Exhibit 10.13
 
[gilla.jpg]
    Gilla Inc.

January 22, 2014

Mr. Andrew Hennessy
Director & Secretary
Drinan Marketing Ltd.

Dear Sir:

Re: Business Combination of Drinan Marketing Ltd. (“Drinan”) and Gilla Inc.
("Gilla")

Subject to and in accordance with the terms and conditions hereinafter
contained, this letter agreement (the "Agreement") is intended to set forth the
basic terms and conditions of the proposed acquisition (the "Acquisition") by
Gilla of all of the issued and outstanding shares of Drinan. Gilla proposes that
the Acquisition will proceed as follows:

1.  
Background of Gilla:  Gilla is a public company and the common shares of Gilla
(the “Gilla Common Shares”) are listed for trading on the OTCQB (the "OTC")
under the symbol GLLA. There are currently 67,766,977 Gilla Common Shares issued
and outstanding and $1,222,000 of convertible debentures issued at a conversion
price of $0.07 per Gilla Common Shares.

 
2.  
Background of Drinan:  Drinan is a private company incorporated under the laws
of Ireland that has only common shares (the "Drinan Common Shares") issued and
outstanding, and no other outstanding stock options, warrants, anti-dilution or
other rights to purchase Drinan Common Shares.  Drinan has no debt, liabilities
or unsecured payables not disclosed in its Trial Balance for the period ended
December 31, 2013 (the “Drinan Financial Statements”).

 
3.  
Acquisition of Drinan:  At the Closing, Gilla will issue 500,000 Common Shares
to Andrew Hennessy and Michele Hennessy (250,000 Common Shares each) in exchange
for Andrew and Michele Hennessy’s entire shareholding in Drinan Marketing
Limited. In addition Andrew Hennessy and Michele Hennessy will be entitled to an
earnable deferred consideration of Gilla Common Share Purchase Warrants1 to be
commercialized and set forth in the Formal Agreement.

 
4.  
Management Agreements:  The parties acknowledge that upon closing of the
transaction, Gilla or a subsidiary of Gilla (“Gilla Group”) will enter into a
management agreement with Andrew Hennessy (effective at the time of the closing
of the Acquisition) with the understanding that Andrew Hennessy will become an
employee of Gilla Group. The management agreement will contain standard
provisions common to a management agreement of this type, including
non-competition and change of control clauses.  Key terms of the management
agreement will include the following:

 
(a)  
€6,250 per month of net salary after payroll tax deduction;

 
(b)  
the ability to participate in management bonus compensation plan to be
determined by the Board of Directors of Gilla;

 
(c)  
the opportunity to participate in the board approved management stock option
plan of Gilla.

 

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1 1,000,000 Warrants to vest upon Drinan achieving pre-determined operational
thresholds.  The warrants are to be exercisable over 3 years with a strike price
of $0.25
 
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5.  
Gilla Representations and Warranties:  Gilla represents and warrants to Drinan
as follows:

 
(a)  
Gilla is duly incorporated and is validly subsisting under the laws of Nevada;

 
(b)  
Gilla has fully owned subsidiaries named Snoke Distribution Canada Ltd., Gilla
Operations LLC, Gilla Enterprises Inc., and Charlie’s Club, Inc.;

 
(c)  
Gilla is in compliance with all of its obligations as a reporting issuer in the
jurisdictions where it is a reporting issuer, including those imposed pursuant
to securities legislation, and the regulations and policies thereunder;

 
(d)  
Gilla is in compliance with all of the policies of the OTC and the Financial
Industry Regulatory Authority (“FINRA”) and is eligible for electronic
book-entry delivery and settlement depository services by the Depository Trust
Company (“DTC”);

 
(e)  
Gilla currently has 67,766,977 Gilla Common Shares issued and outstanding, all
of which are validly issued and outstanding as fully paid and non-assessable;

 
(f)  
Gilla has no agreement, option, understanding, warrant, call, conversion right,
commitment or any right or privilege of any kind which obligates Gilla to allot
or issue any Gilla Common Shares or any equity interests, carried interest,
licenses, sublicenses, fees, indemnities, royalties, profit sharing or any
similar agreement or participation of any nature or kind, contingent or
otherwise, other than the $1,222,000 of convertible debentures issued at a
conversion price of $0.07 per Gilla Common Shares;

 
(g)  
Gilla is not a party to any employment agreements with any of its officers or
employees;

 
(h)  
the financial statements of Gilla for the period ended September 30, 2013 were
true and correct and present fairly in all material respects the financial
position of Gilla as at the date thereof and were prepared in accordance with
U.S. generally accepted accounting principles consistently applied;

 
(i)  
(A) Gilla is a Section 12(g) "reporting issuer" within the meaning of the U.S.
Securities Act of 1933, as amended (the “Securities Act”) and the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) and the respective rules
and regulations promulgated thereunder by the United States Securities &
Exchange Commission (the “SEC”); (B) neither the SEC nor any securities
commission, nor FINRA, nor DTC nor the OTC, has issued any order preventing the
Acquisition or cessation of trading of any securities of Gilla; (C) DTC not
imposed a chill on the trading of the shares of Common Stock of Gilla; (D) Gilla
is in good standing in the state of its incorporation and in each other state
and province where it is required to be registered to conduct business; and (E)
Gilla is fully compliant as a reporting issuer with the Securities Act, the
Exchange Act and all other applicable national, state and provincial securities
laws and regulations, as well as all FINRA OTC policies.

 
(j)  
there is no "material fact" or "material change" (as those terms are defined in
applicable securities legislation) in the affairs of Gilla that has not been
generally disclosed to the public; Gilla has not made any material misstatements
or omitted any material information in any filing made with the SEC or in
connection with the sale or placement of any of its securities; there are no
undisclosed liabilities in any financial statement of Gilla filed with the SEC
or in any of the books and records of Gilla which have been delivered to
Drinan.  All information and materials provided by Gilla to Drinan is true and
correct in all respects; and

 
(k)  
there is no action, suit, litigation, arbitration, investigation, inquiry or
other proceeding in progress, or, to the best of Gilla's knowledge, pending or
threatened against or relating to Gilla or its material assets and there is no
circumstance, matter or thing known to Gilla which might give rise to any such
proceeding or to any governmental investigation relative to Gilla and there is
not outstanding against Gilla any judgment, decree, injunction, rule or order of
any court, government department, commission, agency or arbitrator.

 
6.  
Drinan Representations and Warranties:  Drinan represents and warrants to Gilla
as follows:

 
(a)  
Drinan is duly incorporated and is validly subsisting under the laws of Ireland;

 
(b)  
other than as disclosed herein, Drinan has no outstanding agreements, options,
understandings, warrants, calls, conversion rights, commitments or any rights or
privileges of any kind which obligate Drinan to allot or issue any shares in its
capital;

 
(c)  
Drinan has the sole and exclusive right to all of its assets and technologies to
conduct its business relating thereto;

 
 
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(d)  
there is no action, suit, litigation, arbitration, investigation, inquiry or
other proceeding in progress, or, to the best of Drinan's knowledge, pending or
threatened against or relating to Drinan, its subsidiaries or the Drinan Assets,
or Drinan’s other material assets and there is no circumstance, matter or thing
known to Drinan which might give rise to any such proceeding or to any
governmental investigation relative to Drinan and there is not any outstanding
proceedings against Drinan or in respect of the Drinan Assets, any judgment,
decree, injunction, rule or order of any court, government department,
commission, agency or arbitrator; and

 
(e)  
Drinan has no debt, liabilities, or payables not disclosed in the Drinan
Financial Statements.

 
7.  
Regulatory Requirements:  This agreement is subject to any required regulatory
approvals and upon closing, Gilla agrees to file any and all documents required
to comply with applicable securities laws.

 
8.  
Closing:  The parties agree the date of Closing (the "Closing Date") will occur
on or before February 3, 2014.

 
9.  
Costs:  The parties agree each party will pay for their own respective costs
incurred pursuant to the Acquisition and the other transactions contemplated in
this Agreement, whether or not the transactions contemplated herein are
completed.

 
10.  
Due Diligence:  For the purposes of allowing Gilla and Drinan to review the
business and affairs of each other so as to enable each other to determine if
there are any facts relating to which, if known to the other party, would cause
it to elect to not proceed with the Acquisition, Drinan and Gilla hereby permit
each other and their auditors and agents to conduct, upon the execution of this
Agreement, up to and including the Closing Date, such investigations as each
party may deem reasonably necessary or advisable in order to ensure that each of
the representations, warranties, covenants and agreements as are required by
each party are true and accurate.

 
11.  
Conditions:  The obligations of the parties to consummate the Acquisition will
be subject to the fulfilment of the following conditions:

 
(a)  
the receipt of all necessary approvals;

 
(b)  
the latest available financial statements of Gilla are true and correct and have
been prepared in accordance with generally accepted accounting principles
consistently applied;

 
(c)  
the audited and unaudited financial statements of Drinan required to complete
the Acquisition are delivered to Gilla on or before January 31, 2014 and such
financial statements are true and correct and have been;

 
(d)  
there will be no adverse material change in the business, affairs or operations
of Gilla between the date of the latest available financial statements of Gilla
and the Closing;

 
(e)  
there will be no adverse material change in the business, affairs or operations
of Drinan between the date of the latest available financial statements of
Drinan and the Closing;

 
(f)  
the review to the sole satisfaction of Drinan of the financial condition,
business, properties, title, assets and affairs of Gilla;

 
(g)  
the review to the sole satisfaction of Gilla of the Drinan Assets and of the
financial condition, business, properties, title, assets and affairs of Drinan;

 
(h)  
the approval of the Acquisition by the board of directors of each of Gilla and
Drinan;

 
(i)  
amounts owed by Drinan to Gilla are repaid or accounted for appropriately as a
liability;

 
(j)  
the Drinan security holders will have received certificates representing the
Gilla Common Shares to which they are entitled pursuant to paragraph 3;

 
(k)  
the representations and warranties contained herein and in the Formal Agreement
shall be deemed to have been made again on the Closing Date and shall then be
true and correct in all material respects as of that date;

 
(l)  
no inquiry or investigation (whether formal or informal) in relation to Gilla or
Drinan or their directors or officers, shall have been commenced or threatened
by any officer or official of the OTC or any securities commission, or similar
regulatory body having jurisdiction such that the outcome of such inquiry or
investigation could have a material adverse effect on applicable party; and

 
 
(w)
each party making available all relevant financial statements, documents,
reports, files, books, papers, documents and agreements, and all other relevant
information relating to its business, assets, operations, prospects, financial
condition and affairs, such that the other party shall satisfactorily complete
its due diligence review of such materials on the later of: (i) the date on
which the filing statement in respect of the Acquisition is filed on EDGAR with
the U.S. Securities and Exchange Commission and in accordance with the policies
of OTC; and (i) such other date as agreed to by the parties.

 
 
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The conditions listed in subparagraphs (b), (d), (f) and (j) are for the sole
benefit of and may be waived only by, Drinan. The conditions listed in
subparagraphs (c), (e), and (g) are for the sole benefit of and may be waived
only by Gilla. The balance of the conditions in this paragraph 16 are for the
benefit of, and may be waived by, the parties hereto as they relate to the
obligations of the other parties to perform same.
 
12.  
Confidential Information:  The information provided by each of Gilla and Drinan,
in any form whether written, electronic or verbal, as to financial condition,
business, properties, title, assets and affairs (including any material
contracts) as may reasonably be requested by the other party, including
information contemplated by paragraph 10, will be kept confidential by each
party (the "Confidential Information"), other than information that:

 
(a)  
has become generally available to the public;

 
(b)  
was available to a party or its representatives on a non-confidential basis
before the date of this Agreement; or

 
(c)  
has become available to a party or its representatives on a non-confidential
basis from a person who is not, to the knowledge of the party or its
representatives, otherwise bound by confidentiality obligations to the provider
of such information or otherwise prohibited from transmitting the information to
the party or its representatives.

 
No Confidential Information may be released to any third party without the
consent of the provider thereof, except if such information is required to be
released by law, court order or stock OTC rule. Confidential Information may be
used solely for the purpose of consummating the transactions contemplated by
this Agreement.
 
13.  
Press Releases:  The parties will advise each other, in advance, of any public
statement or press release which they propose to make in respect of the
Acquisition, provided that no party will be prevented from making any public
statement or press release which is required to be made by law or any rule of a
stock exchange or similar organization to which it is bound.  Upon the execution
of this letter agreement, Gilla will issue a Form 8-K as required under the
Exchange Act.

 
14.  
Termination:  This Agreement may be terminated in writing at any time by the
parties hereto in accordance with the terms contained herein or if closing has
not occurred on or before February  14, 2014.

 
15.  
This Agreement will be governed by the laws of the Province of Ontario and the
federal laws of Canada applicable therein.

 
16.  
This Agreement constitutes an enforceable legal agreement, the consideration for
which will be the mutual covenants of the parties contained herein.

 
If the foregoing correctly sets forth your understanding, please indicate your
acceptance thereof by signing and returning the enclosed duplicate of this
letter.

This letter may be signed in counterparts which together will be deemed to
constitute one (1) letter agreement, and delivery of the counterparts may be
effected by means of telecopier from us to you and from you to us.
 

 
Yours truly,
      GILLA INC.       Per:  /s/ J. Graham Simmonds       J. Graham Simmonds    
Chief Executive Officer    
ACKNOWLEDGED AND AGREED TO this  22 day of January, 2014.
      DRINAN MARKETING LIMITED         Per: /s/ Andrew Hennessy       Andrew
Hennessy     Director & Secretary         Per: /s/ Michele Hennessy      
Michele Hennessy     Director  

 
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