Document:

Sponsored Research Agreement between Drexel University and W2 Energy, Inc.

    
      

    

    EXHIBIT
      10.2

    Sponsored
      Research Agreement between Drexel University and W2 Energy, Inc.

    

    SPONSORED
      RESEARCH AGREEMENT

    

    

    This
      Sponsored Research Agreement ("AGREEMENT") is made by and between Drexel
      University, a Pennsylvania nonprofit corporation ("DREXEL"), with offices
      located at 3201 Arch Street, Philadelphia, PA 19104 and W2 Energy Inc., a
      corporation organized and existing under the laws of Nevada ("SPONSOR"), having
      a place of business at 711S Suite 4 Carson Street Carson City
      Nevada.

    

    This
      AGREEMENT is effective on January 31, 2006 ("EFFECTIVE DATE").

    

    
      	
              1.

            	
              DEFINITIONS

            

    

    

    
      	 	
              1.1.

            	
              DREXEL
                INTELLECTUAL PROPERTY means and includes all technical information,
                inventions, developments, discoveries, software, know-how, methods,
                techniques, formulae, data, processes and other proprietary ideas,
                whether
                or not patentable or copyrightable, that are first conceived, discovered,
                developed or reduced to practice in the conduct of the SPONSORED
                RESEARCH.

            

    

    

    
      	 	
              1.2.

            	
              PRINCIPAL
                INVESTIGATOR is Alexander Fridnan, who is responsible for supervision
                and
                administration of the SPONSORED
                RESEARCH.

            

    

    

    
      	 	
              1.3.

            	
              SPONSORED
                RESEARCH means the research program described in Attachment A to
                this
                AGREEMENT.

            

    

    

    
      	
              2.

            	
              SPONSORED
                RESEARCH

            

    

    

    
      	 	
              2.1.

            	
              DREXEL
                agrees to begin the SPONSORED RESEARCH after the EFFECTIVE DATE and
                upon
                payment by SPONSOR of any funds owed. DREXEL agrees to use reasonable
                efforts to conduct the SPONSORED RESEARCH substantially in accordance
                with
                the terms and conditions of this AGREEMENT. SPONSOR acknowledges
                that
                DREXEL and the PRINCIPAL INVESTIGATOR shall have the freedom to conduct
                and supervise the SPONSORED RESEARCH in a manner consistent with
                DREXEL's
                educational and research missions.

            

    

    

    
      	 	
              2.2.

            	
              If
                the services of the PRINCIPAL INVESTIGATOR become unavailable to
                DREXEL
                for any reason, DREXEL is entitled to designate another member of
                its
                faculty who is acceptable to both parties to serve as the PRINCIPAL
                INVESTIGATOR of the SPONSORED RESEARCH. If a substitute PRINCIPAL
                INVESTIGATOR has not been designated within sixty (60) days after
                the
                original PRINCIPAL INVESTIGATOR ceases his or her services under
                this
                AGREEMENT, either party may terminate this AGREEMENT upon written
                notice
                to the other party, subject to the provisions of ARTICLE
                9.

            

    

    

    

    
      	
              3.

            	
              TERM
                OF AGREEMENT

            

    

    

    
      	 	
              3.1.

            	
              The
                term of this AGREEMENT shall begin on the EFFECTIVE DATE of this
                AGREEMENT
                and shall end on February 2, 2007 unless terminated sooner pursuant
                to
                Sections 2.2, 9.1 or 9.2 hereof. This AGREEMENT may be extended or
                renewed
                only by mutual written agreement executed by duly authorized
                representatives of the parties.

            

    

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    4. REIMBURSEMENT
      OF COSTS, PAYMENT

    

    
      	 	
              4.1.

            	
              SPONSOR
                shall reimburse DREXEL for all direct and indirect costs incurred
                in the
                conduct of the SPONSORED RESEARCH in an amount not to exceed the
                total
                amount of $174,990 as set forth in Attachment A. SPONSOR acknowledges
                that
                this amount is a good faith estimate only and not a guarantee of
                the cost
                to conduct the SPONSORED RESEARCH. If at any time DREXEL determines
                that
                it will require additional funds for the SPONSORED RESEARCH, it shall
                notify SPONSOR and provide an estimate of the additional amount.
                SPONSOR
                shall not be responsible for any costs in excess of the amount of
                $174,990
                as set forth in Attachment A unless it has agreed in writing to provide
                additional funds.

            

    

    

    
      	 	
              4.2.

            	
              SPONSOR
                shall make payments to DREXEL in accordance with the payment schedule
                set
                forth in Attachment A. All payments are to be made by check payable
                in
                United States dollars, to "Drexel University", and sent to the address
                in
                Section 11.4.

            

    

    

    
      	 	
              4.3.

            	
              Title
                to any equipment, laboratory animals, or any other materials made
                or
                acquired with funds provided under this AGREEMENT shall vest in DREXEL,
                and such equipment, animals, or materials shall remain the property
                of
                DREXEL following termination of this
                AGREEMENT

            

    

    

    
      	
              5.

            	
              RECORDS
                AND REPORTS

            

    

    

    
      	 	
              5.1

            	
              PRINCIPAL
                INVESTIGATOR shall maintain records of the results of the SPONSORED
                RESEARCH and shall provide SPONSOR with reports of the progress and
                results of the SPONSORED RESEARCH in accordance with Attachment A.
                DREXEL
                shall maintain records of the use of the funds provided by SPONSOR
                and
                shall make such records available to SPONSOR upon reasonable notice
                during
                DREXEL's normal business hours, but not more frequently than once
                each
                calendar year.

            

    

    

    
      	 	
              5.2

            	
              In
                order to preserve the patentability of DREXEL INTELLECTUAL PROPERTY,
                SPONSOR shall maintain DREXEL INTELLECTUAL PROPERTY and information
                provided pursuant to Section 6.1 (whether oral or written) as confidential
                and shall not disclose such information to any third party except
                with
                DREXEL's prior written approval.

            

    

    

    
      	
              6.

            	
              RECORDS
                AND REPORTS

            

    

    

    
      	 	
              6.1

            	
              PRINCIPAL
                INVESTIGATOR shall provide to DREXEL and SPONSOR a complete written
                disclosure of any DREXEL INTELLECTUAL PROPERTY reasonably considered
                patentable. SPONSOR shall advise DREXEL in writing, no later than
                thirty
                (30) days after receipt of such disclosure, whether it requests DREXEL
                to
                file and prosecute patent applications related to such DREXEL INTELLECTUAL
                PROPERTY. If SPONSOR does not request DREXEL to file and prosecute
                such
                patent applications, DREXEL may proceed with such preparation and
                prosecution at its own cost and expense; but such patent applications
                shall be excluded from SPONSOR's option under ARTICLE
                7.

            

    

    

    
      	 	
              6.2

            	
              DREXEL
                shall control the preparation and prosecution of all patent applications
                and the maintenance of all patents related to DREXEL INTELLECTUAL
                PROPERTY. SPONSOR shall reimburse DREXEL upon receipt of invoice
                for all
                documented expenses incurred in connection with the filing and prosecution
                of the patent applications and maintenance of the patents that SPONSOR
                has
                requested DREXEL to prosecute under Section
                6.1.

            

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    

    
      	 	
              6.3

            	
              The
                preparation, prosecution, and maintenance of copyright, trademark
                and
                other intellectual property applications for the DREXEL INTELLECTUAL
                PROPERTY shall be subject to the provisions of Section
                6.1.

            

    

    

    
      	 	
              6.4

            	
              DREXEL
                shall retain all right, title and interest in and to the DREXEL
                INTELLECTUAL PROPERTY and any patents, copyrights and other intellectual
                property protections related
                thereto.

            

    

    

    
      	 	
              6.5

            	
              Rights
                to inventions, improvements and/or discoveries, whether patentable
                or
                copyrightable or not, relating to SPONSORED RESEARCH made solely
                by
                employees of SPONSOR using SPONSOR's facilities shall belong to
                SPONSOR.

            

    

    

    
      	 	
              6.6

            	
              Rights
                to inventions, improvements and/or discoveries relating to SPONSORED
                RESEARCH, whether or not patentable or copyrightable, which were
                made
                jointly during the performance of this AGREEMENT by the PRINCIPAL
                INVESTIGATOR or other inventors owing a duty to assign to DREXEL
                and by
                employees of SPONSOR shall belong jointly to DREXEL and to SPONSOR.
                Such
                inventions, improvements, and/or discoveries shall be subject to
                the terms
                and conditions of this AGREEMENT.

            

    

    

    
      	
              7.

            	
              OPTION

            

    

    

    
      	 	
              7.1.

            	
              In
                consideration of SPONSOR’S funding of the SPONSORED RESEARCH and payment
                for intellectual property expenses as provided for in Article 6,
                

            

    

    DREXEL
      grants SPONSOR a first option to negotiate to acquire a royalty-bearing license
      to practice DREXEL INTELLECTUAL PROPERTY. DREXEL and SPONSOR will negotiate
      in
      good faith to determine the terms of a license agreement as to each item of
      DREXEL INTELLECTUAL PROPERTY for which SPONSOR has agreed to make payment for
      intellectual property expenses as provided for in Article 6. If SPONSOR and
      DREXEL fail to execute a license agreement within six one ((6) months1) year
      after disclosure of the DREXEL INTELLECTUAL PROPERTY to SPONSOR or if SPONSOR
      fails to make payment for intellectual property expenses as provided for in
      Article 6, DREXEL shall be free to license the DREXEL INTELLECTUAL PROPERTY
      to
      any party upon such terms as DREXEL deems appropriate, without any further
      obligation to SPONSOR. If mutually agreed upon, SPONSOR may request in writing
      a
      6 month extension to this time frame.

    

    
      	 	
              7.2.

            	
              Any
                license granted to SPONSOR pursuant to Section 7.1 hereof shall be
                subject, if applicable, to the rights of the United States government
                reserved under Public Laws 96-517, 97-256 and 98-620, codified at
                35
                U.S.C. 200-212, and any regulations issued
                thereunder.

            

    

    

    
      	
              8.

            	
              PUBLICATION,
                USE OF NAME

            

    

    

    
      	 	
              8.1.

            	
              DREXEL
                shall be free to publish the results of the SPONSORED RESEARCH; a
                copy of
                each publication will be provided to
                SPONSOR.

            

    

    

    
      	 	
              8.2.

            	
              DREXEL
                shall not use SPONSOR's name without SPONSOR's prior written consent
                except that DREXEL may acknowledge SPONSOR's funding of the SPONSORED
                RESEARCH in scientific publications and in listings of sponsored
                research
                projects. SPONSOR shall not use DREXEL's name, or the name of any
                trustee,
                officer, faculty member, student or employee thereof, without DREXEL's
                prior written consent.

            

    

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    9. TERMINATION

    

    
      	 	
              9.1.

            	
              In
                addition to the termination right set forth in Section 2.2 hereof,
                either
                party may terminate this AGREEMENT effective upon written notice
                to the
                other party, if the other party breaches any of the terms or conditions
                of
                this AGREEMENT fails to cure such breach within thirty (30) days
                after
                receiving written notice of the breach. In the event of an incurable
                breach, the non-breaching part may terminate this AGREEMENT effective
                immediately upon written notice to the breaching
                party.

            

    

    

    

    
      	 	
              9.2.

            	
              In
                addition, either party may terminate this AGREEMENT for any reason
                upon
                ninety (90) days prior written notice to the other
                party.

            

    

    

    

    
      	 	
              9.3.

            	
              In
                the event of termination of this AGREEMENT prior to its stated term,
                whether for breach or for any other reason whatsoever, DREXEL shall
                be
                entitled to retain from the payments made by SPONSOR prior to termination
                DREXEL's reasonable costs of concluding the work in progress. Allowable
                costs include, without limitation, all costs or noncancellable commitments
                incurred prior to the receipt, or issuance, by DREXEL of the notice
                of
                termination, and the full cost of each employee, student and faculty
                member supported hereunder through the end of such commitments. In
                the
                event of termination, DREXEL shall submit a final report of all costs
                incurred and all funds received under this AGREEMENT within sixty
                (60)
                days after the effective termination date. The report shall be accompanied
                by a check in the amount of any excess of funds advanced over costs
                and
                allowable commitments incurred. In case of a deficit of funds, SPONSOR
                shall pay DREXEL the amount needed to cover costs and allowable
                commitments incurred by DREXEL under this
                AGREEMENT.

            

    

    

    

    
      	 	
              9.4.

            	
              Termination
                of this AGREEMENT shall not affect the rights and obligations of
                the
                parties accrued prior to termination. The provisions of ARTICLE 6,
                entitled INTELLECTUAL PROPERTY; ARTICLE 7, entitled OPTION, ARTICLE
                10,
                entitled DISCLAIMER OF WARRANTIES, INDEMNIFICATION; and ARTICLE 11,
                entitled ADDITIONAL PROVISIONS, shall survive
                termination.

            

    

    

    
      	
              10.

            	
              DISCLAIMER
                OF WARRANTIES, INDEMNIFICATION

            

    

    

    
      	 	
              10.1

            	
              DREXEL
                MAKES NO WARRANTIES, EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER,
                INCLUDING, WITHOUT LIMITATION, WARRANTIES WITH RESPECT TO THE CONDUCT,
                COMPLETION, SUCCESS OR PARTICULAR RESULTS OF THE SPONSORED RESEARCH,
                OR
                THE CONDITION, OWNERSHIP, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR
                PURPOSE OF THE SPONSORED RESEARCH OR ANY DREXEL INTELLECTUAL PROPERTY.
                DREXEL SHALL NOT BE LIABLE FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL,
                PUNITIVE OR OTHER DAMAGES SUFFERED BY SPONSOR OR ANY OTHER PERSON
                RESULTING FROM THE SPONSORED RESEARCH OR THE USE OF ANY DREXEL
                INTELLECTUAL PROPERTY PRODUCT.

            

    

    

    

    

    

    

    

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    
      	
            	10.2	
              SPONSOR
                shall defend, indemnify and hold harmless DREXEL, the PRINCIPAL
                INVESTIGATOR and any of DREXEL's faculty, students, employees, trustees,
                officers, affiliates and agents (hereinafter referred to collectively
                as
                the "INDEMNIFIED PERSONS") from and against any and all liability,
                claims,
                lawsuits, losses, damages, costs or expenses (including attorneys'
                fees),
                which the INDEMNIFIED PERSONS may hereafter incur, or be required
                to pay
                as a result of SPONSOR's use of the results of SPONSORED RESEARCH
                or any
                DREXEL INTELLECTUAL PROPERTY or as a result of any breach of this
                AGREEMENT or any act or omission of SPONSOR, its employees, affiliates,
                contractors, licensees or agents. DREXEL shall notify SPONSOR upon
                learning of the institution or threatened institution of any such
                liability, claims, lawsuits, losses, damages, costs and expenses
                and
                DREXEL shall cooperate with SPONSOR in every proper way in the defense
                or
                settlement thereof at SPONSOR's request and
                expense.

            

    

    

    
      	
              11.

            	
              ADDITIONAL
                PROVISIONS

            

    

    

    
      	 	
              11.1

            	
              No
                rights hereunder may be assigned by SPONSOR, directly or by merger
                or
                other operation of law, without the express written consent of DREXEL.
                Any
                prohibited assignment of this AGREEMENT or the rights hereunder shall
                be
                null and void. No assignment shall relieve SPONSOR of responsibility
                for
                the performance of any accrued obligations which it has prior to
                such
                assignment.

            

    

    

    
      	 	
              11.2

            	
              A
                waiver by either party of a breach or violation of any provision
                of this
                AGREEMENT will not constitute or be construed as a waiver of any
                subsequent breach or violation of that provision or as a waiver of
                any
                breach or violation of any other provision of this
                AGREEMENT.

            

    

    

    
      	 	
              11.3

            	
              Nothing
                herein shall be deemed to establish a relationship of principal and
                agent
                between DREXEL and SPONSOR, nor any of their agents or employees,
                nor
                shall this AGREEMENT be construed as creating any form of legal
                association or arrangement which would impose liability upon one
                party for
                the act or failure to act of the other party. Nothing in this AGREEMENT,
                express or implied, is intended to confer on any person other than
                the
                parties hereto or their permitted assigns, any benefits, rights or
                remedies.

            

    

    

    
      	 	
              11.4

            	
              Notices,
                payments, statements, reports and other communications under this
                AGREEMENT shall be in writing and shall be deemed to have been received
                as
                of the date dispatched if sent by public overnight courier (e.g.,
                Federal
                Express) and addressed as follows:

            

    

    

     

    
      	 If to DREXEL: 	 with a copy to:
	 	 
	
              Margaret Vigiolto

              Associate Vice Provost

              Drexel University

              3201 Arch Street, Suite 100

              Philadelphia, PA 19104

            	
              Office of the General Counsel

              Drexel University

              3201 Arch Street, Suite 100

              Philadelphia, PA 19104

            
	 	 
	
              If
                to SPONSOR: 

            	 
	 	 
	
              Michael
                McLaren

              
                CEO

                W2
                  Energy Inc

                26
                  Densley Ave Toronto

                Ontario
                  M6M 2R1

              

            	 

    

    
 

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    

    
      	 	
              11.5

            	
              This
                AGREEMENT shall be construed and governed in accordance with the
                laws of
                the Commonwealth of Pennsylvania, without giving effect to conflict
                of law
                provisions. The parties hereby submit to the exclusive jurisdiction
                of and
                venue in any state or federal courts located within the Eastern District
                of Pennsylvania with respect to any and all disputes concerning the
                subject of this AGREEMENT.

            

    

    

    
      	 	
              11.6

            	
              DREXEL
                and SPONSOR shall not discriminate against any employee or applicant
                for
                employment because of race, color, sex, sexual preference, age, religion,
                national origin, disability, or because he or she is a disabled veteran
                or
                veteran of the Vietnam Era.

            

    

    

    
      	 	
              11.7

            	
              Neither
                party shall be liable for any failure to perform as required by this
                AGREEMENT to the extent such failure to perform is due to circumstances
                reasonably beyond such party's control, including, without limitation,
                labor disturbances or labor disputes of any kind, accidents, failure
                of
                any governmental approval required for full performance, civil disorders
                or commotions, acts of aggression, acts of God, energy or other
                conservation measures imposed by law or regulation, explosions, failure
                of
                utilities, mechanical breakdowns, material shortages, disease, or
                other
                such occurrences.

            

    

    

    
      	 	
              11.8

            	
              SPONSOR
                shall comply with all laws, regulations and other legal requirements
                applicable to SPONSOR in connection with this AGREEMENT, including
                but not
                limited to any legal requirements applicable to SPONSOR's use of
                the
                results of the SPONSORED RESEARCH or any DREXEL INTELLECTUAL PROPERTY
                and
                laws controlling the export of technical data, computer software,
                laboratory prototypes, and all other export controlled
                commodities.

            

    

    

    
      	 	
              11.9

            	
              This
                AGREEMENT embodies the entire understanding between the parties relating
                to the subject matter hereof and supersedes all prior understandings
                and
                agreements, whether written or oral. This AGREEMENT may not be varied
                except by a written document signed by duly authorized representatives
                of
                both parties.

            

    

    

    IN
      WITNESS WHEREOF, the duly authorized representatives of the parties hereby
      execute this AGREEMENT as of the date first written above.

    

     

    

    
      	 DREXEL UNIVERSITY 	 W2 Energy Inc.
	 	 
	 By: 	 By: 
	 	 
	
              Name:
                /s/Margaret Vigiolto 

            	
              Name: /s/Michael
                McLaren

            
	 	 
	
              Title:
                Assoc. Vice Provost for Research

            	
              Title: CEO

            
	 	 
	
              Date:
                

            	
              Date:
                

            

    

    

    

    I
      have
      read and agreed

    to
      the
      responsibilities of

    the
      PRINCIPAL INVESTIGATOR:

     

     

    By: Date:

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    Attachment
      A

    

     

    Summary
      of SPONSORED RESEARCH

     

    PLASMA
      ASSISTED CONVERSION OF BIOMASS TO LIQUID FUEL

    

     

    Work
      Scope

     

    

    
      	 	
              1)

            	
              Thermodynamic
                and kinetic analysis. Analysis will be made for possible processes
                (with
                different feedstock, but mostly with peat as a simulation substance
                for
                dried sewage sludge) from the standpoints of thermodynamics, chemical
                kinetics, desirable product composition and acceptable energy spending.
                Several promising feedstock compositions will be selected for further
                study. 

            

    

    Processes
      includes conversion of feedstock into syn-gas with desirable composition
      H2:CO
      =
      2:1; into acetylene C2H2,
      ethane
      C2H4
      and
      methane CH4.

    
      	 	
              2)

            	
              Development
                of two experimental setups for experimental study and optimization
                of the
                selected processes. 

            

    

    
      	 	
              a)

            	
              Modified
                Thermogravimetric Analyzer (MTGA). Available TA Instruments
                Thermogravimetric Analyzer Q600 SDT with 0.1 μg sensitivity and a
                temperature range from ambient to 1500°C will be modified to measure
                reaction rate of the condensed particles of a selected feedstock
                composition at various gas temperatures with and without plasma.
                A
                dielectric-barrier discharge plasma generator, which does not change
                gas
                temperature, will be mounted inside the Analyzer to activate a stream
                of
                air, O2
                or
                H2
                molecules which will react with particle surface. This MTGA together
                with
                the chemical analysis methods will be used for process fundamental
                study
                and optimization.

            

    

    
      	 	
              b)

            	
              Gliding
                Arc Tornado (GAT) reactor for the technological process development.
                This
                system will be based on our earlier successfully developed system
                for
                methane conversion. This GAT reactor should be installed in the system
                with powder (ash) collection and gas analysis. Study of the process
                using
                this laboratory setup will allow us to make the next step to the
                pilot
                plant development.

            

    

    
      	 	
              3)

            	
              Experimental
                study and analysis of results. Two types of experiments will be
                conducted:

            

    

    
      	 	
              a)

            	
              Biomass
                oxidation and hydrolysis in MTGA

            

    

    
      	 	
              b)

            	
              Biomass
                conversion in GAT 

            

    

    
      	 	
              4)

            	
              Development
                of technical requirements and preliminary design of the Pilot
                plant

            

    

    

    

    

    Project
      Timetable

    

     

    

    PRINCIPAL
      INVESTIGATOR 
      Alexander Fridman

    CO-PRINCIPAL
      INVESTIGATOR 
      Alexander Gutsol

    

    

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    Representative
      of SPONSOR

     

        1)
      Name: Michael
      McLaren  

    

        2)
      Phone
      Number: 416-246-1100  

     

    Period
      of Performance  

    

    February
      3, 2006 - February 2, 2007

     

    Report
      Schedule

     

    Progress
      report - August 2, 2006

    Final
      report - February 2, 2007

     

    Budget

     

    
      	
              Plasma
                Conversion of Biomass

            	 	 
	
              PROPOSAL
                BUDGET:December 1, 2005 - November 30, 2006

            	
               

            
	
              Yearly
                % Increase in Salaries

            	
              4%

            	 
	
              Fringe
                Benefit Rate

            	
              26.8%

            	 
	
              Indirect
                Cost Rate

            	
              50.0%

            	 
	 	
              Year
                01

            	
              Total

            
	
              Principal
                Investigator (Prof. Alexander Fridnan):

            	 	 
	
              1
                m
                (Summer)

            	
              16,000

            	
              16,000

            
	
              0%
                (Fall, Winter, Spring)

            	
              0

            	
              0

            
	
              Co-Principal
                Investigator (Research Prof. Alexander Gutsol):

            	
               

            
	
              0%
                (Summer)

            	
              16,000

            	
              16,000

            
	
              Technician
                

            	 	 
	
              1
                (12 month appt.)

            	
              13,000

            	
              13,000

            
	
              Subtotal

            	
              45,000

            	
              45,000

            
	
              Benefits
                @ 26.8%

            	
              12,060

            	
              12,060

            
	
              Part-time
                Wages

            	
              0

            	
              0

            
	
              Research
                Assistants (Salary):

            	 	
               

            
	
              1
                (12 month appt.)

            	
              19,000

            	
              19,000

            
	
              Total
                Personnel

            	
              76,060

            	
              76,060

            
	
              Miscellaneous

            	
              0

            	
              0

            
	
              Publications
                

            	
              0

            	
              0

            
	
              Telephone/Communications
                

            	
              0

            	
              0

            
	
              Travel
                (Domestic)

            	
              4,000

            	
              4,000

            
	
              Travel
                (Foreign)

            	
              4,000

            	
              4,000

            
	
              Supplies

            	
              16,100

            	
              16,100

            
	
              Purchased
                Services (eq. manufacturing)

            	
              16,500

            	
              16,500

            
	
              Consultant

            	
              0

            	
              0

            
	
              Subcontract
                < $25K

            	
              0

            	
              0

            
	
              Participant
                Support

            	
              0

            	
              0

            
	
              Computer
                Use

            	
              0

            	
              0

            
	
              Modified
                Total Direct Cost

            	
              116,660

            	
              116,660

            
	 	 	
               

            
	
              Indirect
                @ 50%

            	
              58,330

            	
              58,330

            
	 	 	
               

            
	
              Research
                Assistants (Tuition):

            	 	
               

            
	
              1
                (12 month appt.)

            	
              0

            	
              0

            
	
              Equipment

            	
              0

            	
              0

            
	
              Subcontract
                > $25K

            	
              0

            	
              0

            
	
              Total
                Project Cost

            	
              174,990

            	
              174,990

            
	 	 	 
	
              Total
                Sponsor Funding

            	
              174,990

            	
              174,990

            

    

     

    Invoice
      and Payment Schedule: Monthly
      invoice

     

    
8Letter 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)	
              Assisting
                W2 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.

            

    

     

     

     

     

     

     

     

     

    6

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