Point of Care Nano-Technology, Inc. - FORM 8-K - EX-99.1 - AGREEMENT AND PLAN OF MERGER

Attached files

file	filename
8-K - FORM 8-K - Point of Care Nano-Technology, Inc.	f8k070711_altenergy.htm

Exhibit 99.1

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is entered into and executed as of July 7, 2011 by and between ALTERNATIVE ENERGY & ENVIRONMENTAL SOLUTIONS, INC., a Nevada corporation ("Public Company"); U.S. EcoFuels, Inc., a Florida corporation ("ECO"); and National Invest & Trade, Ltd., a Nevada corporation ("NIT"); and Allen N. Sharpe, personally ("Sharpe").

WHEREAS, NIT and ECO owns or licenses certain patents, technology, know how, trade secrets and other information, which may or may not be patentable, contracts and other assets related to the business of energy crop and producing, marketing and selling torrified wood products, ownership interests in machinery and in a limited liability company all as described in the Executive Summary NIT and ECO provided to Public Company and on Schedule 1 to this Agreement (the "Business Assets"); and

WHEREAS, NIT licenses part of the Business Assets to ECO, but is willing to assign all ownership rights to ECO to further the purposes of this Agreement; and

WHEREAS, ECO and Public Company have been discussing a transaction in which ECO will merge into a wholly-owned subsidiary of Public Company following ECO's acquisition of all of NIT's interests in the Business Assets from NIT; and

NOW, THEREFORE, ECO, NIT, Sharpe and Public Company (hereinafter collectively referred to as the "Parties" and individually as "Party"), in consideration acknowledged herein, hereby agree as follows:

ARTICLE I

DEFINITIONS

1.1. "Intellectual Property" means any and all patents, copyrights, trade secrets, firmware, trade or service names and marks and other legal rights to own and/or use, or to exclude others from ownership or use, (and all applications for any of the foregoing) that relates to, consists of, comprises, incorporates, embodies or otherwise relates to, any of the Technology and/or Technical Data.

1.2. "Technology" means all inventions, proprietary data, information know-how, show-how, trade secrets, copyrights, regulatory submissions or other intellectual property of any kind, whether known, owned or controlled by, or licensed (with the right to sublicense) to, any of the ECO and NIT, including knowledge, experience and all skills which relate to or are useful for the research, development, manufacture, use or commercialization of products and/or services, including, without limitation, Technical Data, experience and skills, whether or not the same could be, or has been, recorded in writing or otherwise recorded.

1.3. "Technical Data" means all information (oral or written) related to the aforesaid Technology, including, but not limited to, research reports and all technological data calculations and information, machinery designs, drawings, blueprints, manufacturing processes, quality controls, experiments, installation measurements and tests, operation, maintenance on and of the Technology and any product resulting therefrom. Technical Data also includes all information and data required to manufacture devices related to Technology. Technical Data also includes testing data, design data, test equipment, tooling, method sheets, test and manufacturing specifications, vendor lists and vendor data.

ARTICLE II

MERGER TERMS

2.1. Merger. ECO shall merge into a wholly-owned subsidiary of Public Company to be organized under the laws of the State of Nevada ("Acquisition Subsidiary") (the "Merger"). The effective time (the "Effective Time") of the Merger shall be the date and time of filing articles or certificates of merger with the appropriate government office of the State of Nevada that causes the Merger to occur. Except as specifically indicated otherwise all the following shall automatically occur immediately at the Effective Time of the Merger.

2.2. Surviving Company. Acquisition Subsidiary will be the surviving company in the Merger (the "Surviving Company").

2.3. Merger Parties. Public Company, Acquisition Company and Surviving Company are hereinafter sometimes collectively referred to as "Merger Parties".

2.4. State of Incorporation. The Surviving Company of the Merger shall be incorporated under the laws of the State of Nevada.

2.5. Articles of Incorporation. The articles of incorporation of Acquisition Subsidiary shall be the articles of incorporation of the Surviving Company of the Merger.

2.6. Bylaws. The bylaws of Acquisition Subsidiary shall be the bylaws and of the Surviving Company of the Merger.

2.7. Officers and Directors. The officers and directors of the Surviving Company and of Public Company shall be persons mutually acceptable to ECO and Public Company.

2.8. Cancellation of ECO Securities. All the shares of Common Stock of ECO and other shares of capital stock of ECO that are not ECO Convertible Securities ("Cancelled ECO Shares") and all Cancelled ECO Convertible Securities (as defined below) issued or outstanding immediately before the closing of the Merger shall be cancelled in the Merger. Such cancellation shall occur immediately upon the Effective Time of the Closing of the Merger. None of ECO Acquisition Subsidiary, the Surviving Company or Public Company shall have any obligation or liability to the holders of such Cancelled ECO Shares and/or Cancelled ECO Convertible Securities, except the obligation to issue Merger Consideration Shares to such holders of Cancelled ECO Shares and Cancelled ECO Convertible Securities as described below.

2.9. Definitions. The term "Cancelled ECO Convertible Securities" means any and all preferred stock, notes, debentures, other debt, warrants, options, contracts and other rights issued by ECO or any ECO Subsidiary, which upon exchange, conversion, exercise or other action entitles the holder to receive any capital stock or Convertible Securities of ECO, any ECO Subsidiary or of any Merger Party. The term "ECO Subsidiary" means any corporation, limited liability or other entity in which ECO or any ECO Subsidiary owns any interest.

2.10. Merger Consideration Shares. In exchange for such Cancelled ECO Shares and Cancelled ECO Convertible Securities, Public Company shall issue to the holders of all Cancelled ECO Shares immediately before the Effective Time of the closing (the "Closing") of the Merger (the "ECO Shareholders") and to the holders of all Cancelled ECO Convertible Securities immediately before the Effective Time of the closing ("ECO Convertible Securities Holders") an aggregate of Sixteen Million (16,000,000) shares of Common Stock of Public Company (the "Merger Consideration Shares"), which shall be distributed as described below.

2.11. Allocation of Merger Consideration Shares. The Merger Consideration Shares shall be distributed first to holders of ECO Convertible Securities to satisfy the conversion rights of the holders of ECO Convertible Securities. Any Merger Consideration Shares remaining after satisfaction the conversion rights of holders of ECO Convertible Securities (the "Remaining Merger Consideration Shares") shall be distributed to holders of Cancelled ECO Shares pro rata with each Cancelled ECO Share issued or outstanding immediately before the Effective Time of the Closing of the Merger to be issued a number of Remaining Merger Consideration Shares equal to the quotient derived by dividing the (i) total number of Remaining Merger Consideration Shares by (ii) the total number of Cancelled ECO Shares. The timing of the distribution of Merger Consideration Shares and conditions to receipt of Merger Consideration Shares shall be as described below.

2.12. Equity Compensation Shares. Public Company shall reserve for issuance to officers, directors, key employees and contractors of Public Company and Surviving Company Eight Hundred Thousand (800,000) shares of Common Stock of Public Company in an Equity Compensation Plan acceptable to ECO and Public Company.

2.13. Shares for ECO Advisors. At the Closing, Public Company shall issue to advisers to ECO designated by ECO One Million Four Hundred Thousand (1,400,000) shares of Common Stock of Public Company provided such advisers execute and deliver to Public Company and Surviving Company (i) releases of any and all liabilities and obligations to such advisers for services provided to ECO, which releases shall be in form and substance reasonably acceptable to Public Company and (ii) a lock-up agreement in the form shareholders of ECO execute and deliver as provided in this Agreement.

2.14. Pre-Merger Public Company Shares. The number of shares of capital stock of Public Company issued and outstanding immediately prior to the Effective Time of the Closing of the Merger held by shareholders of Public Company ("Pre-Merger Public Company Shareholders") shall be Six Million Shares of Common Stock of Public Company (the "Pre-Merger Public Company Shares").

2.15. Post-Merger Fully Diluted Shares. All the Common Stock of Public Company issued in the Merger shall be sufficient to cause the fully diluted securities of Public Company immediately after the closing of the Merger to be owned as follows:

All the Common Stock of the Company issued in the Merger will cause the fully diluted securities of the Company immediately after the closing of the Merger to be owned as follows:

Name or Group	Number of Shares of Common Stock
Pre-Merger Closing owners of the Common Stock of the Company or their Designees	6,012,515
Pre-Merger Closing owners of Warrants to purchase Common Stock of the Company	2,025,030
Pre-Merger Closing owners of ECO capital stock and Convertible Securities	16,000,000
Service Providers to ECO	1,400,000
Reserved for future stock option and other grants to persons who are not shareholders, officers of directors of NIT or ECO prior to the Effective Time of the Closing of the Merger	800,000
Total Fully Diluted Shares	26,237,545

2.16. Approvals of ECO and NIT. Prior to executing and delivering the Merger Agreement, the Boards of Directors and shareholders of ECO and NIT shall have approved the Merger and other transactions contemplated hereby.

2.17. Legal Effect of Merger. At the Effective Time, the effect of the Merger shall be as provided in this Agreement and the applicable provisions of Nevada Law and Florida Law. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time of the Merger all the property, rights, privileges, powers and franchises of ECO shall vest in the Surviving Company, and all debts, liabilities and duties of ECO (except Cancelled ECO Convertible Securities) shall become the debts, liabilities and duties of the Surviving Company.

2.18. Dissenters' Rights. Any holder of securities of ECO who perfects their dissenters’ rights in accordance with and as contemplated by applicable Florida law and Nevada law shall not be converted into Common Stock of the Public Company, but instead shall be entitled to receive such consideration as determined pursuant to the applicable provisions of Florida law and Nevada Law upon surrender to the Public Company of the certificate or certificates representing the shares for which payment is being made (the "Dissenters’ Compensation"). In the event that a dissenting stockholder of ECO fails to perfect, or effectively withdraws or loses, its right to appraisal and payment for its shares under Florida law and Nevada law, the Public Company shall issue and deliver the number of shares of Common Stock of the Public Company to which such holder of shares of ECO securities would otherwise be entitled as described above (without interest) upon surrender by such holder of the certificate or certificates representing such shares held by such holder.

2.19. Fractional Shares. No certificates representing fractional shares of Common Stock of Public Company will be issued as a result of the Merger. Each holder of ECO Cancelled Shares and Cancelled ECO Convertible Securities cancelled pursuant to the Merger who would otherwise have been entitled to receive a fraction of a share of Common Stock of Public Company shall receive, in lieu thereof, cash (rounded to the nearest whole cent and without interest) in an amount equal to the market value of such fractional part of a share of Common Stock of the Public Company. The market value of a share of Public Company Common Stock at the Effective Time and fractional parts of a full share shall be determined by Public Company by any reasonable means. Multiple fractional shares owned by any holder shall be aggregated so that the maximum cash payment for any holder shall not exceed the value of one share. No such holder will be entitled to dividends, voting rights, or any other rights as a stockholder in respect of any fractional shares.

2.20. Exchange Agent. Public Company's transfer agent or such other person as the Public Company shall so select shall act as the exchange agent (the "Exchange Agent") in the Merger. Public Company shall make available to the Exchange Agent for exchange in accordance with this Section, the shares of Common Stock of the Public Company issuable pursuant to this Agreement.

(a) Exchange Procedures. Promptly after the later of (i) the Effective Time or (ii) determination of the number of Merger Consideration Shares issuable to ECO Convertible Securities Holders and the number of Remaining Consideration Shares, Public Company shall cause the Exchange Agent to mail to each holder of record (as of the Effective Time) a certificate or certificates (the "Certificates") which immediately prior to the Effective Time represented ECO Cancelled Shares and/or Cancelled ECO Convertible Securities, which were converted into the right to receive shares of Common Stock of the Public Company in the Merger, (i) a letter of transmittal in customary form (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent and shall be in such form and have such other provisions as Public Company may reasonably specify) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for certificates representing shares of Common Stock of the Public Company and (iii) a Lock-Up and Installment Re-Sales Restriction Agreement in the form of Exhibit A to this Agreement (the "Lock-Up Agreement") and (iv) a general release in form and substance acceptable to Public Company releasing Surviving Company and Public Company from any and all liabilities of ECO to such holder of Certificates. Upon surrender of Certificates for cancellation to the Exchange Agent or to such other agent or agents as may be appointed by Public Company, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, the holders of such Certificates shall be entitled to receive in exchange therefore certificates representing the number of whole shares of Common Stock of the Public Company into which their ECO Cancelled Shares and Cancelled ECO Convertible Securities were converted at the Effective Time in accordance with the provision of this Agreement, and the Certificates so surrendered shall forthwith be canceled. Until so surrendered, outstanding Certificates will be deemed from and after the Effective Time, for all corporate purposes to evidence only the ownership of the number of full shares of Common Stock of Public Company into which such ECO Cancelled Shares and Cancelled ECO Convertible Securities shall have been so converted. All certificates for Common Stock of Public Company issued as a result of the conversion of ECO Cancelled Shares and Cancelled ECO Convertible Securities in the Merger will be held in escrow and subject to release following the expiration of the period during which the owner has agreed not to re-sell in the Lock-Up Agreement.

(b) Dividends. No dividends or other distributions declared or made after the date of this Agreement with respect to Common Stock of Public Company with a record date after the Effective Time will be paid to the holders of any unsurrendered Certificates with respect to the shares of Common Stock of Public Company represented thereby until the holders of record of such Certificates shall surrender such Certificates in accordance with this Section.

(c) Transfer of Ownership. If certificates representing shares of Common Stock of Public Company are to be issued in a name other than that in which the Certificates surrendered in exchange therefore are registered, it will be a condition of the issuance thereof that the Certificates so surrendered will be properly endorsed and otherwise in proper form for transfer and that the persons requesting such exchange will have paid to Public Company or any agent designated by it any transfer or other taxes required by reason of the issuance of certificates representing shares of Common Stock of Public Company in any name other than that of the registered holder of the Certificates surrendered, or established to the satisfaction of Public Company or any agent designated by it that such tax has been paid or is not payable.

(d) Tax Withholding. Each of the Exchange Agent, Public Company and the Surviving Company shall be entitled to deduct and withhold from any consideration payable or otherwise deliverable pursuant to this Agreement to any holder or former holder of Certificates such amounts as may be required to be deducted or withheld there from under any provision of federal, state, local or foreign tax law or under any other applicable laws, rules or regulations. To the extent such amounts are so deducted or withheld, such amounts shall be treated for all purposes under this Agreement as having been paid to the person to whom such amounts would otherwise have been paid.

(e) No Liability. Notwithstanding anything to the contrary, neither the Exchange Agent, Public Company, the Surviving Company nor any party hereto shall be liable to a holder of shares of securities for any amount properly paid to a public official pursuant to any applicable abandoned property, escheat or similar laws, rules and regulations.

2.21. Termination of Rights. All shares of Common Stock of Public Company issued upon the surrender for exchange of Certificates in accordance with the terms hereof shall be deemed to have been issued in full satisfaction of all rights pertaining to such Certificates, and there shall be no further registration of transfers on the records of the Surviving Company cancelled securities which were outstanding immediately prior to the Effective Time. If after the Effective Time Certificates are presented to the Surviving Company for any reason, they shall be canceled or exchanged as provided above.

2.22. Lost Certificates. In the event any Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall issue in exchange for such lost, stolen or destroyed Certificates, upon the making of an affidavit of that fact by the holder thereof, certificates representing the shares of Common Stock of Public Company into which the shares represented by such Certificates were converted; provided, however, that Public Company may, in its discretion and as a condition precedent to the issuance of such certificates representing shares of Common Stock of Public Company, require the owner of such lost, stolen or destroyed Certificates (i) to indemnify Public Company, the Surviving Company and Exchange Agent (in form and substance acceptable to Public Company, the Surviving Company and the Exchange Agent) against any claim that may be made against Public Company, the Surviving Company or the Exchange Agent with respect to the Certificates alleged to have been lost, stolen or destroyed and/or (ii) to post a bond in an amount, form and substance acceptable to Public Company, the Surviving Company and the Exchange Agent.

ARTICLE III

CLOSING AND CLOSING CONDITIONS

3.1. The closing of the transactions contemplated hereby (the "Closing") will be held not later than September 30, 2011 at a time and place agreed by ECO and NIT and Public Company.

3.2. Each person receiving shares of Common Stock of Public Company pursuant to this Agreement will execute and deliver at or prior to the Closing a Lock-up and Installment Re-Sales Restriction Agreement in the form of Exhibit A attached to this Agreement (the "Lock-Up Agreement").

3.3. Each officer, director, key employee and shareholder of NIT and/or ECO designated by Public Company will execute and deliver at the Closing an Employment and Non-Competition Agreement in the form of Exhibit B attached to this Agreement.

3.4. Officer, director, key employee designated by Public Company will execute and deliver at the Closing an Inventions Assignment Agreement in the form of Exhibit C attached to this Agreement.

3.5. NIT and ECO shall cause each their officers, directors and shareholders designated by Public Company to execute the general releases (the "Releases") in the form and substance acceptable to Public Company.

3.6. The obligation of Public Company to close is subject to ECO and NIT executing and delivering to Public Company the agreements described above and such other agreements and documents as Public Company shall reasonably request, including without limitation, (i) verification of assignment of the Business Assets from NIT to ECO (ii) cancellation of all debt of ECO other than trade payables incurred in the ordinary course of business to persons who are not shareholders of either ECO or NIT, and (iii) delivery to Public Company of audited financial statements of ECO (and to the extent necessary to comply with SEC regulations audited financial statements of NIT) and other information sufficient to enable Public Company to comply with the rules and regulations of the Securities and Exchange Commission, including, without limitation, information sufficient to file a "Super 8-K" within the time period required by SEC rules.

3.7. Execution, delivery and filing of Articles or Certificates of Merger with the appropriate governmental agencies of the State of Nevada and the State of Florida.

3.8. Such other documents, agreements and certificates as Public Company shall reasonably request.

3.9. NIT and ECO shall cause all shareholders' agreements and similar arrangements with respect to any securities of ECO to the Effective Time.

ARTICLE IV

COVENANTS

4.1. NIT Liabilities. The Parties herby agree that Public Company is not assuming any liabilities or other obligations of NIT, whether arising before or after the Closing.

4.2. Cooperation. The parties will cooperate with each other and shall take all reasonable actions required to be taken under any applicable state blue sky or securities laws to permit the issuance of the Common Stock of Public Company pursuant to the Merger. Disclosure documents provided to shareholders of NIT and ECO shall be in form and substance reasonably acceptable to the parties. The parties shall provide to one another written information about themselves necessary for such documents to be prepared in compliance with applicable laws, rules and regulations.

4.3. Public Announcements. None of the parties hereto will issue any other public announcement and/or press release concerning this Agreement without the prior written consent of the other parties, which consents shall not be unreasonably withheld, except as required by applicable laws, rules and regulations.

4.4. Insider Trading. Neither NIT, ECO nor any of the shareholders, officers, directors or employees shall engage in any transactions involving the securities of Public Company prior to the consummation of the Merger, and the Parties shall use their best efforts to cause each of its officers, directors and employees not to engage in any such restricted transaction.

ARTICLE V

NONCOMPETITION AND CONFIDENTIALITY

5.1. Restricted Business. The term "Restricted Business" means researching, developing, implementing manufacturing selling, licensing, distributing and/or otherwise transferring and/or commercializing technologies, products and/or services related to the business of (i) producing, marketing and selling torrified wood and other biomass fuels and/or (ii) growing, field planting, harvesting, torrifying, producing marketing and selling "arundo donax" and other biomass plant fuels.

5.2. Restriction Period. The term "Restriction Period" with respect to NIT, ECO and Sharpe means the period of time commencing on the date of the Closing and terminating on the later to occur of (i) September 30, 2016 or (ii) one (1) year after termination (for any reason or no reason) of such employment or consulting contracts by Sharpe with Surviving Company or Public Company, provided, however, if after employment with Surviving Company or Public Company is terminated, Sharpe shall provide services (whether as an employee, consultant, contractor or otherwise, to Surviving Company or Public Company and/or any Affiliate of Surviving Company or Public Company), the Restriction Period shall not terminate until one(1) year after termination of the last day of such status as an employee, consultant or contractor of Surviving Company or Public Company and/or any Affiliate of Surviving Company or Public Company. The term "Affiliate" shall have the meaning of that term as defined in rules and regulations of the Securities and Exchange Commission.

5.3. Relevant Market. The term "Relevant Market" shall be defined as the following divisible and severable territorial divisions:

(a) the World, except that if this geographic scope is determined to be unreasonable or otherwise invalid, the Relevant Market shall be:

(b) all the countries in North America, all the countries of the European Union, Japan, South Korea, China, Taiwan, Australia, Russia, Indonesia and India, except that if this geographic scope is determined to be unreasonable or otherwise invalid, the Relevant Market shall be:

(c) all the countries in North America, the European Union and Russia and China, except that if this geographic scope is determined to be unreasonable or otherwise invalid, the Relevant Market shall be:

(d) all the countries in North America and the European Union, except that if this geographic scope is determined to be unreasonable or otherwise invalid, the Relevant Market shall be:

(e) the United States of America, except that if this geographic scope is determined to be unreasonable or otherwise invalid, the Relevant Market shall be:

(f) North Carolina, except that if this geographic scope is determined to be unreasonable or otherwise invalid, the Relevant Market shall be:

(g) The area that is within a circle (x) the center of which is the principal office of Public Company and/or Surviving Company and (y) that has a radius of one hundred miles that begins at the then principal office of Public Company and/or Surviving Company.

5.4. The Parties hereby acknowledge and agree that (a) the Restricted Business operates in a worldwide market; (b) Public Company and/or Surviving Company will make a significant investment in the development of the Restricted Business in this market, and specifically in the geographic area identified as the Relevant Market and, as a result, will have a valuable economic interest in its business in the Relevant Market which it is entitled to protect; (c) NIT, ECO and Sharpe have possession and familiarity with, confidential and proprietary information concerning the Restricted Business, which NIT, ECO and Sharpe are selling to Public Company and/or Surviving Company, all of which will constitute valuable assets and privileged information belonging to Public Company and/or Surviving Company after the Closing, and the Merger Consideration Shares includes such valuable assets and privileged information; and (d) in order to protect Public Company's and/or Surviving Company's interest being purchased pursuant to this Agreement, it is reasonable and necessary to place the restrictions contained in this Agreement on NIT's, ECO's and Sharpe's ability to compete against Public Company and/or Surviving Company. Engaging in the Business includes, but is not limited to, working as an officer, director, employee, consultant, independent contractor or vendor for any person or entity conducting the Restricted Business, or interest in any entity that operates in the Restricted Business.

5.5. For the purposes stated above, NIT, ECO and Sharpe covenant and agree that NIT, ECO and Sharpe shall not, directly or indirectly, engage in the Restricted Business or assist any person or entity engaged in the Restricted Business, except on behalf of Surviving Company and/or Public Company. The restrictions set forth in this Article shall apply only during the Restriction Period and only in the Relevant Market.

5.6. For the purposes stated above, NIT, ECO and Sharpe hereby agree not to disclose to, and not to provide copies to, any third party any other person or entity any of the Technology or Technical Data included in the Business Assets.

5.7. NIT, ECO and Sharpe acknowledge and agree that the restrictions set forth in this Agreement (including, but not limited to, the period of restriction and the geographical area of restriction set forth above) are fair and reasonable and are necessarily required for the protection of the interest of Surviving Company and/or Public Company. If any of the restrictions set forth herein shall be declared invalid for any reason whatsoever by a court of competent jurisdiction, the validity and enforceability of the remainder of such restrictions shall not thereby be adversely affected. NIT, ECO and Sharpe acknowledge that Surviving Company and/or Public Company will have a substantial economic interest in the Restricted Business in the referenced geographical areas which this Agreement specifically is intended to protect, and that the geographical areas and period of restriction are limited in scope to the geographic territory and period of time reasonably necessary to protect Surviving Company and/or Public Company's economic interest and otherwise are reasonable and proper. In the event the Restriction Period or any other such time limitation is deemed to be unreasonable by a court of competent jurisdiction, NIT, ECO and Sharpe hereby agrees to submit to such reduction as the court shall deem reasonable. In the event the Relevant Market is deemed by a court of competent jurisdiction to be unreasonable, NIT, ECO and Sharpe hereby agrees that the geographic territory reflected in the Relevant Market shall be reduced by excluding any separately identifiable and geographically severable area necessary to make the remaining geographic restriction reasonable, but this Agreement shall be enforced as to all other geographical areas which are not so excluded.

5.8. NIT, ECO and Sharpe understand and acknowledge that a breach or violation by any of the NIT, ECO and Sharpe of any of the covenants contained herein shall be deemed a material breach of this Agreement and will cause substantial, immediate, and irreparable injury to Surviving Company and/or Public Company, and that Surviving Company and/or Public Company will have no adequate remedy at law for such breach or violation. In the event any of NIT, ECO and Sharpe actually (or reasonably anticipated to) breach or violate of the covenants contained herein, Surviving Company and/or Public Company shall be entitled to bring a civil action seeking, and shall be entitled to, an injunction restraining NIT, ECO and Sharpe from violating or continuing to violate such covenant or from any threatened violation thereof, or for any other legal or equitable relief relating to the breach or violation of such covenant. NIT, ECO and Sharpe agrees that, if Surviving Company and/or Public Company institutes any action or proceeding against NIT, ECO and Sharpe seeking to enforce any of such covenants or to recover other relief relating to an actual or threatened breach or violation of any of such covenants, NIT, ECO and Sharpe shall be deemed to have waived the claim or defense that Surviving Company and/or Public Company has an adequate remedy at law and shall not urge in any such action or proceeding the claim or defense that such a remedy at law exists. However, the exercise by Surviving Company and/or Public Company of any such right, remedy, power, or privilege shall not preclude Surviving Company and/or Public Company or its successors or assigns from pursuing any other remedy or exercising any other right, power, or privilege available to it for any such breach or violation, whether at law or in equity, including the recovery of damages, all of which shall be cumulative and in addition to all other rights, remedies, powers, or privileges of Surviving Company and/or Public Company.

5.9. In addition to any other remedy available at law or equity, Surviving Company and/or Public Company shall have the right to purchase for an aggregate of One ($1.00) Dollar all the Common Stock of Surviving Company and/or Public Company owned by Sharpe and/or NIT or any Affiliate of either Sharpe or NIT.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES

AND ADDITIONAL AGREEMENTS OF ECO AND NIT

6.1. ECO and NIT hereby jointly and severally represent and warrant to Public Company and agree as follows:

(a) ECO has good and marketable title to all the Business Assets, Technology, Technical Data, and Intellectual Property, free and clear of all liens, charges and encumbrances and no one except the ECO has any license or other right to use or acquire any of the Business Assets, Technology, Technical Data and Intellectual Property. The Executive Summary ECO and NIT provided are not false with respect to any material facts stated therein and do not omit to state any material facts necessary to prevent any statements therein from being misleading.

(b) NIT has full right, power and authority to transfer, assign and sell the Business Assets to ECO as contemplated by this Agreement, ECO and NIT have full power and authority to enter into the Merger and to carry out the terms and provisions of this Agreement without the need for any action, consent, approval or release of any third party, and carrying out of the terms and provisions of this Agreement will not conflict with, or result in a breach of the terms or provisions of, nor be an event of default under, any contract, lease or agreement or other obligation to which either is bound.

(c) This Agreement, once executed by ECO and NIT, constitutes a valid and binding agreement enforceable against them in accordance with its terms, except as enforceability may be limited by insolvency, moratorium, bankruptcy or other similar laws affecting creditor’s rights and general principles of equity affecting the availability of specific performance and other equitable remedies.

(d) To the knowledge of ECO and NIT, Public Company and Acquisition Subsidiary by using the Business Assets, including the Technology, Technical Data and Intellectual Property, will not infringe any third party's rights or interest.

(e) There is no litigation or dispute (including, without limitation by any former employer or customer of any of the ECO and NIT) arising from, or relating to, any of the Business Assets or any ECO and NIT pending, or to the knowledge of ECO and NIT, threatened. To the knowledge of ECO and NIT, there is no basis for any such litigation or dispute, including, without limitation, no basis for a dispute by any former employer of any of the ECO and NIT.

(f) ECO and NIT have taken all actions and obtained all consents and approvals required to authorize entering into and execution and performance of this Agreement and the agreements that are exhibits to this Agreement and transfer of the Business Assets to Public Company.

6.2. ECO and NIT have not granted, and will not grant to any third party, any license, sublicense, option or other rights to any of the Business Assets.

6.3. All the Technology, Technical Data and Intellectual Property included in the Business Assets are original works of Seller or contractors to ECO and NIT, who have assigned all rights to ECO and NIT. ECO and NIT have provided to Public Company the names and contact information for all such contractors. All such contractors were working on a "work for hire" basis and have executed agreements assigning all their rights to the Technology, Technical Data and Intellectual Property included in the Business Assets being sold by ECO and NIT pursuant to this Agreement. ECO and NIT hereby assign to Public Company all ECO's and NIT's rights under such contracts. No other person or entity (including, without limitation, any employee, agent, representative or contractor) has contributed to, or participated in the conception, design, development or implementation of any of the Technology, Technical Data or Intellectual Property (or any part thereof) included in the Business Assets.

6.4. ECO and NIT have not disclosed any of the Technology, Technical Data or Intellectual Property (or any part thereof) included in the Business Assets to any person or entity, except under confidentiality and proprietary information agreements and similar agreements. All such agreements remain in full force and effect. ECO and NIT are not aware of any breach of any such agreement. ECO and NIT are transferring to Surviving Company and Public Company in the Merger all the rights of ECO and NIT under all such confidentiality and proprietary information agreements and similar agreements, and are specifically transferring to the Public Company the right to enforce and bring claims under such agreements. If ECO and NIT' rights under such confidentiality and proprietary agreements and similar agreements are not assignable, then ECO and NIT hereby agree to take any and all actions necessary to enforce the rights of ECO and NIT under such agreements.

6.5. ECO and NIT agree to cooperate with any filing of any patent applications, including, without limitation, executing and reviewing such documents and instruments as necessary to complete filing of, and prosecute, any patent, trade name or mark, copyright and other applications relating to the Business Assets as Public Company shall determine. Such cooperation shall be provided free of charge to Public Company except as to such costs as may reasonably incurred.

6.6. ECO and NIT agree to provide to the Surviving Company and Public Company free of charge any and all necessary technical instructions with respect to the Technology, Technical Data and Intellectual Property to assist Public Company in learning how to use the Business Assets.

6.7. ECO and NIT hereby agree to indemnify and hold harmless the Surviving Company and Public Company from any and all liability, cost or expense, (including, without limitation, reasonable attorneys fees and expenses) arising out of or connected with, (i) any breach by ECO and NIT of any representation, warranty or agreement of any of ECO and NIT in this Agreement or in any exhibit to this Agreement and/or (ii) any claim by any third party against Surviving Company and/or Public Company arising out of, or related to, the Business Assets or any other liability or obligation of any of the ECO and NIT.

ARTICLE VII

REPRESENTATIONS AND WARRANTIES OF PUBLIC COMPANY

7.1. Public Company is a company duly registered, validly existing and in good standing under the laws of the State of Nevada, and has full legal capacity, power and authority to enter into and execute this Agreement.

7.2. Public Company has taken all actions and obtained all consents and approvals required to authorize its entering into and execution of this Agreement, and signing, execution and performance of this Agreement and the exhibits to this Agreement.

7.3. This Agreement, and the exhibits to this Agreement, when executed and delivered, constitutes the lawful, valid and binding obligations of Public Company and is enforceable against Public Company in accordance with its terms.

7.4. The documents filed by Public Company with the Securities and Exchange Commission since January 1, 2011 do not contain any misstatements of material facts and do not omit to state any material facts which are required to make material facts stated not misleading.

7.5. Public Company hereby agrees to indemnify and hold harmless the ECO and NIT from any liability, cost or expense arising out of or connected with, (i) any breach by Public Company of any representation, warranty or agreement of any of Public Company in this Agreement or in any exhibit to this Agreement and/or (ii) any claim by any third party against ECO arising out of, or related to, any other liability or obligation of Public Company related to this Agreement or any exhibit to this Agreement.

ARTICLE VIII

MISCELLANEOUS

The parties further agree as follows:

8.1. Notices. All necessary notices, demands, and requests required or permitted to be given under the provisions of this Agreement shall be deemed duly given if (i) hand-delivered or (ii) one (1) business day after deposited with a reputable overnight courier service, which shall be addressed to a Party to the address of that Party on the signature page of this Agreement or addressed to such other addresses as any Party shall designate from time to time by giving written notice in accordance with the provisions of this subsection.

8.2. Expenses. The parties agree to pay the cost of their own legal fees and other expenses incurred in the negotiation, drafting, execution and consummation of this Agreement and the closing of any purchase hereunder.

8.3. Governing Law Arbitration and Venue. This Agreement is governed by North Carolina law, except for principals of law that govern conflicts of law or choice of jurisprudence. All claims or disputes arising among the parties and relating to this Agreement or the breach, termination or validity thereof shall be settled by binding arbitration in accordance with the then-current rules for arbitration of the CPR Institute for Dispute Resolution. There shall be a single neutral arbitrator selected in accordance with such rules. The arbitration process shall be governed by the North Carolina Uniform Arbitration Act. The place of the arbitration shall be Wake County, North Carolina, and the arbitrator shall apply the substantive law of the State of North Carolina, exclusive of its choice of law rules, in deciding the dispute. The arbitrator shall have authority to award provisional relief. The final award of the arbitrator may include compensatory damages, not including pre-award interest, and specific relief limited to requiring the parties to comply with the provisions of this Agreement. The arbitrator is not empowered to award exemplary or punitive damages and each party hereby waives any right to recover such damages with respect to any dispute resolved by arbitration. The arbitrator is empowered to award reasonable attorneys’ fees in addition to the costs of arbitration. The arbitrator’s award may be confirmed and judgment entered thereon in accordance with the governing arbitration law specified above. Any claim of a party hereunder shall be time barred unless arbitration with respect to such claim is commenced within one (1) year after such claim arose.

8.4. Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision.

8.5. Section Headings. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

8.6. Amendments and Waivers. This Agreement may be amended, modified or terminated only by a written instrument duly executed by the Public Company and ECO and any conditions to a party's obligations under this Agreement may be waived only in writing by that party.

8.7. Entire Agreement. With respect to the subject matter hereof, this Agreement and the agreements that are exhibits to this Agreement contains the entire understanding of the parties and there are no agreements or undertakings among the parties other than as expressly set forth in this Agreement. With respect to its subject matter, this Agreement and the agreements that are exhibits to this Agreement supersede any prior understanding or agreements of the parties. There are no conditions precedent or subsequent to the effectiveness of this Agreement except as stated in or incorporated by reference into this Agreement and the agreements that are exhibits to this Agreement. All prior negotiations, understandings, terms and conditions are merged in this Agreement and the agreements that are exhibits to this Agreement.

8.8. Third Parties. Nothing in this Agreement shall be construed as giving any person, firm, or other entity other than the parties to this Agreement and their respective successors and permitted assigns, any right, remedy, or claim under or in respect of this Agreement or any of its provisions.

8.9. Benefit. This Agreement shall be binding upon and shall inure to the benefit of the parties to this Agreement, and their respective heirs and legal representatives. This Agreement may not be assigned by any party.

8.10. Specific Performance. The parties each agree that they will be irreparably damaged in the event that this Agreement is not specifically enforced and, accordingly, all obligations to perform under this Agreement by any party hereto, shall be enforceable by the other parties hereto by a decree of specific performance.

8.11. Construction. This Agreement is the result of negotiations among the parties hereto and their respective counsel. This Agreement shall not be construed more strictly against one party than any other because it may have been drafted by one of the parties or its counsel and each of the parties hereto hereby acknowledges and agrees that it has contributed substantially and materially in the negotiation and drafting of this Agreement.

8.12. Delay Not Waiver. Any delay in enforcing a party's right under this Agreement or any waiver as to a particular default or other matter will not constitute a waiver of such party's rights to the future enforcement of its rights under this Agreement, except only as to an express written and signed waiver to a specific matter for a specific period of time.

8.13. Expenses. Each party shall pay its own expenses of the Acquisition and other transactions contemplated by this Memorandum of Understanding, including legal fees.

8.14. Counterparts. This Agreement may be executed in one or more counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement. The parties hereto agree that facsimile signatures shall be as effective as if originals.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN TESTIMONY WHEREOF, each of the parties hereunto has caused this Agreement and Plan of Merger to be executed under seal and in such form as to be binding, all as of the day and year first above written.

	U.S. ECOFUELS, INC.		ALTERNATIVE ENERGY & ENVIRONMENTAL, INC.
By:	/s/ Allen Sharpe	By:	/s/ Scott Williams
Name:	Allen Sharpe	Name:	Scott Williams
Title:	President	Title:	President
Address:		Address:

	NATIONAL INVEST & TRADE, LTD.
By:	/s/ Allen Sharpe
Name:	Allen Sharpe
Title:	President
Address:

	NATIONAL INVEST & TRADE, LTD.
	/s/ Allen Sharpe
Allen N. Sharpe, Personally
Address:

LIST OF SCHEDULES AND EXHIBITS

Schedule 1	List of Business Assets

Exhibit A	Form of Lock-up and Re-Sales Restrictions Agreement

Exhibit B	Form of Non-Competition Agreement

Exhibit C	Form of Inventions Assignment Agreement

SCHEDULE 1

MERGER AGREEMENT

DESCRIPTION OF BUSINESS ASSETS

Assets Transferred List:

Technologies:

Torrefaction Systems: All intellectual property, rights, plans, engineering plans and designs, market and product research, lessons learned, know how and trade secrets concerning the preparation, torrefaction, treatment, marketing, selling and dealing with the torrefaction of biomass in any form.

Energy Crops: All intellectual property, research, know how, trade secrets, physical and chemical processes, chemical treatments, and systems concerning the cultivation, growing, harvesting and processing of energy crops (in particular arundo donax or giant reed).

Torrefaction Machine: A fully engineered and working Torrefaction Machine operated as a testing and production unit at Wrens, GA. This machine was built and positioned at a cost of more than $ 360,000 and has been operational for 4 months.

Georgia Torrewood, LLC: ECO has a fully paid 50% interest in the entity operating the test and production facility, torrefaction machine, and associated equipment/system in Wrens, GA. This LLC has been granted a License for and manages and maintains the Torrefaction Machine (Model 1). It is to pay ECO a monthly rental of $ 5,000 for its use of the machine once it reaches normal production levels.

All prospect and client lists, industry research, business relationships, and good will of any kind relating to this industry and the enterprise defined.

NIT transfers all of its assets of any kind to this venture.

EXHIBIT A

AGREEMENT AND PLAN OF MERGER

LOCK-UP AND INSTALLMENT RE-SALES RESTRICTION AGREEMENT

AGREEMENT dated as of ____________, 2011 (the "Effective Date") between and among the persons listed on Schedule 1 to this Agreement ("Shareholders"); and Alternative Energy & Environmental Solutions, Inc., a Nevada corporation (the "Company");

WHEREAS, Shareholders have acquired securities of the Company or have the right to acquire securities of the Company in connection with a Merger (the "Merger"), which securities are listed on Schedule 1 (d) to this Agreement; and

WHEREAS, as a condition to issuance of such securities, the Company desires Shareholders to agree to limit sales of securities of the Company in order to facilitate the Company raising additional capital, which Shareholders hereby acknowledge and agree would increase the value of the securities of the Company owned or to be acquired by Shareholders, or prevent the decrease in value of the securities of the Company owned or to be acquired by Shareholders.

NOW, THEREFORE, the parties hereby agree as follows:

1.	Definitions.

(a) "Affiliate" shall mean any and all persons and entities who are deemed "affiliates" under either the 1933 Act, the 1934 Act or any rule or regulation of the SEC promulgated under either the 1933 Act or the 1934 Act.

(b) "Common Equivalent Securities" shall mean: (i) all shares of common stock, (ii) all securities having equivalent rights to common stock; (iii) all options, warrants, convertible securities and other rights to acquire Common Equivalent Securities; and (iv) securities of any class or series that are Publicly Traded.

(c) "Constructive Sale" shall mean with respect to any Common Equivalent Securities: (i) a short sale of such Common Equivalent Securities; or (ii) entering into or acquiring a derivative contract with respect to such Common Equivalent Securities; or (iii) entering into or acquiring a futures or forward contract to deliver such Common Equivalent Securities; or (iv) entering into any hedging or other derivative transaction that has the effect of either directly or indirectly materially changing the economic benefits or risk of owning such Common Equivalent Securities.

(d) "Covered Securities" shall mean the following securities of the Company or any Holding Company: (i) the shares of Common Stock acquired from the Company in the Merger, which securities are listed on Schedule 1 (d) to this Agreement, (ii) all other Common Equivalent Securities of the Company or of any Holding Company acquired by Shareholders or any Affiliate of Shareholders, now or in the future, by any means, and (iii) all Common Equivalent Securities of the Company or any Holding Company received now or in the future by Shareholders or any Affiliate of Shareholders in exchange for, or on account of, any Covered Securities, including, without limitation, in connection with any merger, consolidation, exchange reorganization, recapitalization, dividend, split, reverse split or similar transaction or event.

(e) "Covered Transaction" shall mean any of the following acts, transactions or events:

(i)	Sell any of the Covered Securities or other securities of the Company or Holding Company received on account of ownership of the Covered Securities.

(ii)	Transfer, assign or otherwise dispose of any of the Covered Securities.

(iii)

Pledge, hypothecate or otherwise create a lien on any of the Covered Securities.

(iv)	Loan to any person or entity any Common Equivalent Securities of the Company or any Holding Company.

(v)	Sell short any Common Equivalent Securities of the Company or any Holding Company.

(vi)	Enter into a Constructive Sale respect to any Common Equivalent Securities of the Company or any Holding Company.

(vii)

Enter into, terminate, suspend or modify any 10b5-1 or other plan or agreement designed to facilitate trading Covered Securities without the prior written approval of the Company and any Holding Company.

(viii)

Enter into any agreement concerning any of the foregoing transactions, or otherwise facilitate any other person conducting any of the foregoing transactions.

(f) "Holding Company" shall mean any company whose Common Equivalent Securities are Publicly Traded (i) with which the Company merges or consolidates, or (ii) of which the Company or its successor becomes a wholly or majority owned subsidiary.

(g) "Lock-up Period" shall mean the period that begins on the date of this Agreement and that ends at the end on the first anniversary of the end of the calendar month during which the later of the following two events occur: (i) closing date of the Merger or (ii) the date a Registration Statement pursuant to Section 5 of the 1933 Act covering the resale of shares of Common Equivalent Securities of the Company or any Holding Company becomes effective by order of the SEC, which Registration Statement includes shares of Common Stock sold in the private placement to investors, and/or or upon the exercise of outstanding warrants of the Company by their holders (whether in a pubic offering or private placement), who after the closing date of the Merger invest sufficient capital in Public Company (collectively, the "Private Placement") to fund operations for at least twenty-four (24) months after the closing date of the Merger (the "Private Placement Target") on a cumulative basis from all sales of securities (including in the Private Placement) of any all series or classes occurring on or after the closing date of the Merger, other than conversion of outstanding debt. (For clarification by way of example, if the Registration Statement becomes effective on February 15, 2012 and the Company achieves the Private Placement Target capital-raising milestone on March 10 , 2012, then the Lock-up Period would end on March 31, 2014.) Notwithstanding the foregoing, if no private placement occurs and the Private Placement Target is achieved solely by exercise of registered warrants such that the warrant shares can be resold without a new registration statement, ( i) if an amendment is required to the warrant registration statement, then the one-year period referred to above will begin upon effectiveness of such amendment or (ii) if no amendment is required to resell the warrant shares, then the one-year period referred to above will begin on the date the Private Placement Target is achieved.

(h) "Installment Re-Sale Restriction Period" shall mean the period that begins upon termination of the Lock-up Period and that ends on the first (1st) annual anniversary of the beginning of the Installment Re-Sale Restriction Period. (For clarification, based on the example at the end of Section 1 (g) above, the Installment Re-Sale Restriction Period would begin April 1, 2014 and would end on March 31, 2015.)

(i) "Pro Rata Share of Shareholders" shall mean the percentage determined by dividing (i) the maximum number of Covered Securities owned by any Shareholder ("Shareholders’ Ownership"), by (ii) the maximum number of Covered Securities owned by all Shareholders whose resale is restricted under this Agreement. Securities purchased in Public Markets or from persons or entities other than the Company or any Holding Company shall not be included in the calculation of Shareholders’ Pro Rata Share, unless the Company and any Holding Company agrees to include the same in the calculation.

(j) "Private Placement" shall mean any offer and sale of Common Equivalent Securities of the Company or any Holding Company that occurs on or after March 15, 2011 not including conversion of debt, but on or before December 31, 2011.

(k) "Public Market" shall mean: (i) any national securities exchange (as defined in the 1934 Act); (ii) NASDAQ or any equivalent automated quotation system; (iii) the Over-the-Counter Bulletin Board; (iv) the Pink Sheets; or (v) any foreign equivalent of any of the above designated in writing by the Company or Holding Company in their sole discretion.

(l) "Publicly Traded" shall mean being sold or quoted for sale in any Public Market.

(m) "SEC" means the Securities and Exchange Commission of the United States of America or its successor agency.

(n) "1933 Act" means the Securities Act of 1933, as amended, and any successor statute.

(o) "1934 Act" means the Securities Exchange Act of 1934, as amended, and any successor statute.

2. Effectiveness. This Agreement shall become effective when executed and delivered by the Company and Shareholders.

3. Lock-up Period Obligations. Shareholders hereby agree that, neither Shareholders nor any Affiliate or Permitted Transferee (as defined in Section 7 hereof) of Shareholders, will enter into any Covered Transaction during the Lock-up Period.

4. Installment Re-Sale Restriction Period Obligations. Shareholders hereby agrees that neither Shareholders, nor any Affiliate or Permitted Transferee of Shareholders, will enter into any Covered Transaction during the Installment Re-Sale Restriction Period, except that during any calendar month during the Installment Re-Sale Restriction Period, any Shareholder, together with its Affiliates and Permitted Transferees, may sell a number of Covered Securities equal to the lower of the following amounts (the "Permitted Volume"):

(a) Eight and One-Half (8.5%) Percent of the highest number of Covered Securities at any time owned by such Shareholder, its Affiliates and Permitted Transferees (which number shall include all Common Equivalent Securities, whether or not exercised or converted) (the "Stable Measurement Number"); or

(b) The number of Covered Securities obtained by multiplying: (i) the average weekly reported volume of trading of the Common Equivalent Securities on all national securities exchanges and/or reported through the automated quotation system of a registered securities association during the four calendar weeks that ended immediately prior to the beginning of the calendar month during which the sale occurs (the "Average Weekly Volume"), by (ii) the Shareholders’ Pro Rata Share.

5. Interpretation. For purposes of determining compliance with the foregoing, (i) if more than one class or series of Covered Securities are Publicly Traded, a separate calculation for each class or series of Publicly Traded Covered Securities shall be made to determine the Permitted Volume of sales for each class or series and failure to sell the full Permitted Volume of one class or series shall not entitle Shareholders to sell more than the Permitted Volume of any other class or series; (ii) if Shareholders fail to sell the full Permitted Volume of Covered Securities in any calendar month, the unsold Permitted Volume of Covered Securities may not be carried over to any subsequent calendar month; (iii) a sale shall be deemed to occur on the date the transaction is executed, not when the order is placed or the securities delivered to complete the sale; (iv) Shareholders shall have the obligation to cancel any open sale orders at the end of any month, if execution of the order in the following month would cause sales to exceed the Permitted Volume of sales for such later month; (v) prior to selling any Covered Securities in any calendar month, Shareholders shall report to the Company or any Holding Company all sales of Covered Securities in all prior months; and (vi) prior to selling any Covered Securities in any calendar month, Shareholders shall request the Company or Holding Company to confirm to the Shareholders the Permitted Volume of Covered Securities for the Shareholders for that calendar month, but if the Company or Holding Company fails to provide the information within three (3) trading days after written request, the Shareholders shall be entitled to sell Covered Securities equal to the Stable Measurement Number. In the event any Affiliate or Transferee or Shareholders owns or acquires any Covered Securities, the Company shall be entitled to treat Shareholders and its Affiliates and Permitted Transferees as a single person for purposes of determining compliance with this Agreement, unless the Company otherwise agrees. Unless the Company or Holding Company designates another person, all communications regarding the foregoing shall be made in writing to the Chief Financial Officer of the Company or Holding Company, who shall make all determinations about the number of Covered Securities permitted to be sold. All determinations by the Company or Holding as to the number of Covered Securities permitted to be sold in any month shall be final and binding on Shareholders, unless the Company or Holding Company has acted in bad faith. Shareholders shall have the burden of proving bad faith by clear and convincing evidence.

6. Securities Law Compliance. Shareholders further agree that both during and after termination of the restrictions set forth above, Shareholders will comply with all securities laws, rules and regulations when purchasing or reselling securities of the Company or any Holding Company, including, without limitation, SEC Rule 144, Section 16 of the 1934 Act, SEC Rule 10b-5 and other restrictions on trading while in possession of material non-public information. To ensure compliance, Shareholders hereby agree to comply with any and all insider trading policies the Company or any Holding Company may adopt from time to time effective immediately upon written notice from the Company or any Holding Company of the policy. Without limiting the foregoing, Shareholders hereby agree that the determination of the Company or any Holding Company as to whether any Shareholder possesses material nonpublic information shall be final and binding on Shareholders.

7. Exceptions. Notwithstanding the foregoing, the obligations of Shareholders pursuant to Sections 3 and 4 above are subject to the following:

(a) The Board of Directors of the Company or Holding Company may terminate or waive any provision of this Agreement that restricts any party from taking any action prohibited by Section 3 or 4 of this Agreement prior to termination of the Lock-up Period or the Installment Re-Sale Restricted Period, provided the Board of Directors of the Company provides all Shareholders with the same termination or waiver at the same time and to the same extent. Nothing herein shall prohibit the Company from amending or waiving any agreement with any persons or entities other than Shareholder and any such amount or waiver or amendment with other persons or entities shall have no effect on the obligations of Shareholders under this Agreement.

(b) Notwithstanding the foregoing, Shareholders may transfer Covered Securities of the Company or Holding Company to a Permitted Transferee: (i) if the transfer is made by Shareholders without payment or other consideration by the Permitted Transferee; (ii) if a transfer is otherwise permitted under applicable laws, rules, regulations and other agreements and contracts; and (iii) the Permitted Transferee first signs an agreement that includes substantially the terms set forth herein and that is otherwise reasonably acceptable to the Company or Holding Company. A "Permitted Transferee" means: (i) if a Shareholder is an individual, to any family member or to any trust where the sole beneficiaries are Shareholder and/or family members or to any entity in which Shareholder is a General Manager or General Partner; (ii) if a Shareholder is a corporation, to any direct or indirect parent or subsidiary or owner of such Shareholder; (iii) if a Shareholder is a partnership, to any partner of such Shareholder; (iv) if a Shareholder is a limited liability company, to any member of such Shareholder; and (v) if a Shareholder is a trust, to any beneficiary of such trust. Except for transfers in compliance with this Agreement, any transfer or attempted transfer of any Covered Securities not in compliance with this Agreement, shall be null and void and without effect and the Company is hereby authorized to stop any such transfer.

(c) Notwithstanding the foregoing, subject to compliance with securities laws, the Shareholders may sell all or part of the Warrants included in the Covered Securities in a limited number of private transaction(s), if the purchaser(s) agree to comply with the restrictions of this Agreement in a contract acceptable to the Company.

8. Continuation. The provisions of this Agreement shall continue in effect notwithstanding that any Covered Securities are registered for re-sale or are otherwise sellable under any exemption from registration.

9. Legends and Stop Transfer Instructions. Certificates evidencing the Covered Securities shall have a legend in form and substance acceptable to the Company and Holding Company referring to the restrictions of this Agreement and the Company or Holding Company may instruct the transfer agent of the Company or Holding Company to stop any transfer of any securities by Shareholders or any Affiliate or Permitted Transferee of Shareholders in violation of this Agreement and may take any other action required to avoid violation of this Agreement, including, without limitation, obtaining an injunction. Neither the Company nor any Holding Company shall have any liability for any refusal to transfer, unless the Company or Holding Company has acted in bad faith. Shareholders shall have the burden of proving bad faith by clear and convincing evidence.

10. Amendment by Majority in Interest. To provide the Company with flexibility to raise capital or to enter into a merger, consolidation or similar transaction, this Agreement may be amended or supplemented to lengthen the re-sale restrictions in Sections 3 and/or 4 hereof or to decrease the number of Covered Securities that can be sold in any time period pursuant to Section 4 hereof, upon execution and delivery of a written amendment or supplement by: (i) the Company and any Holding Company; and (ii) the Shareholders of who own a majority of the Covered Securities (including shares issuable upon exercise or conversion of any warrants, stock option, convertible securities or other rights to acquire Covered Securities) that are then subject to this Agreement. Shareholders hereby agrees to be bound by such amendment or supplement immediately upon request, notice of its provisions and notice that the required signatures have been obtained, notwithstanding that a Shareholder has not executed such amendment or supplement.

11. Miscellaneous.

(a) Shareholders hereby agree to cause all Affiliates and Permitted Transferees of Shareholders that own or acquire beneficially or of record any Common Equivalent Securities of the Company or any Holding Company (or any right to acquire any such Common Equivalent Securities) to execute and deliver a counterpart of this Agreement. All obligations of Shareholders and Permitted Transferees under this Agreement shall apply to any Affiliate of Shareholders and Permitted Transferees which owns or acquires any Common Equivalent Securities of the Company or any Holding Company to the same extent as to Shareholders notwithstanding that such Affiliate or Permitted Transferee has not executed or delivered this Agreement. Shareholders hereby agree to be responsible for the actions and omissions of its Affiliates and Permitted Transferees.

(b) Each Shareholder hereby represents and warrants to the Company as follows: (i) Shareholders is both the record owner and the beneficial owner of the number of Covered Securities listed on Schedule 1(d) to this Agreement free and clear of any and all pledges, liens, security interests and other rights, claims and encumbrances; (ii) no other person or entity has any contract or other right to acquire any such Covered Securities; (iii) neither Shareholder nor any Affiliate of Shareholders owns of record or beneficially, or has any right to acquire, any Common Equivalent Securities of the Company other than the Covered Securities; (iv) Shareholder has full power and authority to execute and deliver and perform this Agreement; and (v) this Agreement has been duly and validly executed and delivered and constitutes a valid and binding agreement of Shareholder enforceable in accordance with its term.

(c) Shareholders agree to notify the Company or any Holding Company in writing of the acquisition by Shareholders or any Affiliate of Shareholders or Permitted Transferees of any Common Equivalent Securities of the Company or any Holding Company.

(d) The representations, warranties, understandings, acknowledgments and agreements in this Agreement are true and accurate as of the date hereof, shall be true and accurate as of the date of the acceptance hereof by the Company and shall survive thereafter. Shareholders hereby agrees to indemnify and hold harmless the Company and any Holding Company from and against any loss or expense (including, without limitation, court costs and reasonable attorneys fees and expenses) resulting from any breach by Shareholders or any Affiliate or Permitted Transferee of Shareholders of any representation, warranty, covenant or agreement of Shareholders or any Affiliate or Permitted Transferee of any Shareholders.

(e) Any notices required or permitted to be given under the terms hereof: (i) may be personally delivered to any party, in which case the notice shall be effective when delivered; (ii) may be sent by overnight courier, in which case the notice shall be effective on the first scheduled delivery date established by such courier service; or (iii) may be sent by certified or registered mail (return receipt requested), in which case the notice shall be effective five days after being placed in the mail, in each case addressed to a party as provide herein. Except in the case of actual personal delivery, unless indicated otherwise in a notice sent in compliance with this Agreement, the addresses for such communications shall be: (i) if to the Company, to the principal office of the Company at the time of such notice addressed to the Chief Financial Officer of the Company; and (ii) if to Shareholders, to the address set forth immediately below such Shareholder’s name on the signature pages to this Agreement.

(f) This Agreement shall be enforced, governed and construed in all respects in accordance with the laws of the State of North Carolina, as such laws are applied by Delaware courts to agreements entered into and to be performed in North Carolina, without regard to principles of conflicts of laws, and shall be binding upon the Shareholders, the Shareholder’s heirs, estate, legal representatives, successors and assigns and shall inure to the benefit of the Company and its successors and assigns.

(g) All claims or disputes arising among the parties and relating to this Agreement or the breach, termination or validity thereof shall be settled by binding arbitration in accordance with the then-current rules for arbitration of the CPR Institute for Dispute Resolution. There shall be a single neutral arbitrator selected in accordance with such rules. The arbitration process shall be governed by the North Carolina Uniform Arbitration Act, W.S. §§ 1-36-101 through 1-36-119. The place of the arbitration shall be Sheridan County, North Carolina, and the arbitrator shall apply the substantive law of the State of North Carolina, exclusive of its choice of law rules, in deciding the dispute. The arbitrator shall have authority to award provisional relief. The final award of the arbitrator may include compensatory damages, not including pre-award interest, and specific relief limited to requiring the parties to comply with the provisions of this Agreement. The arbitrator is not empowered to award exemplary or punitive damages and each party hereby waives any right to recover such damages with respect to any dispute resolved by arbitration. The arbitrator is empowered to award reasonable attorneys’ fees in addition to the costs of arbitration. The arbitrator’s award may be confirmed and judgment entered thereon in accordance with the governing arbitration law specified above. Any claim of a party hereunder shall be time barred unless arbitration with respect to such claim is commenced within one (1) year after such claim arose.

(h) Shareholders agree not to transfer or assign this Agreement, or any of Shareholder’s interest herein, without the express written consent of the Company and any Holding Company. The Company or Holding Company may assign any or all of its rights under this Agreement without the consent or approval of Shareholders. Except for any Holding Company, this Agreement is not intended, and shall not be deemed to create or confer any rights or remedies upon any person or entity other than the parties hereto (including parties to counterparts of this Agreement) and their respective successors and permitted assigns, or to otherwise create any third party beneficiary hereto.

(i) This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes any and all prior or contemporaneous representations, warranties, agreements and understandings in connection therewith.

(j) This Agreement may be amended only by a writing executed by all parties hereto. This Agreement may be executed in one or more counterparts.

[REMAINDER OF PAGE LEFT BLANK]

IN WITNESS WHEREOF, the parties have executed this Lock-up and Installment Sales Restriction Agreement as of the date first written above.

ALTERNATIVE ENERGY & ENVIRONMENTAL SOLUTIONS, INC.

By: ____________________________

Title: ___________________________

Address for Notices:____________________________

____________________________________________

SHAREHOLDERS

____________________________(SEAL)

Name: ____________________________