITALS



WHEREAS the Minority Shareholders collectively own 100% of the outstanding capital stock of RTC;



WHEREAS, RTC is a holding company whose sole asset are 49% of the outstanding shares of Energy Enzyme, Inc. (" EEI "), a Delaware corporation.



WHEREAS, upon the completion of either of the Merger Milestones (defined on Exhibit B attached hereto), AE desires to acquire, as a wholly-owned subsidiary via the merger with RTC, and to issue shares of AE restricted common stock to the stockholders of RTC upon the terms and conditions set forth herein. At the consummation of the Merger (defined below), and subject to the terms and conditions herein, RTC shall be merged with and into AE, whereupon AE shall be the surviving corporation of said Merger (AE is sometimes hereinafter referred to as the " Surviving Corporation ") and EEI shall thereby become a wholly-owned subsidiary of AE (RTC is sometimes hereinafter referred to as t he " Constituent Corporation ").



WHEREAS, the boards of directors of AE and RTC, respectively, deem it advisable and in the best interests of such corporations and their respective stockholders that RTC merge with and into AE pursuant to this Agreement and the Delaware Certificate of Merger (in the form attached hereto as Exhibit A ) and pursuant to applicable provisions of law (such transaction hereafter referred to as the " Merger ").



WHEREAS, RTC has an authorized capitalization consisting of 1,000 shares of $0.001 par value common stock, of which 1,000 shares shall be issued and outstanding and owned by AE as of the Closing of the Merger;



WHEREAS, the Minority Stockholders beneficially own 1,000 shares of common stock of RTC (totaling 100% of the total fully diluted outstanding shares of RTC) and its board of directors and stockholders deem it advisable and in the best interests of the Minority Stockholders to bring about the Merger on the terms and conditions described herein;



NOW, THEREFORE, in consideration of the premises and of the mutual representations, warranties and covenants herein contained and intending to be legally bound hereby, the Parties hereby respectively enter into an agreement, for which the sufficiency of which considerations is hereby acknowledged as follows:



AGREEMENT



1. Definitions .



As used in this Agreement, the following terms shall have the meanings set forth below:







1








" AE Closing Shares " has the meaning provided in Article 3 hereof.



" AE Earnout Shares " has the meaning provided in Article 3 hereof.



" Affiliates " means with respect to any Person (first Person): (a) each other Person that controls, is controlled by, or is under common control with, such Person; (b) each other Person that holds a Material Interest in such Person; (c) each other Person that serves as a director, officer, general partner, executor or trustee of such first Person (or in a similar capacity); (d) each other Person in which such first Person holds a Material Interest; and (e) each other Person with respect to which such Person serves as a general partner or a trustee (or in a similar capacity). For purposes of this definition "Material Interest ? means direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934 , as amended) of (i) voting securities, or other voting interests, representing at least 10% of the outstanding voting power of an entity, or (ii) equity securities or other equity interests representing at least 10% of the outstanding equity securities or equity interests in an entity.



" Agreement " is defined in the preamble hereto.



" Closing " has the meaning provided in Article 7.



" Code " means the Internal Revenue Code of 1986, as amended.



" Contract " means any agreement, contract, license, lease, instrument, note, bond, mortgage, indenture, guarantee or other legally binding commitment or obligation, whether oral or written.



" DGCL " means the Delaware General Corporate Law.



" Earnout Milestones " have the meaning provided on Exhibit B , attached hereto.



" Earnout Period " shall mean the five (5) year period beginning on the date of this agreement first listed above and expiring on the day immediately prior to the five (5) year anniversary of the date of this Agreement.



" Effective Time " has the meaning provided in Article 7.



" Encumbrance " means, with respect to any Person, any mortgage, deed of trust, pledge, lien, security interest, charge, claim or other security arrangement of any nature whatsoever, whether voluntarily or involuntarily given, including any conditional sale or title retention arrangement, and any assignment, deposit arrangement or lease intended as, or having the effect of, security and any filed financing statement or other notice of any of the foregoing (whether or not an Encumbrance is created or exists at the time of the filing).



" Exchange Act " means the Securities Exchange Act of 1934, as amended.



" GAAP " means generally accepted accounting principles in the United States.







2








" AE Disclosure Documents " means all documents provided by AE to RTC prior to the Effective Time.



" AE Stock " means the common stock, par value $0.01 per share, of AE.



" Governmental Entity " means any nation, state, municipality and any federal, state, local, foreign, provincial or supranational court or governmental agency, authority, instrumentality or regulatory body.



" Indebtedness " means indebtedness for borrowed money or the equivalent or represented by notes, bonds or other similar instruments or letters of credit (or reimbursement agreements in respect thereof) or representing the balance deferred and unpaid of the purchase price of any property (other than trade payables constituting current liabilities and personal property leases), and including without limitation capital lease obligations, including all accrued and unpaid interest thereon, and applicable prepayment, breakage or other premiums, fees or penalties and the costs of discharging such indebtedness, all as determined in accordance with GAAP.



" Indemnification Provisions ," means the indemnification provisions as provided in Exhibit G , attached hereto



" Legal Requirement " shall mean any federal, state, local, provincial, foreign, international, multinational or other statute, law, treaty, rule, regulation, guideline, administrative order, directives, ordinance, constitution or principle of common law (or any interpretation thereof by a Governmental Entity).



" NRS " means the Nevada Revised Statutes.



" Merger " is defined in the recitals hereto.



" Merger Milestones " have the meaning provided on Exhibit B , attached hereto.



" Merger Consideration " has the meaning provided in Article 3 hereof.



" Party " or " Parties " means either, or collectively, AE or RTC.



" Person " means any individual and any corporation, partnership, limited liability company, firm, trust, or other business entity and any Governmental Entity.



" Rights " means warrants, options, rights, convertible securities and other arrangements or commitments which obligate an entity to issue or dispose of any of its capital stock, and stock appreciation rights, performance units and other similar stock-based rights whether they obligate the issuer thereof to issue stock or other securities or to pay cash.



" SEC " means the US Securities and Exchange Commission.



" SEC Documents " means all forms, reports and documents filed, or required to be filed, by the Surviving Corporation pursuant to the Securities Laws.







3








" Securities Act " means the Securities Act of 1933, as amended.



" Securities Laws " means the Securities Act; the Exchange Act; the Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940, as amended; the Trust Indenture Act of 1939, as amended; the rules and regulations of the Securities and Exchange Commission promulgated thereunder; and the blue sky and other Legal Requirements of any state that are applicable to the purchase and sale of securities generally.



" Stockholders " means all Persons who hold issued and outstanding shares of RTC Stock as of the Effective Time.



" Subsidiary " or " Subsidiaries " means with respect to any party, any corporation, company, partnership or other organization, whether incorporated or unincorporated, which is consolidated with such party for financial reporting purposes.



" Tax ," or collectively, "Taxes" means all taxes, however denominated, including any interest, penalties, criminal sanctions or additions to tax (including, without limitation, any underpayment penalties for insufficient estimated tax payments) or other additional amounts that may become payable in respect thereof (or in respect of a failure to file any Tax Return when and as required), imposed by any Governmental Entity, which taxes shall include, without limiting the generality of the foregoing, all income taxes, payroll and employment taxes, withholding taxes (including withholding taxes in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other person or entity), unemployment insurance taxes, social security (or similar) taxes, sales and use taxes, excise taxes, franchise taxes, gross receipts taxes, occupation taxes, real and personal property taxes, stamp taxes, value added taxes, transfer taxes, profits or windfall profits taxes, licenses in the nature of taxes, estimated taxes, severance taxes, duties (custom and others), workers' compensation taxes, premium taxes, environmental taxes (including taxes under Section 59A of the Code), disability taxes, registration taxes, alternative or add-on minimum taxes, estimated taxes, and other fees, assessments, charges or obligations of the same or of a similar nature.



" Tax Return ," or collectively, "Tax Returns" means all returns, reports, estimates, information statements or other written submissions, and any schedules or attachments thereto, required or permitted to be filed pursuant to Legal Requirements of any Governmental Entity Tax authority, including but not limited to, original returns and filings, amended returns, claims for refunds, information returns, ruling requests, administrative or judicial filings, accounting method change requests, responses to revenue agents' reports (federal, state or local) and settlement documents.



" Transaction Documents " has the meaning provided in Article 8 hereof.



" Transaction Expenses " means all fees, costs, expenses and disbursements, incurred by the Minority Stockholders, AE, or RTC in connection with the transactions contemplated by this Agreement, the Merger and the other agreements referenced or provided for herein, including, without limitation: (a) the fees and expenses of any legal counsel retained by AE or RTC; (b) the fees and expenses of any accountants; (c) any fees and expenses of any other counsel, accountants, financial advisors or other similar professionals with respect to services rendered to RTC or AE in connection with the transactions contemplated by this Agreement.







4








" RTC Stock " means the common stock, $0.001 par value per share, of RTC.



In addition, the following terms shall be interpreted as set forth below:



(a) The words "hereof," "herein," "hereby" and "hereunder" and/or words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provisions of this Agreement.



(b) Terms defined in the singular shall have a comparable meaning when used in the plural, and vice-versa.



(c) References to the " Knowledge " of an entity shall refer to the actual personal knowledge of the directors and officers of the entity, and the knowledge of any fact or matter which any person would have following inquiries of those employees and directors or former employees and directors of the entity of whom such persons would reasonably believe would have actual knowledge of such matters presented.



(d) References to an "Exhibit" or to a "Schedule" are, unless otherwise specified, to one of the Exhibits or Schedules attached to or referenced in this Agreement. The reference to an "Article" or "Section" is, unless otherwise specified, to one of the Articles or Sections of this Agreement.



2. Plan of Reorganization .



The parties to this Agreement do hereby agree that RTC shall be merged with and into AE, with AE serving as the Surviving Corporation, upon the terms and conditions set forth herein and in accordance with the provisions of the NRS and DGCL. It is the intention of the Parties that this transaction shall qualify as a tax-free reorganization under Section 368(a)(2)(E) of the Internal Revenue Code of 1986, as amended, and related sections thereunder.



3. Terms of Merger .



In accordance with the provisions of this Agreement and the requirements of applicable law, RTC shall be merged with and into AE as of the Effective Time (the terms "Closing" and "Effective Time" are defined in Article 7 hereof). AE shall be the Surviving Corporation and the separate existence of RTC shall cease when the Merger shall become effective. Consummation of the Merger shall be upon the following terms and subject to the conditions set forth herein:



(a) Corporate Existence .



(1) As of the Effective Time: (i) the Surviving Corporation shall continue its corporate existence as a Nevada corporation and it shall thereupon and thereafter possess all rights, privileges, powers, franchises and property (real, personal and mixed) of RTC; (ii) any debts due to either of RTC, on whatever account, any causes of action and any other things belonging to RTC shall be taken and deemed to be transferred to and shall be vested in the Surviving Corporation by virtue of the Merger without further act or deed; and (iii) any rights of creditors and any liens, if any, upon any property of RTC shall be preserved unimpaired, limited in lien to the property affected by such liens immediately prior to the Effective Time, and any debts, liabilities and duties of RTC shall thenceforth attach to the Surviving Corporation.







5








(2) As of the Effective Time: (i) the Certificate of Incorporation and the By-laws of AE, as existing immediately prior to the Effective Time, shall be and remain the Certificate of Incorporation and By-laws of the Surviving Corporation; (ii) the members of the Board of Directors of RTC holding office immediately prior to the Effective Time shall resign and not remain as the members of the Board of Directors of the Surviving Corporation; and (iii) until the Board of Directors of the Surviving Corporation shall otherwise determine, all persons who hold offices of the Surviving Corporation at the Effective Time shall continue to hold the same offices of the Surviving Corporation.



(b) Events Occurring Immediately Prior to the Effective Time . Immediately prior to the Merger becoming effective, on the day of such effectiveness:



(1) AE shall consummate the Merger under Section 251 of the DGCL by filing a Delaware Certificate of Merger between RTC and AE with the Secretary of State; and



(2) AE shall consummate the Merger under Section 92A of the NRS by filing the Articles of Merger with the Nevada Secretary of State.



(c) Conversion of Securities .



As of the Effective Time and without any action on the part of AE, RTC or the holders of any of the securities of any of these corporations, each of the following shall occur:



(1) All shares of RTC Stock issued and outstanding immediately prior to the Effective Time, other than any shares of RTC Stock to be canceled pursuant to Section 3(c)(2) , and the holders shall have right to receive the Merger Consideration (as defined below) in accordance with the terms hereof. All such shares of RTC Stock shall no longer be outstanding and shall automatically be canceled and shall cease to exist, and each certificate previously evidencing any such shares shall thereafter represent the right to receive, upon the surrender of such certificate in accordance with the provisions of Article 4 hereof, certificates evidencing such number of shares of AE Stock, respectively, into which such shares of RTC Stock were converted. No fractional shares of AE Stock will be issued in the Merger. The holders of such certificates previously evidencing shares of RTC Stock outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such shares of RTC Stock, except as expressly otherwise provided herein or by law; and



(2) Any shares of RTC capital stock held in the treasury of RTC immediately prior to the Effective Time shall automatically be canceled and extinguished without any conversion thereof and no payment shall be made with respect thereto.



(d) Merger Consideration; Earnout . The term " Merger Consideration ? shall mean (i) that number of restricted shares of AE Stock applicable for achievement of the Merger Milestone giving rise to the Closing, as specified on Exhibit B (the "AE Closing Shares"), and (ii) the right to receive that number of shares of AE Stock applicable upon achievement of each Earnout Milestone during the Earnout Period, as specified on Exhibit B (the "AE Earnout Shares").







6








(e) Payment of Merger Consideration. The AE Closing Shares shall be delivered within 30 days after on the Closing Date, and (ii) the AE Earnout Shares shall be delivered within thirty (30) days after the applicable Earnout Milestone is achieved as set forth on Exhibit B .



(f) No Other Rights . Upon consummation of the Merger, until surrendered to the Surviving Corporation, each certificate for shares of RTC stock which immediately prior to the Effective Time represented outstanding shares shall represent solely the right to receive the Merger Consideration relating
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