Filed by Automated Filing Services Inc. (604) 609-0244 - Terrace Ventures Inc. - Exhibit 10.1






LOAN AGREEMENT 

THIS AGREEMENT dated as of the 18th day of May, 2007


BETWEEN: 


  
    
      
        
          SOLARA TECHNOLOGIES INC., a British
            Columbia company having an office at Suite 530, North Office Tower,
            Oakridge Centre, 650 West 41st Avenue, Vancouver, BC V5Z
            2M9 

          (hereinafter called the "Borrower") 

        

      

    

  



OF THE FIRST PART 

AND: 


  
    
      
        
          TERRACE VENTURES INC., a Nevada corporation
            with a corporate office at 810 Peace Portal Drive, Suite 202, Blaine,
            WA 98230 

          (hereinafter called the "Lender") 

        

      

    

  



OF THE SECOND PART 

WHEREAS: 

	A. 	
      The Lender has offered to lend $200,000 (U.S.) to the
      Borrower;

	 	 
	B. 	
      The Borrower and the Lender have entered into a letter of
      intent dated February 28, 2007 contemplating a merger of the Borrower and
      the Lender (the “Merger”);

	 	 
	C. 	
      The Borrower has agreed to borrow such sum, subject to
      the terms and upon the conditions hereinafter set
forth.



NOW THEREFORE THIS AGREEMENT WITNESSES THAT in
consideration of the sum of $1.00 paid by each party to the other (the receipt
of which is hereby acknowledged) the parties hereto mutually covenant and agree
as follows: 

1.                    
 INTERPRETATION 

1.1          
          Definitions. Where used
herein or in any amendment hereto each of the following words and phrases shall
have the meanings set forth as follows: 

	 	(a) 	
      "Agreement" means this Loan Agreement including the
      Schedules hereto together with any amendments hereof;

	 	 	 
	 	(b) 	
      "Event of Default" means any event set forth in paragraph
      7.1;

	 	 	 
	 	(c) 	
      "Loan" means the loan of $200,000 (U.S.) to be made by
      the Lender to the Borrower in accordance with this Agreement;

	 	 	 
	 	(d) 	
      “Maturity” means May 25,
2008;







2

	 	(e) 	
      "Principal Sum" means the sum of $200,000
  (U.S.);

	 	 	 
	 	(f) 	
      "Security Documents" means, collectively, the Promissory
      Note, and such other documents and instruments relating to the security
      granted under this Agreement as may be requested by the Lender from time
      to time to better secure payment of the Loan and accrued interest thereon;
      and

	 	 	 
	 	(g) 	
      “SR&ED Credits” means those scientific research and
      development tax credits in respect of the 2005 and 2006 taxation years of
      the Borrower that are due and are to become payable to the Borrower from
      the Canada Revenue Agency.



1.2                   
Number and Gender. Wherever the singular or the masculine are used herein
the same shall be deemed to include the plural or the feminine or the body
politic or corporate where the context or the parties so require. 

1.3                   
Headings. The headings to the articles, paragraphs, subparagraphs or
clauses of this Agreement are inserted for convenience only and shall not affect
the construction hereof. 

1.4                   
References. Unless otherwise stated a reference herein to a numbered or
lettered article, paragraph, subparagraph or clause refers to the article,
paragraph, subparagraph or clause bearing that number or letter in this
Agreement. A reference to this Agreement or herein means this Loan Agreement,
including the Schedule hereto, together with any amendments thereof. 

1.5                   
Currency. All dollar amounts expressed herein refer to lawful currency of
The United States of America. 

2.                    
 TERMS OF LOAN 

2.1                   
Loan and Repayment. The Lender hereby agrees to lend to the Borrower the
Principal Sum of $200,000 (U.S.). The Loan shall be made in United States
currency and shall be repaid by the Borrower on or before May 25, 2008. 

2.2                   
Interest. The Borrower shall pay on the amount of the Principal Sum,
interest at a rate of 8% per annum, payable on Maturity. The Borrower shall pay
interest at the aforesaid rate on all overdue interest. 

2.3                   
Advances. As of the date of this Agreement, the Lender has advanced
$20,000 (U.S.) of the Principal Sum (the “Initial Sum”) to the Borrower and the
receipt of the Initial Sum is hereby acknowledged by the Borrower. The balance
of the Principal Sum shall be advanced by the Lender, unless there shall be an
Event of Default, in the form of certified cheque, bank draft or wire transfer
as follows: a) $55,000 (US) on signing of this agreement, and b) the balance of
$125,000 (US) on or before May 25, 2007. 

2.4                    
Pre-Payment. The Borrower may pre-pay all or any portion of the loan at
any time. 

3.                     
SECURITY, PROMISSORY NOTE, EXTENSIONS & WAIVER 

3.1                   
Security . As security for the due payment of the Loan, the Borrower
hereby grants to the Lender a security interest in all of the Borrower’s right
title and interest in and to any presently owned and after acquired SR&ED
Credits and all proceeds thereof. 




3

3.2                    The
Borrower represents that they are entitled to SR & ED credits estimated at a
minimum of $200,000 US, and will apply for such credits in a timely and diligent
manner. 

3.3                   
The borrower will advance to lender any and all SR & ED refunds received as
partial or full repayment of the loan. 

3.4                    Promissory
Note. To evidence any advances under the Loan, the Borrower agrees to enter
into promissory notes in the forms attached hereto as Schedule “A”. 

3.5                    Extensions.
The Lender may grant extensions as the Lender may see fit without prejudice to
the liability of the Borrower or to the Lender's rights under this Agreement or
under the Security Documents. 

3.6                    Waiver.
The Lender may waive any breach by the Borrower of this Agreement or of any
default by the Borrower in the observance or performance of any covenant or
condition required to be observed or performed by the Borrower hereunder or
under the Security Documents. No failure or delay on the part of the Lender to
exercise any right, power or remedy given herein or by statute or at law or in
equity or otherwise shall operate as a waiver thereof, nor shall any single or
partial exercise of any right preclude any other exercise thereof or the
exercise of any other right, power or remedy, nor shall any waiver by the Lender
be deemed to be a waiver of any subsequent similar or other event. 

4.                     
COVENANTS OF THE BORROWER 

4.1                    General
Covenants. The Borrower hereby covenants and agrees with the Lender that so
long as the Loan or any part thereof remains outstanding, the Borrower will:


	 	(a) 	
      duly and punctually pay or cause to be paid to the Lender
      all amounts required to be paid to it pursuant to this Agreement on the
      day, at the place, in the monies and in the manner set forth
  herein;

	 	 	 
	 	(b) 	
      duly observe and perform each and all of its covenants
      and agreements as set forth in this Agreement and in the Security
      Documents;

	 	 	 
	 	(c) 	
      at all times maintain its corporate existence and carry
      on and conduct its businesses in a proper and efficient manner;
  and

	 	 	 
	 	(d) 	
      provide the Lender, within five (5) days of any written
      request from the Lender, with a full and complete list setting out all of
      the jurisdictions in which the Borrower carries on
  business.



4.2                   
Negative Covenants. The Borrower covenants and agrees that so long as the
Loan or any part thereof remains outstanding, the Borrower will not, without the
prior written consent of the Lender: 

	 	(a) 	
      declare or pay or set aside for payment any dividend or
      otherwise make distribution with respect to its shares, or voluntarily
      purchase, redeem, acquire or retire any shares of any class;

	 	 	 
	 	(b) 	
      guarantee or otherwise become surety for or upon the
      obligations of others except in the ordinary course of business;

	 	 	 
	 	(c) 	
      pay or set aside for payment any bonus, management fee or
      other non-salary remuneration (including options) to any of its employees,
      directors or officers;







4

	 	(d) 	
      commence or in anyway become involved in, whether
      directly or indirectly or in conjunction with any other person, any new
      businesses not reasonably related to the current business of the
      Borrower.



5.                     
REPRESENTATIONS AND WARRANTIES 

5.1                   
Representations. The Borrower represents and warrants to the Lender, and
acknowledges that the Lender is relying upon such representations and warranties
in entering into this Agreement, as follows: 

	 	(a) 	
      the Borrower has the capacity to enter into this
      Agreement, and the execution of this Agreement and the completion of the
      transactions contemplated hereby shall not be in violation any agreement
      to which the Borrower is a party; and

	 	 	 
	 	(b) 	
      the execution, delivery and performance of this Agreement
      and all instruments and agreements delivered pursuant hereto, have been
      duly authorized by all necessary corporate action on the part of the
      Borrower and will not violate any provision of the Borrower's constating
      documents or any agreement to which it is a party, and this Agreement and
      those Security Documents to which the Borrower is party constitute legal,
      valid and binding obligations of the Borrower enforceable against the
      Borrower in accordance with their respective terms except as limited by
      applicable bankruptcy, insolvency, reorganization or other laws of general
      application relating to or affecting the enforcement of creditors' rights
      and rules or laws concerning equitable remedies.



6.                     
CLOSING ARRANGEMENTS 

6.1                   
Conditions Precedent. The Lender's obligation to advance the Principal
Sum to the Borrower shall be subject to the satisfaction of the following
conditions: 

	 	(a) 	
      the representations and warranties of the Borrower shall
      be true as of the date hereof and as of each date of advancement;
    and

	 	 	 
	 	(b) 	
      the Borrower shall have complied with all of its
      obligations hereunder; and



The foregoing conditions precedent are inserted for the benefit
of the Lender and may be waived in whole or in part by the Lender at any time
prior to closing by delivering to the Borrower written notice to that effect.


7.                    
 EVENTS OF DEFAULT AND REMEDIES 

7.1                   
Events of Default. Any one or more of the following events, whether or
not any such event shall be voluntary or involuntary or be effected by operation
of law or pursuant to or in compliance with any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body, shall constitute an Event of Default: 

	 	(a) 	
      if the Borrower defaults in the payment of any monies due
      hereunder as and when the same is due;

	 	 	 
	 	(b) 	
      if the Borrower defaults in the observance or performance
      of any other provision hereof or of any security
  documents;







5

	 	(c) 	
      if the Borrower makes default in the due payment,
      performance or observance, in whole or in part, of any debt, liability or
      obligation of the Borrower to the Lender, whether secured hereby or
      otherwise;

	 	 	 
	 	(d) 	
      if the Borrower commits an act of bankruptcy or makes a
      general assignment for the benefit of its creditors or otherwise
      acknowledges its insolvency;

	 	 	 
	 	(e) 	
      if the borrower does not enter into a formal merger
      agreement with the lender within 60 days;

	 	 	 
	 	(f) 	
      if the borrower does not obtain shareholder approval for
      the proposed merger within 90 days;

	 	 	 
	 	(g) 	
      if the borrower does not obtain US audited GAP financial
      statements for the fiscal years 2006 and 2007, within 90 days;

	 	 	 
	 	(h) 	
      if the borrower does not merge with the lender within 120
      days



7.2                   
Remedies Upon Default. Upon the occurrence of any Event of Default and at
any time thereafter, provided that the Borrower has not by then remedied such
Event of Default, the Lender may, in its discretion, by notice to the Borrower,
declare this Agreement to be in default. At any time thereafter, while the
Borrower shall not have remedied such Event of Default, the Lender, in its
discretion, may: 

	 	(a) 	
      declare the Loan and other monies owing by the Borrower
      to the Lender to be immediately due and payable;

	 	 	 
	 	(b) 	
      demand payment from the Borrower and exercise all
      remedies available to the Lender.



8.                     
MISCELLANEOUS 

8.1                    Notices.
Any notice required or permitted to be given under this Agreement or the
Promissory Note shall be in writing and may be given by delivering same or
mailing same by registered mail or sending same by telegram, telex, telecopier
or other similar form of communication to the following addresses: 

	 	The Borrower: 	Solara Technologies Inc. 
	 	  	Suite 530, North Office Tower, 
	 	  	Oakridge Centre, 650 West 41st
      Avenue 
	 	  	Vancouver, BC V5Z 2M9 
	 	  	  
	 	The Lender: 	Terrace Ventures Inc. 
	 	  	810 Peace Portal Drive, Suite 202 
	 		Blaines, WA 
  98230


Any notice so given shall: 

	 	(a) 	
      if delivered, be deemed to have been given at the time of
      delivery;

	 	 	 
	 	(b) 	
      if mailed by registered mail, be deemed to have been
      given on the fourth business day after and excluding the day on which it
      was so mailed, but should there be, at the time of mailing or between the
      time of mailing and the deemed receipt of the notice, a
  mail







6

	 		
      strike, slowdown or other labour dispute which might
      affect the delivery of such notice by the mails, then such notice shall be
      only effective if actually delivered; and

	 	 	 
	 	(c) 	
      if sent by telegraph, telex, telecopier or other similar
      form of communication, be deemed to have been given or made on the first
      business day following the day on which it was
sent.



Any party may give written notice of a change of address in the
aforesaid manner, in which event such notice shall thereafter be given to such
party as above provided at such changed address. 

8.2                    Amendments.
Neither this Agreement nor any provision hereof may be amended, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against whom enforcement of the amendment, waiver, discharge or
termination is sought. 

8.3                   
Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties hereto and supersedes all prior agreements and
undertakings, whether oral or written, pertaining to the subject matter hereof.


8.4                   
Action on Business Day. If the date upon which any act or payment
hereunder is required to be done or made falls on a day which is not a business
day, then such act or payment shall be performed or made on the first business
day next following. 

8.5                   
No Merger of Judgment. The taking of a judgment on any covenant contained
herein or on any covenant set forth in any other security for payment of any
indebtedness hereunder or performance of the obligations hereby secured shall
not operate as a merger of any such covenant or affect the Lender's right to
interest at the rate and times provided in this Agreement on any money owing to
the Lender under any covenant herein or therein set forth and such judgment
shall provide that interest thereon shall be calculated at the same rate and in
the same manner as herein provided until such judgment is fully paid and
satisfied. 

8.6                   
Severability. If any one or more of the provisions of this Agreement
should be invalid, illegal or unenforceable in any respect in any jurisdiction,
the validity, legality or enforceability of such provision shall not in any way
be affected or impaired thereby in any other jurisdiction and the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby. 

8.7                   
Successors and Assigns. This Agreement shall enure to the benefit of and
be binding upon all parties hereto and their respective heirs, personal
representatives, successors and assigns, as the case may be. 

8.8                   
Governing Law. This Agreement shall be governed by and be construed in
accordance with the laws of the province of British Columbia and the parties
hereto agree to submit to the jurisdiction of the courts of British Columbia
with respect to any legal proceedings arising herefrom. 

8.9                   
Independent Legal Advice. This Agreement has been prepared by O’Neill Law
Corporation acting solely on behalf of the Lender and the Borrower acknowledges
that it has been advised to obtain independent legal advice. 

8.10                   Time.
Time is of the essence of this Agreement. 

8.11                  
Headings. The headings of the paragraphs of this Agreement are inserted
for convenience only and do not define, limit, enlarge or alter the meanings of
any paragraph or clause herein. 




7

8.12                  
Counterparts. This agreement may be executed in one or more counterparts,
each of which so executed shall constitute an original and all of which together
shall constitute one and the same agreement. 

IN WITNESS WHEREOF the parties hereto have caused this
Agreement to be duly executed and delivered as of the day and year first written
above. 

THE BORROWER: 

SOLARA TECHNOLOGIES INC. 

  by its authorized signatory 

                   /s/
Dorn Beattie 
Per: ________________________________ 

 

THE LENDER: 

TERRACE VENTURES INC. 
by its authorized
signatory: 

                   /s/
Howard Thomson 
Per:________________________________ 




8

SCHEDULE “A”
To The Loan Agreement Dated as of May
18, 2007 
Form Of Promissory Note 

PROMISSORY NOTE 

	EXECUTED BY: 	SOLARA TECHNOLOGIES INC. 
	  	(the "Borrower") 
	 	 
	IN FAVOUR OF: 	TERRACE VENTURES INC. 
	  	(the "Lender") 
	 	 
	PRINCIPAL AMOUNT: 	$20,000 (U.S.) 
	 	 
	DATE OF ADVANCE: 	May 1, 2007 
	 	 
	PLACE OF EXECUTION: 	Vancouver, BC, Canada
  


FOR VALUE RECEIVED the Borrower hereby promises to pay
to or to the order of the Lender on May 18, 2008, the principal sum of $20,000
(U.S.), together with interest thereon at the rate of 8% per annum, calculated
and compounded annually, both before and after maturity from the date hereof.


The Borrower waives presentment, demand, notice, protest and
notice of dishonour and all other demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of this Promissory
Note. 

DATED at Vancouver, BC this 18th day of May, 2007.


SOLARA TECHNOLOGIES INC.
 by its authorized
signatory: 

 

Per: ____________________________





9

PROMISSORY NOTE 

	EXECUTED BY: 	SOLARA TECHNOLOGIES INC. 
	  	(the "Borrower") 
	 	 
	IN FAVOUR OF: 	TERRACE VENTURES INC. 
	  	(the "Lender") 
	 	 
	PRINCIPAL AMOUNT: 	$55,000 (U.S.) 
	 	 
	DATE OF EXECUTION: 	May 18, 2007 
	 	 
	PLACE OF EXECUTION: 	Vancouver, BC, Canada
  


FOR VALUE RECEIVED the Borrower hereby promises to pay
to or to the order of the Lender on May 18, 2008, the principal sum of $55,000
(U.S.), together with interest thereon at the rate of 8% per annum, calculated
and compounded annually, both before and after maturity from the date hereof.


The Borrower waives presentment, demand, notice, protest and
notice of dishonour and all other demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of this Promissory
Note. 

DATED at Vancouver, BC this 18th day of May, 2007. 

SOLARA TECHNOLOGIES INC. 
by its authorized
signatory: 

 

Per: ________________________________