AGREEMENT AND PLAN OF MERGER

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:

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.

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LIST OF SCHEDULES AND EXHIBITS

SCHEDULE 1

TO

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

TO

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.

(a)   " Affiliate " shall mean any and all persons and enti