Letter Agreement between AAB, Inc. and W2 Energy, Inc.


    
      

    


    EXHIBIT
      10.3

    Letter
      Agreement between AAB, Inc. and W2 Energy, Inc.

    


    


    


    Patrick
      H. Rafferty

    Vice
      President and Director

    ABB
      Inc.

    501
      Merritt 7

    Norwalk,
      CT 06856

    


    Michael
      McLaren

    President,
      Chief Executive Officer        

    W2
      Energy
      Inc.

    26
      Densley Ave.

    Toronto,
      Ontario

    Canada
      M6M 2R1

    


    Re:
      W2
      Energy Inc. Financial Arranger Contract

    


    Dear
      Mr.
      McLaren:

    


    By
      this
      letter agreement (the "W2 Energy Inc. Financial Arranger Contract ", or the
      “Contract”), W2 Energy Inc. and its affiliates, including management and
      controlling stockholders (“Client" or “W2”), hereby engages ABB Inc. (“Arranger”
or “ABB”), upon the terms and subject to the conditions set forth herein, and
      Arranger agrees to be so engaged, to assist Client, as requested in the
      arranging of debt and/or equity financing for the Biomass to Liquid
      Transportation Fuels and Electricity Co-generation Project to be located in
      Guelph Ontario Canada the ("Project”). 

    


    


    I. Tasks
      and Obligations of Arranger

    


    As
      financial advisor, ABB will advise the Client on options for the financial
      structure of the Project, potential sources of financing, and certain project
      negotiations. 

    


    Specifically,
      ABB will provide W2 the following services: 

    


    
      	
              a)

            	
              Assisting
                W2 in the development of a financing plan for the
                Project;

            


    

    


    
      	
              b)

            	
              Assisting
                and maintaining with W2 a financial model specifically tailored to
                the
                Project, and suitable for presentation;


            


    

    


    
      	
              c)

            	
              Identifying
                with W2 the critical financing issues and developing mitigants, as
                necessary;

            


    

     

    
 

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    
       

      
        	d)	
                AssistingW2
                  with certain discussions and negotiations with the various relevant
                  parties involved in agreements relating to the Project including,
                  but not
                  limited to 

              


      

    


    
      	 	
              1.

            	
              financial
                agreements, supply agreements, offtake agreements, and the EPC
                contract;

            


    

    


    
      	 	
              2.

            	
              Assisting
                in the preparation of descriptive materials including an information
                memorandum, offering documents and term sheets, and any other documents
                and agreements to be used in connection with a financing of the
                Project;

            


    

    


    
      	 	
              3.

            	
              Assisting
                in identifying potential lenders and/or equity participants, presenting
                the financial structure of the Project to them, and coordinating
                with them
                as necessary;

            


    

    


    
      	 	
              4.

            	
              Advising
                on structuring, negotiating, and closing the financing for the Project;
                and 

            


    

    


    
      	 	
              5.

            	
              Assisting
                in the implementation of the financing for the Project in co-ordination
                with all relevant parties.

            


    

    


    


     

    II. ABB
      Organization

     

    


    For
      the
      Project, Patrick H. Rafferty shall lead ABB’s effort, and he shall act as the
      primary contact for W2 within the ABB organization. Support may be provided
      by
      ABB’s world-wide project and trade finance network as required. 

    


    


    III. Fees
      and Payment

    


    For
      the
      foregoing services, W2 agrees to pay ABB the following amounts:

    


    
      	 	
              a)

            	
              A
                success fee (the "Success Fee") equal to .75% of the Total Project
                Financing per Project. "Total Project Financing" means:
                

            


    

    


    
      	 	
              1.

            	
              all
                debt financing arranged by ABB, of whatever kind and from whatever
                source,
                provided to or used by or for the benefit of the Project; and
                

            


    

    


    
      	 	
              2.

            	
              such
                equity capital as ABB may have assisted in arranging for the
                Project.

            


    

    


    W2
      shall
      pay 100% of the Success Fee:

    


    
      	 	
              a)

            	
              Upon
                financial closing of the financing for the Project, or
                

            


    

    


    
      	 	
              b)

            	
              If
                the Project secures such financing as described in Section III a)
                above
                from sources other than those arranged by ABB, W2 will pay ABB a
                reduced
                Success Fee equal to .375% of the financing ABB was looking to raise
                for
                the Project, or

            


    

    


    
      	 	
              c)

            	
              If
                no project financing has occurred by October 24, 2006, and to the
                extent
                that ABB has diligently performed its tasks and obligations as arranger,
                W2 shall pay ABB $50,000 before April 24, 2007.


            


    

    


    Either
      fee in Section 3 b) or C) above shall be referred to as the “Reduced Success
      Fee”.


    
      
         

      

      
        2

        
          

        

      

      
         

      

    


    W2
      agrees
      to pay ABB the Success Fee or Reduced Success Fee, as appropriate, within 10
      (ten) days of Financial Closing. "Financial Closing" means the earlier of (i)
      such date on which the principal loan(s) or similar agreements covering the
      debt
      financing for any Project are executed by the debt providers (or if debt
      financing is not used, the date on which the principal agreements for equity
      or
      other financing arrangements are executed) and (ii) the date on which the
      Project is closed without financing arranged by ABB.

    


    In
      addition to the pricing arrangements detailed above, W2 agrees to reimburse
      ABB
      monthly for reasonable Out-of-Pocket Expenses which ABB incurs in connection
      with providing services to W2. "Out-of-Pocket Expenses" include (i) travel
      and
      related expenses and other disbursements made by ABB in connection with
      providing W2 the services hereunder and (ii) any fees and expenses related
      to
      agents, consultants and tax and legal advisors which ABB deems advisable to
      use.
      ABB will seek W2’s approval in advance for any individual expense expected to
      exceed USD 10,000.

    


    Other
      than as provided elsewhere in this Agreement, W2 agrees to pay all amounts
      due
      to ABB in USD within thirty (30) days of W2’s receipt of ABB’s
      invoice.

    


    The
      Client authorizes ABB to send all invoices for amounts due to ABB under this
      Agreement to W2
      Energy
      Inc., 26 Densley Ave. Toronto, Ontario, Canada M6M 2R1.

    


    


    IV.
      Other

     

    As
      W2’s
      financial advisor, ABB will take (and the client hereby so authorize us to
      take)
      such actions in W2’s name as ABB deems reasonably necessary to provide the
      services itemized hereunder, including contacting potential providers of funds,
      government agencies, and others. If ABB deems it necessary, W2 agrees to provide
      ABB with a power of attorney or similar document to help ABB carry out such
      actions on W2’s behalf.

    


    As
      partial consideration of ABB’s services to W2, W2 agrees to the indemnification
      and other terms of the General Terms and Conditions to Engagement Agreements
      that form part of this Engagement. References to "Agreement" shall mean this
      letter and such General Terms and Conditions. Any reference to the term of
      this
      Agreement shall include any extensions hereof. Client acknowledges and consents
      that ABB may have relationships with other parties involved in any Project,
      such
      as suppliers, developers, and providers of funds.

    


    Each
      party and each individual signing below on its behalf represents and warrants
      that such individual is authorized to do so and that his/her signature is
      sufficient to make this Agreement legal, valid and binding on such party. The
      Client represents and warrants that W2 is not using, and shall not use during
      the course of this Engagement, any other financial or similar advisor in
      connection with the Project, without ABB’s prior written
      consent.


    


    


    
      
        V.
          Termination;
          Agreement to Comply. 

      

    

    


    


    This
      Agreement is effective as of the date first written above. Either party may
      terminate it with or without Cause at any time with 30 days' written notice.
      "Cause" for purposes of this Part V shall mean the gross negligence or willful
      misconduct of the other party. 

    


    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    At
      termination of this Agreement the Client agrees to pay ABB all amounts due
      hereunder that have not been paid as of the date of such termination. This
      will
      include any amounts outstanding hereunder and for reimbursement of Out-of-Pocket
      Expenses. The Client agrees to pay, if not already paid, the Success Fee or
      any
      applicable Reduced Success Fee (i) at such date of termination, if Financial
      Closing has occurred, or (ii) otherwise on the date of Financial Closing that
      occurs within one year of the date of such termination, if ABB has terminated
      this Agreement without Cause.

    


    Kindly
      confirm W-2’s agreement with the foregoing terms by signing where indicated
      below on this letter. Please return one signed copy to ABB.

     

    We
      are
      delighted to have this opportunity to work together with W-2’s.

    


    


    Yours
      sincerely,

    


    


    


    /s/Patrick
      H. Rafferty

    Vice
      President & Director

    ABB
      Inc.

    


    


    


    


    ACCEPTED
      AND AGREED:

    


    


    


    /s/Michael
      McLaren     Date

    Chief
      Executive Officer        

    W2
      Energy
      Inc.

     

     


    
      
         

      

      
        4

        
          

        

      

      
         

      

    


    GENERAL
      TERMS AND CONDITIONS TO ENGAGEMENT AGREEMENTS

    


    
      	
            	1.	
              Client
                agrees (i) to provide ABB with all information related to the Project
                in
                Client’s possession or control or which Client could reasonably obtain,
                (ii) to inform ABB timely of developments concerning the Project
                or the
                financing, (iii) to make available to ABB sufficient of Client’s personnel
                and their time, (iv) to assist ABB in obtaining such consents, approvals,
                meetings and authorizations as ABB may deem necessary for the fulfillment
                of its services and (v) to be responsible for making its own evaluation
                and determination in relation to the Project and any transactions
                entered
                into in connection therewith.

            


    

    


    
      	
            	2.	
              Client
                agrees that it will provide information that is true, accurate and
                complete to the best of its knowledge, that ABB will be entitled
                to rely
                upon it without independent verification, and that Client will be
                liable
                for such information and any reliance thereon by any
                party.

            


    

    


    
      	 	
              3.

            	
              Should
                Client have any complaint or dissatisfaction with any aspect of ABB
                services, Client agrees to so notify ABB in writing as soon as possible
                but no later than 30 days after the occurrence of the event giving
                rise
                thereto.

            


    

    


    
      	
            	4.	
              Each
                party represents and agrees that no party not a signatory hereto
                has or
                shall have any privity, interest in or rights in respect of this
                Agreement. Client represents and warrants that this Agreement does
                not
                breach any agreement it has with any other party. Client agrees that
                ABB
                has not made any commitments or representations with regard to the
                provision of funds, any provider of funds, or any other party. Fees
                payable to any arranger or provider of funds in connection with the
                Project are in addition to the fees payable under this
                Agreement.

            


    

    


    
      	
            	5.	
              Client
                will have no obligation to indemnify ABB in respect of any loss,
                claim,
                liability, or expense ("Liability") if caused directly by the gross
                negligence or intentional wrongdoing of ABB. In all other cases,
                Client
                agrees to indemnify ABB, and its affiliates, employees and officers,
                and
                hold them harmless, in respect of any Liability relating to or arising
                out
                of this Agreement, the Project, or the services hereunder. ABB shall
                only
                be liable in relation to this Agreement for its gross negligence
                and
                willful misconduct and such liability shall always be limited to
                the
                amounts it has received from Client under this Agreement. Notwithstanding
                anything in this Agreement to the contrary, neither party shall be
                liable
                for special, indirect, punitive, or consequential damages or losses
                including, without limitation, damages or losses of any of the following
                types: (i) which do not flow directly and immediately from such party's
                actions or omissions; (ii) which represent lost profits or lost
                opportunities; (iii) which arise from the intervention of circumstances
                even if such circumstances were contemplated by the parties at the
                time
                this Agreement was signed; or (iv) which are not reasonably foreseeable
                or
                a natural consequence of such party's actions or omissions.
                

            


    

    


    
      	
            	6.	
              ABB
                will be entitled to suspend its services so long as any amount due
                from
                Client hereunder remains unpaid. Any applicable project retainer
                fee will
                be payable in its entirety in advance for each month this Agreement
                is in
                effect. All amounts due from Client under this Agreement are payable
                to
                such ABB account in such country as ABB shall specify, in immediately
                available funds, and free and clear of any taxes, withholding or
                deduction. Fees and expenses paid hereunder are
                non-refundable.

            


    

    


     


    
      
         

      

      
        5

        
          

        

      

      
         

      

    


    
      	
            	7.	
              Any
                opinion, advice, analysis or summary ABB provides Client orally or
                in
                writing is for Client’s exclusive and confidential use in connection with
                the Project and no other person may use it or rely on it.
                Client agrees not to disclose the same to any party without ABB’s prior
                written consent. Any financial model and other materials developed
                by ABB
                (the "Materials") will remain ABB’s property. However, so long as Client
                remains in compliance with this Agreement, Client may use the Materials
                for Client’s own use in connection with the Project or its business, but
                it may not disclose the Materials to any party without ABB’s prior written
                consent. The parties agree to keep this Agreement and the terms hereof
                confidential.

            


    

    


    
      	
            	8.	
              No
                party may assign this Agreement or any of the rights or obligations
                hereunder to any other party without the prior written consent of
                the
                other party or parties hereto, which shall not be unreasonably
                withheld.

            


    

    


    
      	
            	9.	
              This
                Agreement shall be governed by the laws of New York, without giving
                affect
                to any provision thereof that would require application of the laws
                of any
                other jurisdiction. Any dispute arising in connection with this Agreement
                shall be finally settled under the Rules of Conciliation and Arbitration
                of the International Chamber of Commerce by one arbitrator appointed
                in
                accordance with said Rules. The place of the arbitration shall be
                New
                York, NY and the language of the arbitration shall be English. Client
                waives any immunity or right to claim immunity that it now has or
                may
                later acquire.

            


    

    


    
      	
            	10.	
              This
                Agreement represents the entire understanding between the parties
                on the
                subject matter hereof and replaces and overrides any previous agreement,
                understanding, and discussions between them thereon. No modification
                or
                amendment of this Agreement is valid if not in writing and signed
                by
                authorized representatives of each party. Paragraphs 2, 5, 6, 7,
                9 and 10
                hereof and any payment obligation of a party, not satisfied as of
                termination, shall survive termination of this
                Agreement.

            


    

     

     

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