Document:

ex10-4.htm

    Exhibit
10.4

    

     

    

     

    

     

    AuraSource,
Inc.

     

    

     

    

     

    

     

    

     

    And

     

    

     

    

     

    

     

    

     

    Société
Guinea Consultant International (LTD) Sarl.,

     

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    EXPLORATION
LICENSES TRANSFER AGREEMENT

     

    

     

    

    

    

    

    

    

    Effective
as of September 21, 2008

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

     

    EXPLORATION
LICENSES TRANSFER AGREEMENT

     

     

    THIS EXPLORATION LICENSES TRANSFER
AGREEMENT (hereinafter referred to as “this Agreement”)
is executed to be effective as of this September 21, 2008.

     

    BETWEEN

     

    SOCIÉTÉ GUINEA CONSULTANT
INTERNATIONAL (LTD) SARL. (hereinafter referred to as the “Party A”);
and

     

    AuraSource, Inc.(hereinafter
referred to as “Party B”
or the “Company”).

     

    WHEREAS  Party A has
represented that Party A owns three Exploration Licenses in The Republic of
Guinea for bauxite, gold, base metals and associated metals, covering acreage of _____, as
reflected in that certain License numbers: No _________________issued by the The
Ministry of the Mine and Geology of the Republic of Guinea, ( hereinafter the
“Exploration
Licenses”); and

    

    WHEREAS Party B desires to
acquire and purchase, and Party A desires to sell and transfer to Party B, the
Exploration Licenses and all rights thereunder, all on the terms and subject to
the conditions set forth herein; and

    

    WHEREAS subject to the
satisfactory completion of its due diligence, review and investigation of the
territory covered by the Exploration Licenses and Party B’s determination that
the results of such review and investigation reflect convincing evidence that
the territory contains minerals and precious metals (of a quantity and quality
adequate for Party B’s purposes and business objectives), Party B desires to
issue to Party A, and Party A desires to acquire and purchase, 20,000,000 shares
of Company A’s common stock (the “Shares”) as full consideration for acquiring
the Exploration Licenses and all rights thereunder under the terms of this
Agreement.

    

    NOW THEREFORE, the Parties
hereby agree as follows:

    

    SECTION 1 - APPLICATION AND TRANSFER
OF NEW EXPLORATION LICENCE

     

    1.1           Immediately
following the execution of this Agreement, Party A shall prepare and submit to
the relevant administrative and/or governmental authority (or authorities) all
documents, instruments and certificates necessary to transfer the Exploration
Licenses to Party B. Party A shall ensure that the Exploration Licenses is
transferred to Party B within 30 calendar days after the execution of this
Agreement.  Except as expressly set forth herein, the new Exploration
Licenses to be issued to Party B (“New Exploration Licenses”) shall contain the
same terms, conditions and provisions as those set forth in the Exploration
Licenses issued to Party A.

     

    1.2           Without
limiting the generality of the foregoing, the New Exploration Licenses shall
confirm the rights and privileges granted to Party B, including without
limitation, exploration rights for a term of no less than two (2) years from the
date of issuance of the New Exploration Licenses.  Further, without
limiting the generality of the foregoing, the New Exploration Licenses shall
provide rights for commercial exploitation and extraction of minerals and
precious metals, all on terms acceptable to Party B.

     

    SECTION
2 – ASSISTANCE

     

    2.1           From
time to time Party B may desire to acquire additional, ancillary and/or expanded
rights and licenses under or pursuant to the New Exploration Licenses and/or
with respect to the territory covered by such license (collectively, all such
additional, ancillary and/or expanded rights and licenses, the “Additional
Exploration Licensess”).  Party A hereby covenants and agrees to
provide such assistance and support as may be requested by Party B in connection
with Party B’s application for any and all such Additional Exploration Licensess
free of charge, including without limitation, assistance and support in
connection with Party B’s efforts to secure regulatory and other governmental
approvals for engaging in the commercial exploitation, extraction and
transportation of minerals and precious metals.

     

    2.2           In
addition to assistance in connection with applications for securing the rights
and licenses contemplated hereunder, the parties expect and envision that Party
B will require assistance in connection with Party B’s operations and its
efforts to secure preferential treatment from and harmonizing relationships with
local, provincial and state government where possible (all such assistance is
collectively referred to herein as “Additional
Assistance”).  Party A hereby covenants and agrees to provide
such Additional Assistance as Party B may request from time to time after the
date hereof.  Party A and Party B shall agree on the fees or rates to
be charged by Party A for the Additional Assistance, provided, however, that
such fees or rates shall be reasonable and commensurate with fees charged by
Party A and/or other parties with respect to similar types of
services.

     

    2.3           Party
A agrees to execute such further documents, instruments and/or certificates and
to take such other actions as are necessary to carry out the transactions
contemplated by this Agreement and to secure the rights, licenses and approvals
contemplated hereby (including without limitation, the Exploration Licenses, the
Additional Exploration Licensess and/or ancillary or related approvals from
governmental authorities).

     

    SECTION
3 – PURCHASE PRICE; CONSIDERATION

     

    As full
consideration for the sale and transfer by Party A of the New Exploration
Licenses and the other covenants, agreements and obligations undertaken by Party
A hereunder, Party B agrees to issue the Shares to Party A, all in accordance
with the terms and provisions hereof and subject to the conditions and
restrictions set forth herein.

     

    (a)           Party
B shall issue the Shares in the name of Party A within 10 days after (i)
execution and delivery of this Agreement by all parties in accordance with the
terms hereof and (ii) satisfaction of each and all of the conditions precedent
set forth in Section 3(b) hereof.  Subject to the satisfaction of the
conditions set forth in Section 3(b), the Shares shall be placed and held in
escrow (by the Company) and shall be released from escrow on the terms, and
subject to the conditions and restrictions, set forth in Section 3(c), Section
3(d) and Section 4 hereof.

     

    (b)           Without
limiting such further conditions and provisions set forth in Section 3 and
Section 4 hereof, the obligations of Party B under this Agreement shall be
conditioned on and subject to the satisfaction of each and all of the following
conditions:

     

    
      	
              ·  

            	
              Party
      B’s receipt of documents, instruments and certificates signed and issued
      by authorized governmental or administrative authorities evidencing the
      transfer to Party B of the rights and licenses granted under the
      Exploration Licenses.

            

    

     

    
      	
              ·  

            	
              The
      issuance and transfer of the New Exploration Licenses to Party B and Party
      B’s receipt of documents, instruments and certificates signed and issued
      by authorized governmental or administrative authorities evidencing the
      New Exploration Licenses and Party B’s ownership of related exploration
      rights and licenses, including without limitation, rights to commercially
      exploit, extract and transport minerals and precious metals, all in
      accordance with the terms contemplated herein and otherwise on terms
      acceptable to Party B.

            

    

     

    
      	
              ·  

            	
              Completion
      of Party B’s due diligence review and investigation to the satisfaction of
      Party B.

            

    

     

    
      	
              ·  

            	
              Party
      B’s receipt of a legal opinion issued by a qualified attorney in the
      Republic of Guinea in form and substance to the reasonable satisfaction of
      Party B (“Legal Opinion”), in respect of the legal, financial and tax
      aspects of New Exploration Licenses and other matters as Party B may
      reasonably require in connection with the operations of the businesses
      authorized or granted under the Exploration Licenses and the New
      Exploration Licenses.

            

    

    

    

    (c)           Subject
to such further conditions and provisions set forth in this Section 3 and
Section 4 hereof, the Shares shall be released from escrow and delivered to
Party A upon satisfaction of each and all of the following
conditions:

    

    
      	
              ·  

            	
              Party
      B’s completion of a site survey and geological investigation reflecting
      mining capacity capable of producing X amount of gold deposits or other
      precious metals (“Site Survey”), as well as Party B’s receipt of such
      other surveys and studies reflecting reserves, soil and geological
      conditions and other matters to the satisfaction of Party
    B.

            

    

    

    
      	
              ·  

            	
              Receipt
      of all required consents and approvals of governmental and/or regulatory
      authorities and/or other third parties as are or may be necessary for the
      consummation of the transactions contemplated hereby and Party B’s ability
      to engage in the exploration activities contemplated hereby and/or
      commercially exploit, extract and transport minerals and precious metals
      (in such quantities and of such qualities that are adequate for the
      purposes and business objectives of Party B, all as determined by Party
      B).

            

    

    

    
      	
              ·  

            	
              Absence
      of any materially adverse conditions or circumstances affecting Party A’s
      rights under the Exploration Licenses, Party B’s operations or Party B’s
      rights or ability to engage in exploration or other activities
      contemplated hereby or otherwise commercially exploit, extract and
      transport minerals and precious metals (in such quantities and of such
      qualities that are adequate for the purposes and business objectives of
      Party B, all as determined by Party
B).

            

    

    

    (d)           If
any of the conditions specified in Section 3(b) or Section 3(c) shall not have
been satisfied, this Agreement shall be terminated and, in the case of the
failure to satisfy the conditions set forth in Section 3(b), Party B shall have
no obligation to consummate any transaction hereunder or any other obligation
whatsoever and, in the case of the failure to satisfy the conditions set forth
in Section 3(c), the Shares shall be released from escrow and returned to Party
B for cancellation by Party B, and Party A shall have no right to receive any of
the Shares or any other consideration or payment whatsoever under or pursuant to
this Agreement.

    

    SECTION
4 – ESCROW AND PLEDGE OF SHARES

    

    4.1           Deposit in
Escrow.  Upon issuance, the certificates for the Shares shall
be deposited in escrow with the Company to be held in accordance with the
provisions of this Section
4.  Each deposited certificate shall be accompanied by a duly
executed Assignment Separate from Certificate in the form of Exhibit B.  The
deposited certificates, together with any other assets or securities from time
to time deposited with the Company pursuant to the requirements of this
Agreement, shall remain in escrow until such time or times as the certificates
(or other assets and securities) are to be released or otherwise surrendered for
cancellation in accordance with Section 4.3.

     

    4.2           Recapitalization.  All
cash and stock dividends on the Shares (or other securities at the time held in
escrow) (including dividends in the form of any stock dividend, stock split,
recapitalization or other change affecting the Company’s outstanding common
stock as a class effected without receipt of consideration or in the event of
any reorganization transaction), any new, substituted or additional securities
or other property which is by reason of such trans­action distributed with
respect to the Shares (or such other securities at the time held in escrow)
shall be immediately delivered to the Secretary of the Company to be held in
escrow under this Section 4, in
accordance with the escrow requirements of Section 4.1.

     

    4.3           Release/Surrender.  The
Shares, together with any other assets or securities held in escrow hereunder,
shall be subject to the following terms and conditions relating to their release
from escrow or their surrender to the Company for cancellation:

     

    (a)           The
certificates for the Shares (as well as all other corresponding assets and
securities) shall be released from escrow and delivered to Party A, if requested
by Party A, only upon satisfaction of each and all of the conditions set forth
in Section 3(b) hereof.

     

    (b)           If
any of the conditions shall not have been satisfied (or waived by Party B, at
its sole and absolute discretion) by the Outside Date (defined below), the
certificates for the Shares (as well as all other corresponding assets and
securities) shall be released from escrow and delivered to Party B, and this
Agreement shall be terminated in accordance with the terms
hereof.   For the purposes hereof, the term “Outside Date” means
December 31, 2008 (or such later date as may be agreed upon by the parties
hereto).

     

    (c)           Should
the Shares (as well as all other corresponding assets and securities) be
released from escrow under the immediately preceding clause, then the escrowed
certificates for such Shares (together with any other assets or securities
issued with respect thereto) shall be delivered to the Company for cancellation,
and Party B shall have no further rights with respect to such Shares (or other
assets or securities).

     

    4.4           Pledge.  Party
A agrees and acknowledges that, upon issuance, the Shares shall be pledged to
Party B as collateral to secure the obligations of Party A under this Agreement,
pursuant to terms of a pledge agreement in a form acceptable to Party B (the
‘Pledge
Agreement”).  The Company’s obligation to issue the Shares
shall be conditioned on Party A’s execution and delivery of the Pledge
Agreement.

     

    SECTION 5 – INVESTMENT
REPRESENTTIONS

    

    Party A
represents and warrants that each and all of the representations and statements
set forth on Exhibit
A hereto is true and accurate, and all such representations and
statements are hereby incorporated herein by reference and made a part hereof as
if fully set forth herein.  In addition to the following trading
restrictions imposed by the Securities Act, Party A hereby acknowledges that the
Shares may be subject to additional resale restrictions and a legend shall be
placed upon the Shares evidencing these restrictions:

    

    (a)           Neither
Party A nor any permitted transferee of the Shares may sell securities of the
Company constituting more than 10% of the daily volume of the Company’s common
stock outstanding on any given day; and

    

    (b)          Neither
Party A nor any permitted transferee of the Shares may sell more than 400,000
shares of common stock of the Company in any calendar month.

     

     

    SECTION
6 - COVENANTS AND OBLIGATIONS OF THE PARTIES

     

    6.1           Covenants
and obligations of Party A:

    

    (a)           After
the Agreement has been signed, Party A shall immediately prepare the required
documents to apply for the New Exploration Licenses and its
transfer.

    

    (b)           Party
A shall bear all costs relating to the application and transfer of the New
Exploration Licenses. Party A shall provide Party B with true copies of all
documents submitted to the Republic of Guinea authorities in relation to such
application and transfer.

    

    (c)           Party
A shall be responsible for all liabilities and debts in respect of the
Exploration Licenses and/or the New Exploration Licenses or its related work
which accrued on or prior to the transfer of the New Exploration Licenses to
Party B, including but not limited to environmental pollutions, land and forest
rentals, related taxes, and management and construction fees.

     

    (d)           Party
A shall comply with all applicable laws in connection with the performance of
each and all of the obligations under this Agreement.

     

    (e)           Party
A shall provide to Party B periodic reports concerning the status of its efforts
in prosecuting any applications for rights and licenses and/or securing
approvals from applicable governmental authorities with respect to the licenses,
rights and transactions contemplated hereby.

     

    (f)           Party
A shall transfer the Exploration Licenses and the previous mineral data to Party
B in accordance with the provisions of this Agreement.

     

    6.2           Covenants
and obligations of Party B:

     

    (a)           Party
B shall issue the Shares in accordance with the terms set forth
herein.

    

    (b)           After
signing this Agreement, Party B will positively assist Party A in transferring
the New Exploration Licenses and its relevant mineral data.

    

    (c)           After
obtaining the New Exploration Licenses which confirms its ownership of the
exploration right and the relevant mineral data, Party B will carry on the Site
Survey action in accordance with Guinea relative law, regulation and rule
requirements.

     

    SECTION
7 - REPRESENTATIONS AND WARRANTIES

     

    7.1           
Each of Party A and Party B represents and warrants to the other party hereto
that:

     

    (a)           Such
party has the requisite power and authority to sign and enter into, and to grant
the rights under, this Agreement, and has the requisite power and authority, and
the ability, to fully perform all the obligations contained in the
Agreement.

     

    (b)           Such
party is duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization.

     

    7.2           Party
A hereby represents and warrants to Party B that:

     

    (a)           Party
A lawfully and exclusively owns the Exploration Licenses, and all rights,
interest and title to the licenses granted thereunder, as well as other rights
and privileges granted by Party A hereunder (or that Party A has agreed to grant
and/or make available hereunder), free and clear of any mortgage, pledge,
claims, charges, liens or other encumbrance of any nature.  Party A
has not granted, assigned or transferred, or agreed to grant, assign or
transfer, any rights, licenses or privileges under the Exploration Licenses to
any party (other than Party B under the terms hereof).  Party A has
not received any notice or claim challenging any such ownership rights of Party
A or suggesting that any other person has any claim of legal or beneficial
ownership or rights with respect thereto, nor, to the best of the knowledge of
Party A, is there a reasonable basis for any such notice or claim.

     

    (b)           Party
A enjoys exclusive exploration rights for the minerals within the term and
geographical area indicated in the Exploration Licenses. The Exploration
Licenses is in full force and effect and in good standing under the laws of
Guinea and has been validly and legally acquired.  Party A has not
granted to any person (other than Party B under the terms hereunder) any rights
or interest in the Exploration Licenses and/or the rights, licenses or
privileges granted thereunder.

    

    (c)           Party
A has not done or omitted to do, nor will do or omit to do, any act or thing
that would or might impair, encumber, or diminish Party B’s full enjoyment of
the rights and privileges granted under this Agreement (or that Party A has
agreed to grant and/or make available under this Agreement). .

     

    (d)           Party
A has not received notice of nor has any knowledge of any proposal to terminate
or vary the terms of or rights attaching to the Exploration Licenses from any
government or regulatory authority.

     

    (e)           All
work and activities of whatsoever nature carried out under or pursuant to the
Exploration Licenses by Party A or by third parties have been carried out in
compliance with all applicable laws and regulations, including environmental
laws and regulations, health and safety laws and regulations and laws and
regulations governing the mining, extraction and handling of minerals and
precious metals.

     

    (f)           No
government department, military unit, organization, company, collective or any
other entity or individual has any legal rights or privileges over any of the
Exploration Licenses or the relevant mineral data except for Party
A.

     

    (g)           All
necessary annual examinations, reports, payments and minimum exploration
expenditures have been made and all other requirements to maintain the
Exploration Licenses have been fulfilled by Party A.

     

    (h)           The
information provided by Party A to Party B are the last exploration report and
corresponding drawings within the area covered by the Exploration Licenses and
that would be covered by the New Exploration Licenses.

     

    (i)           No
consent, approval or authorization of, or registration or filing with, any
governmental authorities or any other person is required in connection with the
execution or delivery of this Agreement or (except as expressly disclosed
herein) the delivery of other agreements or documents contemplated by this
Agreement or the consummation of the transactions contemplated
hereby.

     

    (j)           The
execution and delivery of this Agreement and the other documents and agreements
contemplated hereby, and the performance of the obligations and consummation of
the transactions contemplated hereunder and thereunder, does not and shall not
(either directly or indirectly) (i) conflict with or violate any organizational
documents of Party A or the terms of any agreement or arrangement (whether oral
or written) between it and a third party, or any other obligations Party A has
to a third party, (ii) result in the imposition of any liens, charges, claims or
other encumbrances (other than the rights of Party B hereunder) upon any of the
rights or privileges granted hereunder (or that Party A has agreed to grant
and/or deliver hereunder), (iii) violate or conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice, report or other filing (whether with a governmental authority or other
third party) under the Exploration Licenses or any of the other agreements or
documents referenced herein to which Party A is currently a party or by which
Party A is bound or which are currently in place and relate to the rights and
privileges granted under or pursuant to the Exploration Licenses, or (iv) result
in a breach or violation by Party A of any of the terms, conditions or
provisions of any applicable law or regulation.

     

    (k)           Party
A is and has been in compliance with all laws or regulations in connection with
(or applicable to) the acquisition, maintenance and/or exercise of rights,
licenses or privileges granted  or made available under or pursuant to
the Exploration Licenses.  Party A has received no notice and to the
best of the knowledge of Party A there are no threatened or alleged claims of
violation, liability or potential responsibility under any law or regulation
affecting the rights, licenses or privileges granted or made available under or
pursuant to the Exploration Licenses.  Party A has never conducted any
internal investigation with respect to any such violation (whether actual,
potential or alleged) of any law or regulation by any of its directors,
officers, employees or representatives.

     

    (l)           Party
A possesses all governmental authorizations necessary to exercise the rights and
privileges under the Exploration Licenses.  Party A is not in default
(with or without notice or lapse of time, or both) under any such governmental
authorization.  There are no proceedings pending, nor to the best of
the knowledge of Party A, threatened, that seek the revocation, cancellation,
suspension, failure to renew or adverse modification of any such governmental
authorization.

     

    (m)           Party
A has complied in all respects with all the terms and conditions of the
Exploration Licenses and any other documents and/or instruments relating to the
rights and privileges granted under or pursuant to the Exploration Licenses. No
termination or default, cure notice or show cause notice is currently in effect
or has been issued or, to the best of the knowledge of Party A, is expected with
respect to any of the Exploration Licenses, or the rights, licenses and/or
privileges granted or made available (or to be granted and/or made available) by
Party A hereunder or thereunder. Neither any governmental authority nor any
other person has notified Party A, either in writing or, to the best of the
knowledge of Party A, orally, that Party A (or any representatives or agents of
Party A) has breached or violated any laws, regulations, certification,
representation, clause, provision or requirement pertaining to the Exploration
Licensess and/or any such rights, licenses or privileges.

     

    (n)           The
rights, license and/or privileges granted or made available (or purported to be
granted or made available) under or pursuant to the Exploration Licenses are
(and each of them is) valid and enforceable.  To the best of the
knowledge of Party A, no reasonable basis exists for any claim that any of such
rights, licenses or privileges is either invalid or unenforceable. Party A has
not taken any action or failed to take any action that would result in the
abandonment, cancellation, forfeiture, relinquishment, invalidation, waiver or
unenforceability of any of such rights, licenses or privileges.

     

    (o)           Neither
Party A, nor any activities conducted by Party A, nor the exercise of rights by
Party A, under, in connection with or in relation to, the Exploration Licenses
have infringed upon, misappropriated or violated, or infringe upon,
misappropriate or violate any rights or property of any other person; and Party
A has not received any notice or claim asserting that any such infringement,
misappropriation or violation has occurred or is occurring, nor, to the best of
the knowledge of Party A, is there any reasonable basis for such a
claim.  To the best of the knowledge of Party A, no person is
infringing upon, misappropriating or violating any of the rights or licenses
granted or made available (or purported to be granted or made available) under
the Exploration Licenses or with respect to the exploration of minerals or
precious metals within the territory covered by the License.

     

    (p)           Party
A is capable of taking all necessary actions to facilitate the transfer of the
New Exploration Licenses in this Agreement.

     

    (q)           No
representations or warranties by Party A in this Agreement (i) contains or will
contain any untrue statement of a material fact, or (ii) omits or will omit to
state, when read in conjunction with all of the information contained in this
Agreement any material fact necessary to make the statements or facts contained
therein not misleading.

     

    SECTION
8- INDEMNIFICATION AND LEGAL PROCEEDINGS

     

    8.1           Indemnification.  
All representations and warranties contained in this Agreement shall survive the
consummation of the transactions contemplated hereby and shall remain in full
force and effect indefinitely.  Each of the Parties hereto shall
indemnify the other Party hereto, and such other Party’s affiliates, and their
respective successors, assigns, officers, directors, stockholders, employees and
agents (collectively, the “Indemnified Parties”) against, and hold them harmless
from, any losses, claims, actions, suits, proceedings, damages, liabilities or
expenses of whatever nature or kind (“Losses”), including any investigation
expenses incurred by any Indemnified Parties, whether such Loss exists or
accrues before, on or after the date hereof, directly or indirectly arising or
resulting from, based upon or relating to: (a) any inaccuracy or breach of any
representation or warranty made or given by such Party under this Agreement or
any other documents, agreements or instruments delivery by such Party in
connection with the transactions contemplated by this Agreement; or (b) any
non-fulfillment of any covenant or agreement of such Party under this Agreement
or any other documents, agreements or instruments delivered by such Party in
connection with the transactions contemplated by this
Agreement..  Party A shall indemnify Party B, and its affiliates, and
their respective successors, assigns, officers, directors, stockholders,
employees and agents (collectively, the “Indemnified Party B Persons”) against,
and hold them harmless from, any Losses, including any investigation expenses
incurred by any Indemnified Party B Persons, whether such Loss exists or accrues
before, on or after the date hereof, directly or indirectly arising or resulting
from, based upon or relating to: (i) any breach of any representation or
warranty of Party A contained in this Agreement or any certificate executed by
Party A in connection with the transactions contemplated hereby; (ii) the breach
of any covenant of Party A contained in or contemplated by this Agreement;(iii)
taxes imposed on Party A with respect to tax periods preceding the date hereof;
or (vi) any liabilities arising from, based upon or relating to (directly or
indirectly) any activities or operations conducted by Party A in the territory
covered by the Exploration Licenses or the exercise of rights under the
Exploration Licenses; or (v) any expenses or costs incurred in connection with
the transactions contemplated by this Agreement.

     

    8.2           No
Indemnification.   This indemnity will not apply in respect of
an Indemnified Party or any Indemnified Party B Person in the event and to the
extent that a court of competent jurisdiction in a final judgment shall
determine that the Indemnified Party was grossly negligent or guilty of wilful
misconduct.

     

    8.3           Claim of
Indemnification.   The Parties hereto agree to waive any right
they might have of first requiring the Indemnified Party to proceed against or
enforce any other right, power, remedy, security or claim payment from any other
person before claiming this indemnity.

     

    8.4           Notice of
Claim.   In case any action is brought against an Indemnified
Party in respect of which indemnity may be sought against any of the Parties
hereto, the Indemnified Party will give the relevant Party hereto prompt written
notice of any such action of which the Indemnified Party has knowledge and such
Party will undertake the investigation and defence thereof on behalf of the
Indemnified Party, including the prompt consulting of counsel acceptable to the
Indemnified Party affected and the payment of all expenses.  Failure by the
Indemnified Party to so notify shall not relieve any Party hereto of such
Party’s obligation of indemnification hereunder unless (and only to the extent
that) such failure results in a forfeiture by any Party hereto of substantive
rights or defences.

     

    8.5           Settlement.  
No admission of liability and no settlement of any action shall be made without
the consent of each of the Parties hereto and the consent of the Indemnified
Party affected, such consent not to be unreasonably withheld.

     

    8.6           Legal
Proceedings.   Notwithstanding that the relevant Party hereto
will undertake the investigation and defence of any action, an Indemnified Party
will have the right to employ separate counsel in any such action and
participate in the defence thereof, but the fees and expenses of such counsel
will be at the expense of the Indemnified Party unless:

     

    (a)          such
counsel has been authorized by the relevant Party hereto;

    

    (b)          the
relevant Party hereto has not assumed the defense of the action within a
reasonable period of time after receiving notice of the action;

    

    (c)          the
named parties to any such action include that any Party hereto and the
Indemnified Party shall have been advised by counsel that there may be a
conflict of interest between any Party hereto and the Indemnified Party;
or

    

    (d)          there
are one or more legal defenses available to the Indemnified Party which are
different from or in addition to those available to any Party
hereto.

    

     

    8.7           Contribution.  
If for any reason other than the gross negligence or bad faith of the
Indemnified Party being the primary cause of the loss claim, damage, liability,
cost or expense, the foregoing indemnification is unavailable to the Indemnified
Party or insufficient to hold them harmless, the relevant Party hereto shall
contribute to the amount paid or payable by the Indemnified Party as a result of
any and all such losses, claim, damages or liabilities in such proportion as is
appropriate to reflect not only the relative benefits received by any Party
hereto on the one hand and the Indemnified Party on the other, but also the
relative fault of the Parties and other equitable considerations which may be
relevant.  Notwithstanding the foregoing, the relevant Party hereto shall
in any event contribute to the amount paid or payable by the Indemnified Party,
as a result of the loss, claim, damage, liability, cost or expense (other than a
loss, claim, damage, liability, cost or expenses, the primary cause of which is
the gross negligence or bad faith of the Indemnified Party), any excess of such
amount over the amount of the fees actually received by the Indemnified Party
hereunder.

     

    8.8           Limitations on
Indemnification Obligations.  Notwithstanding anything
contained herein to the contrary, under no circumstances shall Party B’s total
liability of any kind arising out of or related to this Agreement, regardless of
the forum and regardless of the forum and regardless of whether any action or
claim is based on contract, tort, strict liability, infringement or any other
legal right, exceed the amount of proceeds that Party B actually generates in
connection with the exercise of its rights under the New Exploration
Licenses.

     

    SECTION
9 NON-DISCLOSURE

     

    All
information relating to the Agreement and the transaction contemplated therein
shall be treated as confidential and no public disclosure shall be made by any
Party without the prior approval of Party B.  Notwithstanding the
provisions of this Section, the Parties hereto agree to make such public
announcements and disclosure as may be required by or under applicable law,
including without limitation, disclosure to the regulatory or governmental
authorities of this Agreement (but only if the disclosing Party notifies the
other Party hereto of such proposed disclosure and affords such Party the
opportunity to seek confidential treatment and then only discloses such portion
of the information that is required to be disclosed by or under applicable
law).

     

    SECTION
10 - ASSIGNMENT AND AMENDMENT

     

    10.1           Assignment.  
Save and except as provided herein, no Party hereto may sell, assign, pledge or
mortgage or otherwise encumber all or any part of its respective interest herein
without the prior written consent of all of the other Parties
hereto.

     

    10.2           Amendment.  
This Agreement and any provision thereof may only be amended in writing and only
by duly authorized signatories of each of the respective Parties
hereto.

     

    SECTION
11-FORCE
MAJEURE

     

    11.1           Events.  
If any Party hereto is at any time prevented or delayed in complying with any
provisions of this Agreement by reason of strikes, walk-outs, labour shortages,
power shortages, fires, wars, acts of God, earthquakes, storms, floods,
explosions, accidents, protests or demonstrations by environmental lobbyists or
native rights groups, delays in transportation, breakdown of machinery,
inability to obtain necessary materials in the open market, unavailability of
equipment, governmental regulations restricting normal operations, shipping
delays or any other reason or reasons beyond the control of that Party, then the
time limited for the performance by that Party of its respective obligations
hereunder shall be extended by a period of time equal in length to the period of
each such prevention or delay.

     

    11.2           Notice.   A
Party shall, within seven calendar days, give notice to the other Parties of
each event of force
majeure under Section 11.1 hereinabove, and upon cessation of such event
shall furnish the other Parties with notice of that event together with
particulars of the number of days by which the obligations of that Party
hereunder have been extended by virtue of such event of force majeure and all
preceding events of force
majeure.

    

    SECTION
12 - TERMINATION

     

    12.1           Termination.  
Either Party shall have the right to terminate this Agreement during the Term:
(i) upon a material default or breach by the other Party of any of its
obligations under this Agreement, unless (in the case of any default that is
capable of being cured or remedies) within thirty (30) calendar days after
written notice of such default, the defaulting Party remedies such default; or
(ii) if the other becomes insolvent or seeks protection under any bankruptcy,
receivership, trust, deed, creditor's arrangement, or comparable proceeding, or
if any such proceeding is instituted against the other and not dismissed within
one hundred twenty (120) days.  In addition to the foregoing it is
hereby acknowledged and agreed by the Parties hereto that this Agreement will be
terminated in the event that the conditions specified in Section
3(b)  or (c) hereinabove have not been satisfied or waived at or
before the Outside Date.  This Agreement may also be terminated in
writing signed by each of the Parties.

     

     12.2           Effect of
Termination.                                             Upon
termination of this Agreement, this Agreement shall be without force or effect
and all obligations hereunder shall be terminated; provided, however, that the
obligations under Article 8, Article 13 and Article 14 shall remain in full
force and effect and shall survive any termination of this Agreement; and
provided further that nothing shall relieve any Party of such Party’s
obligations arising under this Agreement at any time before termination of this
Agreement.  Nothing contained herein is intended to limit or affect
either Party’s rights to pursue claims associated with any default, breach or
violation of this Agreement during the Term (regardless of whether or not the
Agreement shall have been terminated).

     

    SECTION
13 - NOTICE

     

    13.1           Notice.  Each
notice, demand or other communication required or permitted to be given under
this Agreement shall be in writing and shall be sent by prepaid registered mail
deposited in a post office addressed to the Party entitled to receive the same,
or delivered to such Party, at the address for such Party specified above. 
The date of receipt of such notice, demand or other communication shall be the
date of delivery thereof if delivered, or, if given by registered mail as
aforesaid, shall be deemed conclusively to be the third calendar day after the
same shall have been so mailed, except in the case of interruption of postal
services for any reason whatsoever, in which case the date of receipt shall be
the date on which the notice, demand or other communication is actually received
by the addressee.

     

    13.2           Change of
Address.   Either Party may at any time and from time to time
notify the other Party in writing of a change of address and the new address to
which notice shall be given to it thereafter until further change.

     

    SECTION
14 - GENERAL PROVISIONS

     

    14.1           Entire
Agreement.   This Agreement constitutes the entire agreement to
date between the Parties hereto and supersedes every previous agreement,
communication, expectation, negotiation, representation or understanding,
whether oral or written, express or implied, statutory or otherwise, between the
Parties with respect to the subject matter of this Agreement.

     

    14.2           Enurement.  
This Agreement will enure to the benefit of and will be binding upon the Parties
hereto, their respective heirs, executors, administrators and
assigns.

     

    14.3           Schedules.  
The Schedules to this Agreement are hereby incorporated by reference into this
Agreement in its entirety.

     

    14.4           Time of the
Essence.   Time will be of the essence of this
Agreement.

     

    14.5           Representation and
Costs.   It is hereby further acknowledged and agreed by the
Parties hereto that each Party to this Agreement will bear and pay its own
costs, legal and otherwise, in connection with its respective preparation,
review and execution of this Agreement.

     

    14.6           Applicable Law;
Jurisdiction.   The situs of this Agreement is Nevada, USA and
for all purposes this Agreement will be governed exclusively by and construed
and enforced in accordance with the laws and Courts prevailing in
Nevada.  Any action or proceeding arising out of or relating to this
Agreement or any transaction contemplated hereby may be brought in the courts of
the State of Nevada, County of Clark, or, if it has or can acquire jurisdiction,
in the United States District Court for the District of Nevada, and each of the
parties irrevocably submits to the exclusive jurisdiction of each such court in
any such action or proceeding, waives any objection it may now or hereafter have
to venue or to convenience of forum, agrees that all claims in respect of the
action or proceeding shall be heard and determined only in any such court and
agrees not to bring any action or proceeding arising out of or relating to this
Agreement or any transaction contemplated hereby in any other
court.  The parties agree that any party may file a copy of this
paragraph with any court as written evidence of the knowing, voluntary and
bargained agreement among the parties irrevocably to waive any objections to
venue or to convenience of forum.  Process in any action or proceeding
referred to in the first sentence of this Section 14.6 may be served on any
party anywhere in the world.

     

    14.7           Further
Assurances.   The Parties hereto hereby, jointly and severally,
covenant and agree to forthwith, upon request, execute and deliver, or cause to
be executed and delivered, such further and other deeds, documents, assurances
and instructions as may be required by the Parties hereto or their respective
counsel in order to carry out the true nature and intent of this
Agreement.

     

    14.8           Severability and
Construction.   Each Section, section, paragraph, term and
provision of this Agreement, and any portion thereof, shall be considered
severable, and if, for any reason, any portion of this Agreement is determined
to be invalid, contrary to or in conflict with any applicable present or future
law, rule or regulation in a final unappealable ruling issued by any court,
agency or tribunal with valid jurisdiction in a proceeding to any of the Parties
hereto is a party, that ruling shall not impair the operation of, or have any
other effect upon, such other portions of this Agreement as may remain otherwise
intelligible (all of which shall remain binding on the Parties and continue to
be given full force and agreement as of the date upon which the ruling becomes
final).  The parties hereto are sophisticated and have been
represented by lawyers who have carefully negotiated the provisions
hereof.  As a consequence, the parties do not intend that the
presumptions of any laws or rules relating to the interpretation of contracts
against the drafter of any particular clause should be applied to this Agreement
and therefore waive their effects.

     

    14.9           Captions.  
The captions, section numbers, Section numbers and Schedule numbers appearing in
this Agreement are inserted for convenience of reference only and shall in no
way define, limit, construe or describe the scope or intent of this Agreement
nor in any way affect this Agreement.

     

    14.10           Currency.  
Unless otherwise stipulated, all references to money amounts herein shall be in
lawful money of the United States.

     

    14.11           Counterparts.  
This Agreement may be signed by the Parties hereto in as many counterparts as
may be necessary, and via facsimile if necessary, each of which so signed being
deemed to be an original and such counterparts together constituting one and the
same instrument and, notwithstanding the date of execution, being deemed to bear
the effective Execution Date as set forth on the front page of this
Agreement.

     

    14.12           No Partnership or
Agency.   The Parties hereto have not created a partnership and
nothing contained in this Agreement shall in any manner whatsoever constitute
any Party the partner, agent or legal representative of any other Party, nor
create any fiduciary relationship between them for any purpose whatsoever. 
No Party shall have any authority to act for, or to assume any obligations or
responsibility on behalf of, any other party except as may be, from time to
time, agreed upon in writing between the Parties or as otherwise expressly
provided.

     

    14.13           Consents and
Waivers.   No consent or waiver expressed or implied by either
Party hereto in respect of any breach or default by any other Party in the
performance by such other of its obligations hereunder shall:

     

    (a)           be
valid unless it is in writing and stated to be a consent or waiver pursuant to
this section;

    

    (b)           be
relied upon as a consent to or waiver of any other breach or default of the same
or any other obligation;

    

    (c)           constitute
a general waiver under this Agreement; or

    

    (d)           eliminate
or modify the need for a specific consent or waiver pursuant to this section in
any other or subsequent instance.

    

     

    

     

    [Signature Page
Follows]

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF each of the
Parties hereto has hereunto executed this Agreement as of the Execution Date as
set forth on the front page of this Agreement.

     

    

     

    

     

    SOCIÉTÉ
GUINEA CONSULTANT INTERNATIONAL (LTD) SARL.

     

    

     

    By:

     

    Name:

     

    Title:  

     

    

     

    AURASOURCE,
INC.

     

    

     

    By:           

     

    Name:
Philip Liu

     

    Title:           President

     

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    EXHIBIT
A

    

    INVESTMENT
REPRESENTATIONS

    

    Unless
otherwise indicated, certain terms used below but not defined herein have the
meanings ascribed to them in the Agreement to which this exhibit is
attached.  Party A (for the purposes of this Exhibit A, “Investor”)
hereby represents and warrants, and hereby covenants and agrees to, all of the
following:

    

    1.           Purchase Entirely for Own
Account.  The Agreement is made with Investor in reliance on
Investor’s representation to Company, which by Investor’s signing and delivery
of the Agreement Investor hereby confirms, that the Shares issued to and/or
purchased by Investor (collectively, the “Securities”),
will be acquired for investment for Investor’s own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof,
and that Investor has no present intention of selling, granting any
participation in, or otherwise distributing the same in any transaction other
than a transaction exempt from the registration requirements of the Securities
Act of 1933, as amended (the “Act”).  By
executing the Agreement, Investor further represents that Investor does not have
any contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to such person or to any third person, with
respect to any of the Securities.  Investor is experienced in making
investments in the unregistered and restricted securities.  Investor
understands that such investments (including Investor’s investment in the
Securities) involve a high degree of speculation and risk, including the loss of
Investor’s entire investment in the Securities.  Investor has such
knowledge and experience in financial and business matters that Investor is
capable of evaluating the merits and risks of the investment in Company
represented by the Securities and, by reason of Investor’s financial and
business experience and/or its pre-existing substantive relationship with
Company, Investor has the capacity to protect Investor’s interests in connection
with the Securities.  Investor is financially able to bear the
economic risk of the investment represented by the Securities, including a total
loss of such investment.  The entire legal and beneficial interest in
the Securities is being purchased by Investor and shall be held only for
Investor’s account and neither in whole nor in part for any other
person.

     

    2.           No Advertising or General
Solicitation.  Investor represents and warrants to Company all
of the following:  (i) that, the sale of the Securities to
Investor was not accomplished by the publication of any written or printed
communication, any pre-recorded telephone communication or any communication
spoken on radio, television or similar communication media; and (ii) that
Investor has not seen or received any advertisement or general solicitation with
respect to the sale of any of the securities of Company, including, without
limitation, the Securities.

     

    3.           Reliance on Investor’s
Representations.  Investor understands that the Securities are
not registered under the Act on the ground that their issuance and sale in
connection with the transactions contemplated by the Agreement is (and will be)
exempt from registration under the Act pursuant to exemptions available
thereunder (including, without limitation, the exemptions available under
Section 4(2) of the Act and Regulation D promulgated under the Act), and that
Company’s reliance on such exemption is predicated on Investor’s representations
set forth herein and in the Agreement.  Investor realizes that the
basis for the exemption may not be present if, notwithstanding such
representations, Investor has in mind merely acquiring any of the Securities for
a fixed or determinable period in the future, or for a market rise, or for sale
if the market does not rise. Investor has no such intention.

     

    4.           Information Concerning
Company.  Without limiting the terms of the investment
representations set forth herein, Investor represents that Investor:
(a) has had an opportunity to ask questions and receive answers from
Company and its officers and directors regarding matters relevant to Company and
an investment therein (e.g., as represented by the Securities); (b) has had
the opportunity to obtain any and all information that Investor deemed or deems
necessary to evaluate Company and Investor’s acquisition of the Securities, as
well as to verify the accuracy of the information provided to Investor; and
(c) has received all such information Investor deems necessary and
appropriate to evaluate the financial risks inherent in, and the merits of, an
investment in the Securities.  Without limiting the generality of the
representations and acknowledgments set forth in the Agreement, Investor
understands and has had the opportunity to review carefully each of the
following: (1) the terms and conditions of the Securities,
(2) Company’s intended business plan, (3) the capitalization and
charter documents of the Company, including without limitation, Company’s plans
to issue securities as incentive compensation to management personnel, employees
and/or consultants of Company, which could dilute the equity interest of
Investor in Company, (4) the status and nature of the assets of the
Company, (5) the status and nature of liabilities of the Company (including
amounts and other obligations owed to third parties and amounts and other
obligations owed to affiliates and shareholders of the Company), (6) the
early-stage, developing and/or emerging nature of the business of the Company,
(7) the business prospects and financial affairs of Company, (8) the
competitive environment that Company and its business and services face and
(9) Company’s imminent need for substantial amounts of additional
financing.  Notwithstanding anything to the contrary in the Agreement,
Investor understands, acknowledges and agrees that (A) Company shall have no
obligation to complete any financing and Company can provide no assurance or
guarantee that any equity or other financing will be consummated at any time in
the future, and (B) the issuance and sale of shares or other securities in
Company would result in a dilution of Investor’s equity interest in
Company.  Investor is fully aware of the terms, conditions,
limitations and restrictions applicable to Investor’s ownership of the
Securities and Investor’s ownership or equity state in Company.

     

    5.           Accredited and Sophisticated
Investor.  Investor is an “accredited investor,” as such term
is defined in Rule 502, Regulation D, the Act, by virtue of the fact that
Investor is either (i) a corporation, Massachusetts or similar business
trust, partnership, or an organization described in Section 501(c)(3) of the
Internal Revenue Code (tax exempt organization), in each case (a) not
formed for the specific purpose of acquiring securities of Company and
(b) having total assets in excess of $5,000,000, or (ii) an entity in
which all of the equity owners are “accredited investors.” By reason of
Investor’s (i) pre-existing substantive relationship with Company and one
or more of its officers, directors or control persons and/or (ii) by reason
of Investor’s business or financial experience, Investor is capable of
evaluating the merits and risks of the investment represented by the Securities
and the merits and risks of protecting Investor’s own interests in connection
with such investment.

     

    6.           Economic
Risk.  Investor understands that the purchase of the Securities
will be a highly speculative investment and involves a high degree of risk, and
Investor is able, without impairing Investor’s financial condition, to hold the
Securities for an indefinite time and to suffer a complete loss of Investor’s
investment.

     

    7.           Restricted
Securities.  Investor understands and acknowledges that:
(a) the sale of the Securities has not been (and will not be) registered
under the Act, the Securities must be held indefinitely unless subsequently
registered under the Act or an exemption from the registration requirements of
the Act is available (such as Rule 144 under the Act), and Company is under no
obligation to register any sale or transfer of the Securities; (b) the
Securities are “restricted” securities within the meaning of Rule 144 and, to
the extent they are certificated, will be stamped with the legends specified in
the Agreement and other appropriate legends; (c) Company will make a
notation in its records of the aforementioned restrictions on transfer and
legends; and (d) Company has no obligation to register the transfer of any
of the Securities and shall refuse to register any such transfer not in
compliance with applicable law.

     

    8.           Further Limitations on
Dispositions.  Without in any way limiting the representations
set forth above, Investor further agrees not to make any disposition of all or
any portion of the Securities (other than the valid exercise or conversion
thereof in accordance with their respective terms) unless and until:
(a) there is then in effect a registration statement under the Act covering
such proposed disposition and such disposition is made in accordance with such
registration statement; or (b) (i) Investor shall have notified Company of
the proposed disposition and shall have furnished Company with a detailed
statement of the circumstances surrounding the proposed disposition, and
(ii) if requested by Company, Investor shall have furnished Company with an
opinion of counsel, satisfactory to Company and Company’s counsel, that such
disposition will not require registration of such Securities under the Act or
registration or qualification under any applicable state securities
laws.

     

    9.           No Government Recommendation
or Approval.  Investor understands that no United States
federal or state agency, or similar agency of any other country, has passed on
or made any recommendation or endorsement of Company, this transaction or the
purchase of any of the Securities.

     

    10.           Reliance on Own
Investigation.  Investor has performed a thorough independent
due diligence review of Company, its business enterprise and
operations.  In connection with its due diligence review of Company,
Investor has reviewed information relating to Company’s operations, facilities,
finances, management, capitalizations, employees and other aspects of Company’s
business enterprise.  Notwithstanding anything contained in the
Agreement to the contrary, in making an investment decision with respect to the
Securities under the Agreement, Investor is relying entirely on its own
investigation and examination of Company and its business and has not based any
investment decision on statements from Company or any of its officers,
directors, employees, agents or other representatives.  Without
limiting the generality of the foregoing, no representations or warranties with
respect to income, profits or otherwise have been made to Investor by the
Company or any of the Company’s officers or directors, and Investor understands
that Investor is subscribing for the Shares without relying upon any
representations or warranties.  Investor has relied solely upon the
advice of Investor’s own tax and legal advisors with respect to the tax and
other legal aspects of Investor’s investment in the Shares.

     

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
B

     

    ASSIGNMENT
SEPARATE FROM CERTIFICATE

     

    FOR VALUE
RECEIVED, [______________________] (“Recipient”) hereby sells, assigns and
transfers unto AuraSource, Inc., a Nevada corporation (the
“Company”),_____________________ shares of Common Stock of the Company
represented by Certificate No. _____ herewith and does hereby irrevocably
constitute and appoint ______________________________ attorney to transfer the
said stock on the books of the Company with full power of substitution in the
premises.

     

    

     

    Dated:  ________________

     

    

     

    [______________________________]

     

    

     

    

     

    By:

     

    Its:

     

    

     

    

     

    

     

    

     

    

     

    

     

    INSTRUCTIONS:  PLEASE
DO NOT FILL IN ANY BLANKS OTHER THAN THE SIGNATURE LINE.  THE PURPOSE
OF THIS ASSIGNMENT IS TO ENABLE THE COMPANY TO EXERCISE ITS “REPURCHASE RIGHT”
SET FORTH IN THE AGREEMENT WITHOUT REQUIRING ADDITIONAL SIGNATURES ON THE PART
OF RECIPIENT.EX-10.1

Exhibit 10.1

ASSET PURCHASE AGREEMENT

dated as of the 29th day of October, 2008 

AMONG:

Terra Merchant Resources Inc.

a corporation incorporated under the laws of the Province of Ontario (hereinafter referred to as

“TERRA”)

- and -

GILLAINC.

a corporation incorporated under the laws of Nevada 
(hereinafter referred to as “GILLA”)

WHEREAS
GILLA is a US reporting company listed on the OTC.BB;

WHEREAS GILLA wishes to acquire and TERRA wishes to sell certain of its assets on the terms and
conditions herein contained; and

NOW THEREFORE, in consideration of the mutual covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties
agree as follows.

ARTICLE 1

DEFINITIONS

	 	1.1	 	Definitions

For all purposes of this Agreement the following capitalized terms shall have the meanings set
forth in this Article 1:

	1.1.1	 	“Affiliate” of an entity means any Person directly or indirectly controlling, controlled by
or under direct or indirect common control with such entity.
	 
	1.1.2	 	“Business Day” means a day, excluding Saturday and Sunday, on which banking institutions are
open for business in Toronto, Ontario.
	 
	1.1.3	 	“Charter” means the certificate and articles of incorporation (as amended), certificate and
articles of organization (as amended), statute, constitution, operating agreement, joint
venture or partnership agreement or articles or other constituting document of any Person
other than an individual, each as from time to time amended or modified.

 

 

	1.1.4	 	“GILLA Shares” means the common shares in the capital of GILLA.
	 
	1.1.5	 	“GILLA Warrants” means warrants to acquire GILLA Shares.
	 
	1.1.6	 	“Closing” means the closing of the exchange of securities between the TERRA Shareholders and
GILLA, pursuant to the terms of this Agreement.
	 
	1.1.7	 	"Closing Date” means such date after the receipt of all required approvals as TERRA and
GILLA may agree in writing.
	 
	1.1.8	 	"Closing Time” means 11:00 a.m. (Toronto time) on the Closing Date.
	 
	1.1.9	 	“Control” in respect of a Person (including the terms ''controlled by” and “under common
control with”) means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through Ownership of voting
securities, by contract or by other arrangement.
	 
	1.1.10	 	“Distribution” means: (a) the declaration or payment of any dividend in cash, securities or
property on or in respect of any class of securities of the Person or its Subsidiaries; (b)
the purchase, redemption or other retirement of any securities of the Person or its
Subsidiaries, directly or indirectly; or (c) any other distribution on or in respect of any
class of securities of the Person or its Subsidiaries.
	 
	1.1.11	 	“Terra Assets” means all licenses, rights and entitlements to Terra’s prospective gold
property in Angola, upon which a 43-101 Report has been completed..

	 	1.2	 	Schedules

The following Schedules are attached hereto and form part of this Agreement:

	 	 	 	 	 
	 

	 	Schedule A
	 	GILLA Options
	 

	 	Schedule B
	 	GILLA Warrants
	 

	 	Schedule C
	 	GILLA Material Contracts
	 
	 	 	 	 
	 

	 	Schedule D
	 	Existing Gilla Shareholders’ Rights Agreement

ARTICLE 2

AGREEMENT TO PURCHASE

	 	2.1	 	TERRA Assets

	2.1.1	 	Subject to all of the terms and conditions hereof and in reliance on the representations
and warranties set forth or referred to herein, at the Closing Time Terra shall transfer to

 

 

	 	 	GILLA the Terra Assets in consideration of GILLA’s issuance to TERRA of 9.2 million Gilla
 shares and 5 million Gilla warrants:

	 	2.2	 	Closing and Delivery of Certificates

	2.2.1	 	The Closing shall take place at the Toronto offices of Heenan Blaikie LLP at the Closing
Time on the Closing Date, or as TERRA and GILLA may otherwise agree in writing.

Terra shall transfer the Terra assets to Gilla and Gilla shall transfer the Gilla shares and Gilla
Warrants to Terra, as set out herein

	 	2.3	 	Escrow

Terra acknowledge that GILLA Shares and Gilla Warrants acquired by it pursuant to this Agreement
may be escrowed pursuant to regulatory policies.

	 	2.4	 	Effective Date

	2.4.1	 	The exchange of TERRA Assets for GILLA Shares and GILLA Warrants shall all take effect at
and from the Closing Time.

	 	2.5	 	Share Capital

	2.5.1	 	For greater certainty, the parties acknowledge that assuming that 9,200,000 GILLA Shares are
issued in connection herewith, after the Closing, there will be an aggregate of 37,981,388
GILLA Shares issued and outstanding, plus up to an additional 1.5 million common shares that
may be issued from treasury pursuant to a potential private placement..
	 
	2.5.2	 	For greater certainty, the parties also acknowledge that:

	 	(a)	 	544,804 GILLA Shares have been reserved for issuance to the current holders of
options to purchase GILLA Shares; and
	 
	 	(b)	 	5,000,000 GILLA Shares will be reserved for issuance to the current holders of
TERRA Warrants.

 

 

ARTICLE 3

REPRESENTATIONS AND

WARRANTIES OF TERRA

In order to induce GILLA to enter into this Agreement and to consummate the transactions
contemplated by this Agreement, TERRA hereby represents and warrants as follows to and in favour
of GILLA and acknowledge that GILLA is relying upon such representations and warranties in
connection herewith:

	 	3.1	 	Organization and Existence

	3.1.1	 	TERRA is a corporation duly incorporated and existing under the laws of the Province of
Ontario and has the power to own its properties and to carry on its business as now conducted
and has made all necessary filings under all applicable corporate, securities and taxation
laws or any other laws to which TERRA is subject, except where the failure to make such filing
would not have a Material Adverse Effect on TERRA. TERRA is not in material violation of its
Charter or by-laws. TERRA is in good standing under the company or other laws of each state,
province or other jurisdiction in which it carries on business, except where the failure to
have such standing would not have a Material Adverse Effect on TERRA. No proceedings have been
instituted or are pending for the dissolution or liquidation of TERRA. TERRA is in the process
of incorporating an Angolan subsidiary.

	 	3.2	 	Authorized Capital

	3.2.1	 	The authorized capital of TERRA consists of an unlimited number of TERRA Shares.

	 	3.3	 	Information

All data and information relating to TERRA provided by TERRA to GILLA and its agents and
representatives in connection herewith was and is complete and true and correct in all material
respects.

	 	3.4	 	Authorization

TERRA has the right, authority and power to enter into this Agreement and each agreement, document
and instrument to be executed and delivered by TERRA pursuant to this Agreement and to carry out
the contemplated transaction and other transactions contemplated hereby or thereby. The execution,
delivery and performance by TERRA of this Agreement and each such other agreement, document and
instrument contemplated herein have been duly authorized by all necessary action of TERRA and no
other action on the part of TERRA is required in connection therewith. Other than as set out in
Schedule 3.4, the execution, delivery and performance by

 

 

TERRA of this Agreement and each such other agreement, document and instrument contemplated herein
does not and will not require the authorization approval or consent of, or any filing with any
governmental authority or agency or any other person, and the execution, delivery and performance
by TERRA of this Agreement and each such other agreement, document and instrument contemplated
herein, does not and will not result in (a) a breach of or conflict with the Charter or by-laws of
TERRA; (b) a breach of or a conflict with any Laws, order, judgment, injunction, license or permit
applicable to TERRA; (c) a breach of, constitute a default under, accelerate any obligation under,
or give rise to a right of termination of any indenture, agreement, contract, instrument, lien,
lease, permit, authorization, order, writ, judgement, injunction, decree, determination or
arbitration award to which TERRA is a party or by which the property of TERRA is bound or affected;
(d) result in the creation or imposition of any Lien, on any equity interest in TERRA; or (e)
result in the dissolution or winding-up of TERRA.

	 	3.5	 	No Other Agreement to Purchase

	3.5.1	 	Other than as set out herein, there are no agreements, options, warrants, rights of
conversion or other rights binding upon or which at any time in the future may become binding
upon TERRA to sell the Terra Assets.

	 	3.6	 	No Limitations

There is no non-competition, exclusivity or other similar agreement, commitment or understanding
in place, whether written or oral, to which any of TERRA is a party or is otherwise bound that
would now or hereafter, in any way limit the business, use of assets or operations of TERRA.

	 	3.7	 	Enforceability

The execution and delivery by TERRA of this Agreement and any other agreement contemplated by this
Agreement will result in legally binding obligations of TERRA enforceable against TERRA in
accordance with the respective terms and provisions hereof and thereof subject, however, to
limitations with respect to enforcement imposed by law in connection with bankruptcy or similar
proceedings and to the extent that equitable remedies such as specific performance and injunction
are in the discretion of the court from which they are sought.

 

 

ARTICLE 4

REPRESENTATIONS AND

WARRANTIES OF GILLA

GILLA hereby represents and warrants as follows to and in favour of TERRA and acknowledges that
TERRA is relying upon such representations and warranties in connection herewith:

	 	4.1	 	Organization and Existence

GILLA is a corporation duly incorporated, organized and validly existing under the laws of the
State of Nevada and has the corporate power to own its properties and to carry on its business as
now conducted and has made all necessary filings under all applicable corporate, securities and
taxation laws or any other laws to which GILLA is subject, except where the failure to make such
filing would not have a Material Adverse Effect on GILLA. GILLA is in good standing under the
corporate laws of each State or other jurisdiction in which it carries on business. GILLA is not
in violation of its Charter or by-laws. GILLA has only one Subsidiary — FMC Corporation S. A., a
Cameroon company. No proceedings have been instituted or are pending for the dissolution or
liquidation of GILLA or its subsidiary.

	 	4.2	 	Authorization

	4.2.1	 	The execution, delivery and performance by GILLA of this Agreement and the Qualifying
Transaction: (i) are within its corporate power and authority; (ii) have been, or will be duly
authorized by all necessary corporate proceedings; and (iii) do not and will not conflict with
or result in any breach of any provision of, or the creation of any Lien upon any of the
property of GILLA pursuant to the Charter or by-laws of GILLA, any Laws, order, judgment,
injunction, license or permit applicable to GILLA or any indenture, lease, agreement,
contract, instrument or Lien, to which GILLA is a party or by which the property of GILLA may
be bound or affected.
	 
	4.2.2	 	The GILLA Shares and the GILLA Warrants, when delivered to the TERRA shareholders in
accordance with the terms of this Agreement, will be validly issued and outstanding as fully
paid and non-assessable.

	4.3	 	Consents

The execution, delivery and performance by GILLA of this Agreement does not and will not require
the authorization, approval or consent of, or any filing with, any governmental authority or
agency or any other Person, except those required by applicable securities laws.

 

 

	 	4.4	 	Authorized Capital

	4.4.1	 	The authorized capital of GILLA consists of an unlimited number of GILLA Shares of which
27,781,388 are issued and outstanding as at the date hereof. GILLA may issue up to an
additional 544,804 GILLA Shares pursuant to the exercise of existing GILLA Options and up to
an additional 5,000,000 GILLA Shares pursuant to the exercise of the GILLA Warrants.
	 
	4.4.2	 	The GILLA Shares issued and outstanding as at the Closing Time have been, or will at the
Closing Time be. duly authorized and validly issued and outstanding as fully paid and
non-assessable shares. None of the GILLA Shares or GILLA Options have been issued in violation
of any Laws, GILLA’s Charter or by-laws or any agreement to which GILLA is a party or by which
it is bound.

	 	4.5	 	No Material Adverse Change

Since August 31, 2008, there has occurred no change in the business, operations, results of
operations, assets, capitalization or condition (financial or otherwise) of GILLA, whether or not
in the ordinary course of business, whether separately or in the aggregate with other occurrences
or developments, and whether insured against or not. which could reasonably be expected to have a
Material Adverse Effect on GILLA.

	 	4.6	 	Reporting Issuer

GILLA is a reporting issuer in the United States and is not in default of such legislation or any
regulation thereunder. No order has been issued ceasing or suspending trading or prohibiting the
issue of the GILLA Shares and no proceedings for such are pending or, to the knowledge of GILLA,
threatened.

	 	4.7	 	Listing

The GILLA Shares are listed on the OTC.BB.

	 	4.8	 	Public Record

The information filed by GILLA or on its behalf as part of its continuous disclosure record is
true and correct as at the date hereof.

	 	4.9	 	Corporate Documents, Books and Records

Complete and correct copies of the Charter and by-laws, and of all amendments thereto, of GILLA
have been previously delivered to TERRA. The minute book of GILLA contains

 

 

complete and accurate records in all material respects of all meetings and consents in lieu of
meetings of the board of directors (and its committees) and shareholders of GILLA since
incorporation. Except as reflected in such minute books, there are no minutes of meetings or
consents in lieu of meetings of the board of directors (or its committees) or of the shareholders
of GILLA.

	 	4.10	 	Information

All data and information provided by GILLA, at the request of TERRA and its agents and
representatives, to TERRA and its agents and representatives in connection herewith was and is
complete and true and correct in all material respects.

	 	4.11	 	No Other Agreement to Purchase

Other than as set out herein and other than the GILLA Options and GILLA Warrants, there are no
agreements, options, warrants, rights of conversion or other rights binding upon or which at any
time in the future may become binding upon GILLA to issue any shares or any securities convertible
or exchangeable, directly or indirectly, into any GILLA Shares. There are no shareholders’
agreements, pooling agreements, voting trusts or other agreements or understandings with respect
to the voting of GILLA Shares, or any of them.

	 	4.12	 	Shareholder Loans

There are no loans or other liabilities of GILLA to any shareholder or to any previous shareholder
of GILLA.

	 	4.13	 	Material Contracts

Attached hereto as Schedule C is a true, complete and accurate list of all material contracts,
agreements and commitments entered into by GILLA which are in writing or have been orally agreed
to by GILLA.

	 	4.14	 	Employees

Except as set out in Schedule C, GILLA does not have any employees or independent contractors and
there are no agreements, written or oral, between GILLA and any other party relating to payment,
remuneration or compensation for work performed or services provided.

 

 

	 	4.15	 	Litigation

There is no suit, claim, action, proceeding or, to the knowledge of GILLA, investigation pending
or threatened against or affecting GILLA, or any of the GILLA Assets, or any officer or director
thereof in his capacity as an officer or director thereof.

	 	4.16	 	Location of Office

GlLLA’s head office is located at 112 North Curry Street, Carson City, Nevada, and such address is
the only location where its corporate books and records are located.

	 	4.17	 	No Limitations

	4.17.1	 	There is no non-competition, exclusivity or other similar agreement, commitment or
understanding in place, whether written or oral, to which GILLA is a party or is Otherwise
bound that would now or hereafter, in any way limit the business, use of assets or operations
of GILLA.

	 	4.18	 	Enforceability

The execution and delivery by GILLA of this Agreement and any other agreement contemplated by this
Agreement will result in legally binding obligations of GILLA enforceable against GILLA in
accordance with the respective terms and provisions hereof and thereof subject, however, to
limitations with respect to enforcement imposed by law in connection with bankruptcy or similar
proceedings and to the extent that equitable remedies such as specific performance and injunction
are in the discretion of the court from which they are sought.

ARTICLE 5

COVENANTS

	 	5.1	 	Filings

GILLA and TERRA shall prepare and file any filings required under any applicable laws or other
regulatory bodies relating hereto.

	 	5.2	 	Additional Agreements

Each of the parties hereto agrees to use its commercially reasonable efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective as promptly as practicable the transactions

 

 

contemplated by this Agreement and to cooperate with each other in connection with the
foregoing.

ARTICLE 6

TRANSACTION COSTS

	 	6.1	 	Transaction Costs

Each party shall bear their own costs relating to the matters set out herein.

ARTICLE 7

NOTICES

	 	7.1	 	Notices

Any notice or other communication in connection with this Agreement shall be deemed to be delivered
if in writing (or in the form of a telecopy) addressed as provided below: (a) when actually
delivered or telecopied to said address, or (b) in the case of a letter, three Business Days shall
have elapsed after the same shall have been deposited in the Canadian mail, postage prepaid and
registered or certified:

If to GILLA, then to the following address:

Attention: Georges Benarroch, 114 Belmont Street, Toronto M5R 1P8

or at such other address as GILLA shall have specified by notice actually received by the address
or;

If to TERRA then to the following address:

Royal Bank Plaza

Suite 2600

Toronto, ON M5J 2J4

Fax: 1-866-299-9418

Attention: Daniel Barrette

or at such other address as TERRA shall have specified by notice actually received by the
addressor.

 

 

ARTICLE 8

MISCELLANEOUS

	 	8.1	 	Amendments and Waivers

Except as otherwise expressly provided herein, any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) if, but only if, such amendment or waiver is
in writing and is signed, in the case of an amendment, by TERRA and GILLA, or in the case of a
waiver, by the party against whom the waiver is to be effective. Any amendment or waiver effected
in accordance with this Section 8.1 shall be binding upon the Vendors, the TERRA Warrantholders,
TERRA and GILLA pursuant to this Agreement.

	 	8.2	 	Consent to Jurisdiction

Each of the Vendors, the TERRA Warrantholders, TERRA and GILLA hereby agrees to submit to the
non-exclusive jurisdiction of the courts in and of the Province of Ontario and to the courts to
which an appeal of the decisions of such courts may be taken, and consents that service of process
with respect to all courts in and of the Province of Ontario may be made by registered mail to it
at the address set forth in article 10.

	 	8.3	 	Governing Law

This Agreement shall be governed by and construed in accordance with the laws of the Province of
Ontario and the federal laws of Canada applicable therein without giving effect to any choice or
conflict of law provision or rule that would cause the application of the domestic substantive
laws of any other jurisdiction, and shall bind and inure to the benefit of the parties hereto and
their respective successors and assigns.

	 	8.4	 	Further Assurances

TERRA and GILLA, upon the request of any other party hereto, whether before or after the Closing,
shall do, execute, acknowledge and deliver or cause to be done, executed, acknowledged or
delivered all such further acts, deeds, documents, assignments, transfers, conveyances, powers of
attorney and assurances as may be reasonably necessary or desirable.

	 	8.5	 	Time

Time is of the essence of this Agreement.

 

 

	 	8.6	 	Assignment

This Agreement may not be assigned by any of the parties hereto without the prior written consent
of the other parties hereto, such consents not to be unreasonably withheld or delayed.

	 	8.7	 	Entire Agreement, Counterparts, Section Headings

This Agreement, and the Schedules hereto, sets forth the entire understanding of the parties hereto
with respect to the transactions contemplated hereby and supersedes any prior written or oral
understandings with respect thereto, including, without limitation, the Letter Agreement. This
Agreement may be executed by facsimile and in one or more counterparts thereof, each of which shall
be deemed an original but all of which together shall constitute one and the same instrument. The
headings in this Agreement are for convenience of reference only and shall not alter or otherwise
affect the meaning hereof.

	 	8.8	 	Regulatory Approval

This Agreement is subject to any required regulatory approval.

 

 

	 	8.9	 	Language

The parties confirm that it is their wish that this Agreement, as well as any other documents
relating to this Agreement, including notices, schedules and authorizations, have been and shall be
drawn up in the English language only. Les signataires confirment
leur volonté que la présente
convention, de meme que tous les documents s’y rattachant, y compris tout avis, annexe et
autorisation, soient rédigés en anglais seulement.

	 	8.10	 	Corporate finance fee

It is understood and agreed that Gilla shall issue from its treasury one million (1,000,000) of its
common shares to Credifinance Capital Corp. as a corporate finance fee for introducing, structuring
and arranging this transaction. It is acknowledged that Georges Benarroch is the President of both
Gilla and Credifinance Capital Corp.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above
written.

	 	 	 	 	 	 	 	 	 	 	 
	TERRA MERCHANT
RESOURCES INC.	 	 	 	GILLA INC.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Per:

	 	/s/ Frank Bellotti
 

President
	 	 	 	Per:
	 	/s/ Georges Benarroch
 

President
	 	 

 

 

SCHEDULE A

GILLA OPTIONS

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Name of	 	 	 	 	 	 
	Optionee	 	Options granted	 	Exercise Price	 	Expiration Date
	D.R.R. Capital
Corporation
	 	 	544.804	 	 	$	0.75	 	 	January
31, 2010

 

 

SCHEDULE A

GILLA WARRANTS

 

 

SCHEDULE C

GILLA MATERIAL CONTRACTS

 

 

SCHEDULE D

EXISTING GILLA SHAREHOLDERS RIGHTS AGREEMENT

IT IS AN INTEGRAL PART OF THIS AGREEMENT THAT THE PARTIES ACKNOWLEDGE AND AGREE THAT GILLA HAS
ENTERED INTO AN AGREEMENT WITH ITS SHAREHOLDERS OF RECORD AS OF SEPTEMBER 15, 2008 TO THE EFFECT
THAT, IF THE SALE PRICE OF THE CAMEROON RUTILE PROPERTIES CURRENTLY HELD BY GILLA IS GREATER THAN
US $50 MILLION (SUCH EXCESS AMOUNT REFERRED TO AS THE “EXCESS SALE PRICE”) THEN 40% OF SUCH EXCESS
SALE PRICE SHALL BE SEGREGATED FROM THE GENERAL FUNDS RECEIVED BY GILLA AND DISTRIBUTED AS
FOLLOWS: A. 30% TO THE EXISTING SHAREHOLDERS; B. 10% TO CREDIFINANCE CAPITAL CORP.

THE PARTIES ACKNOWLEDGE AND AGREE THAT THE TERRA SECURITYHOLDERS SHALL NOT PARTICIPATE IN SUCH
CONTRACTUAL
RIGHT PERTAINING TO THE 40% OF THE EXCESS SALE PRICE.

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