ex10-2.htm


     

    
      

      

    

    
      THIS
WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS.  THE
WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, PLEDGED OR OTHERWISE
DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER THOSE LAWS OR UNLESS THE COMPANY
HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO IT THAT SUCH DISPOSITION IS
IN COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.

       

      Right to
Purchase 500,000 Shares of the

      Common
Stock of Ethos Environmental, Inc.

       

      ETHOS
ENVIRONMENTAL, INC.

       

      Common
Stock Purchase Warrant

       

      For good
and valuable consideration, the receipt of which is hereby acknowledged, Ethos
Environmental, Inc., a Nevada corporation (the “Company”), hereby grants to MKM
Opportunity Master Fund, Limited, a Cayman Islands corporation (the “Holder”),
the right, but not the obligation, to purchase from the Company at any time or
from time to time on or before 5:00 p.m., Pacific Standard Time on the
Expiration Date, as defined below, five-hundred thousand shares (500,000) fully
paid and nonassessable shares of common stock of the Company (the “Common
Stock”) at a purchase price per share equal to the Purchase Price, as defined
below.  The number of such shares of Common Stock and the Purchase
Price are subject to adjustment as provided in this Warrant.  The
Expiration Date shall be October 1, 2013.

       

      1. Exercise
of Warrant.  Cash Exercise.  This Warrant may be
exercised by the Holder hereof in full or in part at any time or from time to
time until the Expiration Date by surrender of this Warrant and the subscription
form annexed hereto (duly executed by the Holder), to the Company, and by making
payment, in cash or by certified or official bank check payable to the order of
the Company, in the amount obtained by multiplying (a) the number of shares
of Common Stock designated by the Holder in the subscription form by
(b) the Purchase Price then in effect.  On any partial exercise
the Company will forthwith issue and deliver to or upon the order of the Holder
hereof a modification of this Warrant, providing in the aggregate on the face or
faces thereof for the purchase of the number of shares of Common Stock for which
such Warrant may still be exercised.

       

      
        
          
          

        

        
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      2. Delivery of Stock
Certificates, etc., on Exercise

       

      .  As
soon as practicable after the exercise of this Warrant, and in any event within
three business days thereafter, the Company at its expense (including the
payment by it of any applicable issue or stamp taxes) will cause to be issued in
the name of and delivered to the Holder hereof a certificate for the number of
fully paid and nonassessable shares of Common Stock (or Other Securities) to
which the Holder shall be entitled on such exercise, plus, in lieu of any
fractional share to which the Holder would otherwise be entitled, cash equal to
such fraction multiplied by the then current fair market value (as reasonably
determined by the Company) of one full share, together with any other stock or
other securities or property (including cash, where applicable) to which the
Holder is entitled upon such exercise.  "Other Securities" shall mean
any stock (other than Common Stock) and other securities of the Company or any
other person (corporate or otherwise) which the Holder at any time shall be
entitled to receive, or shall have received, on the exercise of this Warrant, in
lieu of or in addition to Common Stock, or which at any time shall be issuable
or shall have been issued in exchange for or in replacement of Common Stock or
Other Securities pursuant to Sections 3 or 4.

       

      3. Adjustment.

       

      (a) Initial Purchase Price;
Subsequent Adjustment of Price and Number of Purchasable
Shares.  The initial purchase price for shares subject to this
Warrant will be $0.30 per share (the “Initial Purchase Price”), and will be
adjusted from time to time as provided below.  The Initial Purchase
Price or, if such price has been adjusted, the price per share of Common Stock
as last adjusted pursuant to the terms hereof is referred to as the “Purchase
Price” herein.  Upon each adjustment of the Purchase Price, the Holder
will thereafter be entitled to purchase, at the Purchase Price resulting from
such adjustment, the number of shares of Common Stock obtained by multiplying
the Purchase Price in effect immediately before such adjustment by the number of
shares of Common Stock purchasable pursuant to this Warrant immediately before
such adjustment and dividing the product by the Purchase Price resulting from
such adjustment.

       

      (b) Definitions.  For
purposes of this Warrant, the following terms shall have the meanings set forth
below:

       

      (i) "Exercise
Price" shall mean the price, determined pursuant to this Section 3, at
which shares of Common Stock shall be deliverable upon exercise of this
Warrant.

       

      (ii) "Current
Exercise Price" shall mean the Exercise Price immediately before the occurrence
of any event, which, pursuant to this Section 3, causes an adjustment to
the Exercise Price.

       

      (iii) "Convertible
Securities" shall mean any indebtedness or shares of stock convertible into or
exchangeable for Common Stock.

       

      (iv) "Options"
shall mean any rights, warrants or options to subscribe for or purchase Common
Stock or Convertible Securities, including this Warrant.

       

      (v) "Common
Stock Outstanding" shall mean the aggregate of all Common Stock outstanding and
all Common Stock issuable upon exercise of all outstanding Options and
conversion of all outstanding Convertible Securities.

       

      (vi) "Common
Stock Equivalents" shall mean Convertible Securities and rights entitling the
holder thereof to receive, directly or indirectly, additional shares of Common
Stock without the payment of any consideration by such holder for such
additional shares of Common Stock or Common Stock Equivalents.

       

      (c) Adjustments to Exercise
Price.  Subject to Section 3(c)(13) below, the Exercise Price in
effect from time to time shall be subject to adjustment in certain cases as
follows:

       

      
        
          
          

        

        
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      (i) Issuance of Additional
Shares of Common Stock

       

      .  In
case the Company shall at any time after the date of this Warrant issue or sell
any Common Stock, Options, Convertible Securities, or Common Stock Equivalents
(hereinafter the "Additional Shares of Common Stock") without consideration or
for a consideration per share less than the Current Exercise Price, then such
Current Exercise Price shall simultaneously with such issuance or sale be
adjusted to an Exercise Price (calculated to the nearest cent) determined by
multiplying such Current Exercise Price by a fraction,

       

      (a) the
numerator of which shall be (x) the number of shares of Common Stock
outstanding at the close of business on the day immediately preceding the date
of such issuance or sale, plus (y) the number of shares of Common Stock
which the aggregate consideration received (or by the express provisions hereof
is deemed to have been received) by the Company for the total number of
Additional Shares of Common Stock so issued or sold would purchase at such then
Current Exercise Price, and

       

      (b) the
denominator of which shall be the number of shares of Common Stock outstanding
at the close of business on the date of such issuance or sale after giving
effect to such issuance or sale of Additional Shares of Common
Stock.  For the purpose of the calculation described in this
Section 3, the number of shares of Common Stock outstanding shall include,
in addition to the number of shares of Common Stock actually outstanding,
(A) the number of shares of Common Stock issuable upon the exercise of this
Warrant if fully exercised on the day immediately preceding the issuance or sale
or deemed issuance or sale of Additional Shares of Common Stock, and
(B) the number of shares of Common Stock which would be obtained through
the exercise or conversion of all Options and Convertible Securities outstanding
on the day immediately preceding the issuance or sale or deemed issuance or sale
of Additional Shares of Common Stock.

       

      For
purposes of this Section 3, the following provisions shall also be
applicable:

       

      (ii) Cash
Consideration

       

      .  In
case of the issuance or sale of Additional Shares of Common Stock for cash, the
consideration received by the Company therefor shall be deemed to be the amount
of cash received by the Company for such shares.

       

      (iii) Non-Cash
Consideration

       

      .  In
case of the issuance (otherwise than upon conversion or exchange of Convertible
Securities) or sale of Additional Shares of Common Stock for consideration other
than cash or for consideration a part of which shall be other than cash, the
fair value shall be determined reasonably and in good faith by the consent or
vote of the Board of Directors of the Company.

       

      (iv) Options and Convertible
Securities

       

      .  In
case the Company shall in any manner issue or grant any Options or any
Convertible Securities, the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon conversion or exchange of the
total maximum amount of such Convertible Securities at the time such Convertible
Securities first become convertible or exchangeable shall (as of the date of
issue or grant of such Options or, in the case of the issue or sale of
Convertible Securities other than where the same are issuable upon the exercise
of Options, as of the date of such issue or sale) be deemed to be issued and to
be outstanding for the purpose of this Section 3 and to have been issued
for the sum of the amount (if any) paid for such Options or Convertible
Securities and the amount (if any) payable or upon conversion or exchange of
such Convertible Securities at the time such Convertible Securities first become
convertible or exchangeable; provided, however, that, subject to the provisions
of Section 3(c)(5), no further adjustment of the Current Exercise Price
shall be made upon the actual issuance of any such Common Stock or Convertible
Securities or upon the conversion or exchange of any such Convertible
Securities.

       

      
        
          
          

        

        
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      (v) Change in Conversion
Rate

       

      .  If
the rate at which any Convertible Securities referred to in Section 3(c)(4)
are convertible into or exchangeable for shares of Common Stock shall change at
any time (other than under or by reason of provisions designed to protect
against dilution), the Current Exercise Price in effect at the time of such
event shall forthwith be readjusted to the Exercise Price that would have been
in effect at such time had such Convertible Securities still outstanding
provided for such changed purchase price, additional consideration or conversion
rate, as the case may be, at the time same were initially granted, issued or
sold.  If the additional consideration (if any) payable upon the
conversion or exchange of any Convertible Securities referred to in
Section 3(c)(4), or the rate at which any Convertible Securities referred
to in Section 3(c)(4) are convertible into or exchangeable for shares of
Common Stock, shall be reduced at any time under or by reason of provisions with
respect thereto designed to protect against dilution, then in case of the
delivery of shares of Common Stock upon conversion or exchange of any such
Convertible Securities, the Exercise Price then in effect hereunder shall, upon
issuance of such shares of Common Stock, be adjusted to such amount as would
have been obtained had such Convertible Securities never been issued and had
adjustments been made only upon the issuance of the shares of Common Stock
delivered as aforesaid and for the consideration actually received for such
Convertible Securities and the Common Stock.

       

      (vi) Termination of Option or
Conversion Rights

       

      .  Upon
the termination or expiration of any right to purchase Common Stock under any
Option or of any right to convert or exchange Convertible Securities, the
Current Exercise Price shall, upon such termination, be changed to the Exercise
Price that would have been in effect at the time of such expiration or
termination had such Option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination, never been issued, and the
shares of Common Stock issuable thereunder shall no longer be deemed to be
Common Stock Outstanding.

       

      (vii) Stock Splits; Dividends;
Distributions and Combinations

       

      .  If
the Company shall at any time or from time to time after the date of this
Warrant fix a record date for the effectuation of a split or subdivision of the
outstanding shares of Common Stock or the determination of holders of Common
Stock entitled to receive a dividend or other distribution payable in additional
shares of Common Stock or Common Stock Equivalents, then, following such record
date (or the date of such dividend, distribution, split or subdivision if no
record date is fixed), the Exercise Price shall be appropriately decreased so
that the number of shares of Common Stock issuable on exercise of this Warrant
shall be increased in proportion to such increase in the number of outstanding
shares of Common Stock (including for this purpose, Common Stock
Equivalents).  If the number of shares of Common Stock outstanding at
any time after the date of this Warrant is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the Exercise Price shall be appropriately increased so that the
number of shares of Common Stock issuable upon exercise of this Warrant shall be
decreased in proportion to such decrease in the number of outstanding shares of
Common Stock.

       

      
        
          
          

        

        
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      (viii) Other
Dividends

       

      .  If
the Company shall declare a distribution payable in securities of other
companies, evidence of indebtedness issued by the Company or other companies,
assets (excluding cash dividends) or options or rights not referred to in
Section 3(c)(4), then, in each such case for the purpose of this
subsection 3, the holder of this Warrant shall be entitled to receive,
without the payment of any additional consideration, a proportionate share of
any such distribution as though it were the holder of the number of shares of
Common Stock of the Company issuable upon the exercise of this Warrant as of the
record date fixed for the determination of the holders of Common Stock of the
Company entitled to receive such distribution.

       

      (ix) Recapitalizations

       

      .  If
at any time or from time to time there shall be a recapitalization of the Common
Stock (other than a subdivision, combination or merger, sale of the voting stock
of the Company or a sale of assets transaction provided for elsewhere in this
Section 3), provision shall be made so that the holder of this Warrant
shall thereafter be entitled to receive upon exercise of this Warrant the number
of shares of stock or other securities or property of the Company or otherwise,
to which a holder of Common Stock deliverable upon such exercise would have been
entitled on such recapitalization.  In any such case, appropriate
adjustment shall be made in the application of the provisions of this
Section 3 with respect to the rights of the holder of this Warrant after
the recapitalization to the end that the provisions of this Section 3
(including adjustment of the Exercise Price then in effect and the number of
shares purchasable upon exercise of this Warrant) shall be applicable after that
event as nearly equivalent as may be practicable.

       

      (x) Successive
Changes

       

      .  The
above provisions of this Section 3 shall similarly apply to successive
issuances, sales, dividends or other distributions, subdivisions and
combinations on or of the Common Stock after the date of this
Warrant.

       

      (xi) Other Events Altering
Exercise Price

       

      .  Upon
the occurrence of any event not specifically described in this Section 3(c)
as reducing the Exercise Price that, in the reasonable exercise of the business
judgment of the Board of Directors of the Company reached in good faith,
requires, on equitable principles, the reduction of the Exercise Price, the
Exercise Price will be so equitably reduced.

       

      (xii) No
Impairment

       

      .  The
Company will not, by amendment of its Certificate of Incorporation or through
any reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Company, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 3 and in
the taking of all such action as may be necessary or appropriate in order to
protect the exercise rights of the holder of this Warrant against
impairment.

       

      (xiii) Excluded
Events

       

      .  Notwithstanding
any other provision in this Section 3(c) which is inconsistent with or
contrary to the terms of this Paragraph 13, the Exercise Price shall not be
adjusted by virtue of (a) the issuance of capital stock to employees,
consultants, officers or directors of the Company pursuant to stock purchase or
stock option plans or agreements approved by the Board (and not exceeding 20% of
the Company's Common Stock Outstanding), (b) the issuance of securities in
connection with acquisition transactions, (c) the issuance of securities to
financial institutions, suppliers or lessors in connection with commercial
credit arrangements, equipment financings or similar transactions,
(d) exercise of this Warrant, or (e) the repurchase of Common Stock shares
from the Company's employees, consultants, advisors, service providers, officers
or Directors at such person's cost (or at such other price as may be agreed to
by the Company's Board of Directors).

       

      
        
          
          

        

        
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      (xiv) Certificate as to
Adjustments

       

      .  Upon
the occurrence of each adjustment or readjustment of the Exercise Price pursuant
to this Section 3, the Company, at its expense and upon request by the
holder of this Warrant, shall compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish to the holder of this
Warrant a certificate setting forth such adjustment or readjustment and showing
in reasonable detail the facts upon which such adjustment or readjustment is
based.  The Company shall, upon the written request at any time of the
holder of this Warrant, furnish or cause to be furnished to such holder a like
certificate setting forth (a) such adjustment and readjustment,
(b) the Current Exercise Price, and (c) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the exercise of this Warrant.

       

      4. Further
Assurances

       

      .  The
Company will take all action that may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable shares of
stock, free from all taxes, liens and charges with respect to the issue thereof,
on the exercise of all or any portion of this Warrant from time to time
outstanding.

       

      5. Notices of Record Date,
etc.

       

      In the
event of:

       

      (a) any
taking by the Company of a record of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to receive any
dividend on, or any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property, or to receive
any other right, or

       

      (b) any
capital reorganization of the Company, any reclassification or recapitalization
of the capital stock of the Company or any transfer of all or substantially all
of the assets of the Company to or the sale, consolidation or merger of the
Company with, to or into any other person, or

       

      (c) any
voluntary or involuntary dissolution, liquidation or winding-up of the
Company;

       

      then and
in each such event the Company will mail or cause to be mailed to the Holder, at
least 20 days prior to such record date, a notice specifying (i) the date
on which any such record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, (ii) the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding up is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock (or Other
Securities) shall be entitled to exchange their shares of Common Stock (or Other
Securities) for securities or other property deliverable on such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up, and (iii) the amount and character
of any stock or other securities, or rights or options with respect thereto,
proposed to be issued or granted, the date of such proposed issue or grant and
the persons or class of persons to whom such proposed issue or grant is to be
offered or made.  Such notice shall also state that the action in
question or the record date is subject to the effectiveness of a registration
statement under the Securities Act of 1933, as amended (the “Securities Act”),
or a favorable vote of stockholders if either is required.  Such
notice shall be mailed at least 20 days prior to the date specified in such
notice on which any such action is to be taken or the record date, whichever is
earlier.

       

      
        
          
          

        

        
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      6. Reservation of Stock, etc.,
Issuable on Exercise of Warrants

       

      .  The
Company will at all times reserve and keep available out of its authorized but
unissued shares of capital stock, solely for issuance and delivery on the
exercise of this Warrant, a sufficient number of shares of Common Stock (or
Other Securities) to effect the full exercise of this Warrant and the exercise,
conversion or exchange of any other warrant or security of the Company
exercisable for, convertible into, exchangeable for or otherwise entitling the
Holder to acquire shares of Common Stock (or Other Securities), and if at any
time the number of authorized but unissued shares of Common Stock (or Other
Securities) shall not be sufficient to effect such exercise, conversion or
exchange, the Company shall take such action as may be necessary to increase its
authorized but unissued shares of Common Stock (or Other Securities) to such
number as shall be sufficient for such purposes.

       

      7. Transfer of
Warrant

       

      .  This
Warrant may only be transferred in compliance with applicable law.

       

      8. No Rights as a
Shareholder

       

      .  This
Warrant shall not entitle the Holder hereof to any voting rights or other rights
as a shareholder of the Company.

       

      9. Notices

       

      .  Any notices and
other communications required or permitted under this Warrant shall be effective
if in writing and delivered personally or sent by telecopier, major overnight
courier service or registered or certified mail, postage prepaid, return receipt
requested, addressed as follows: The addresses for such communications shall be:
(i) if to the Company: Ethos Environmental, Inc., 6800 Gateway Park Drive, San
Diego, Ca 92154, Fax: 619.575.9300, with a copy to Luis Carrillo, Esq.,
SteadyLaw Group, LLP, 501 W. Broadway Suite 800, San Diego, CA 92101, facsimile
(619) 330-1888; email: luis@steadylaw.com (ii) if to the Holder: MKM Opportunity
Master Fund, Limited, 644 Broadway, Fourth Floor, New York, New York 10012, with
a copy to Charles J. Hecht, Esq., Hecht & Associates, P.C., 275 Madison
Avenue, 28th Floor, New York, New York 10016, facsimile: (212) 490-3263, e-mail:
..

      


      Unless
otherwise specified herein, such notices or other communications shall be deemed
effective (a) on the date delivered, if delivered personally, (b) one
business days after being sent, if sent by a major overnight courier service
such as Federal Express or DHL, (c) one business day after being sent, if
sent by telecopier with confirmation of good transmission and receipt, and
(d) seven business days after being sent, if sent by registered or
certified mail, postage prepaid.  Each of the parties hereto shall be
entitled to specify another address by giving notice as aforesaid to the
other.

       

      10. Securities
Laws

       

      .  By
acceptance of this Warrant, the Holder represents to the Company that this
Warrant is being acquired for the Holder’s own account and for the purpose of
investment and not with a view to, or for sale in connection with, the
distribution thereof, nor with any present intention of distributing or selling
the Warrant or the Common Stock issuable upon exercise of the
Warrant.  The Holder acknowledges and agrees that this Warrant and the
Common Stock issuable upon exercise of this Warrant (if any) have not been (and
at the time of acquisition by the Holder, will not have been or will not be)
registered under the Securities Act or under the securities laws of any state,
in reliance upon certain exemptive provisions of such statutes.  The
Holder further recognizes and acknowledges that because this Warrant and the
Common Stock issuable upon exercise of this Warrant are unregistered, they may
not be eligible for resale, and may only be resold in the future pursuant to an
effective registration statement under the Securities Act and any applicable
state securities laws, or pursuant to a valid exemption from such registration
requirements.

       

      11. Legend

       

      .  Unless
theretofore registered for resale under the Securities Act, each certificate for
shares issued upon exercise of this Warrant shall bear the following or a
similar legend:

       

      The
shares represented by this certificate have not been registered under the
Securities Act of 1933, as amended, or any applicable state securities
laws.  The securities have been acquired for investment and may not be
resold, transferred or assigned in the absence of an effective registration
statement for the securities under the Securities Act of 1933, as amended, or an
opinion of counsel acceptable to the Company that such disposition is in
compliance with the Securities Act and any applicable state securities
laws.

       

      12. Miscellaneous

       

      .  This
Warrant and any terms hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party against which enforcement
of such change, waiver, discharge or termination is sought.  This
Warrant shall be governed by and construed in accordance with the laws of the
State of California; provided, however, that if any California law or laws
require or permit the application of the laws of any other jurisdiction to this
Warrant, such California law or laws shall be disregarded with the effect that
the remaining laws of the State of California shall nonetheless
apply.  The headings in this Warrant are for purposes of reference
only and shall not limit or otherwise affect any of the terms
hereof.  The invalidity or unenforceability of any provision hereof
shall in no way affect the validity or enforceability of any other
provision.


        
          
             


          

          
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      IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed on its
behalf by one of its officers thereunto duly authorized.

       

      Dated:  September  ___,
2008

       

       

      
        
          
            
              	 	
                      ETHOS ENVIRONMENTAL,
      INC.

                       

                       

                    	 	 	 
	By:	
                       

                    	 	 	 
	 	
                      Corey
      P. Schlossmann, President

                    	 	 	 
	 	
                       

                    	 	 	 


            

          

        

      


      
        
           


        

        
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