EX 10.5 Ethos Environmental, Inc. 061307


     

    
      

      

    

    

      ETHOS
        ENVIRONMENTAL, INC.

       

      AMENDED
        AND RESTATED REGISTRATION RIGHTS AGREEMENT

       

      This
        Amended and Restated Registration Rights Agreement (this “Agreement”) is entered
        into as of January 30, 2007 by and among Ethos Environmental, Inc., a
        Nevada corporation (the “Company”), National Advisors, Inc., a California
        corporation (“National”), the National Advisors, Inc. 401(k) Profit Sharing Plan
        (the “Plan”), the
        Suncoast Financial Mortgage Corporation Pension and Profit Sharing Plan
        (“Suncoast”), Scott, Andy, Mark, Inc., a California corporation (“SAM”) and Jon
        P. Rodrigue, as the nominee for himself, and certain of the Holders and others
        (“Rodrigue”) (National, the Plan, Suncoast, SAM and Rodrigue are each referred
        to in this Agreement as a “Holder” and collectively as the
“Holders”).

       

      WHEREAS,
        the Company entered into a Registration Rights Agreement as of January 30,
        2006 with ESSEL Enterprises, LLC (“ESSEL”), and Jon P. Rodrigue as the nominee
        for himself, Sheila G. Lipin, Patrick C. Shea, David Malcolm and Bud Chase
        (“Rodrigue”); and

       

      WHEREAS,
        ESSEL and Sheila Lipin assigned their interests under that January 30, 2006
        Registration Rights Agreement to National and the Plan, and Patrick C. Shea
        assigned his interest under that agreement to SAM; and

       

      WHEREAS,
        certain of the Holders hold a warrant to purchase 1,900,000 shares of the
        Company’s common stock (the “Warrant”); and

       

      WHEREAS,
        Rodrigue as a nominee of certain of the Holders and others holds an option
        to
        purchase one million shares of common stock of the Company under an Option
        granted to it by Neus Leben Stiftung (the “SO Agreement”) in connection with the
        loan of $4,750,000 to the Company; and

       

      WHEREAS,
        certain of the Holders have certain rights to acquire additional shares of
        the
        Company’s common stock under an Investor Rights Agreement with the Company and
        certain of its shareholders (the “Rights Agreement”); and

       

      WHEREAS,
        the January 30, 2006 Registration Rights Agreement provides that the Company
        and
        the holders of not less than two-thirds (2/3’s) of the Registrable Shares (as
        defined in that agreement) can enter into an amendment of that agreement
        which
        shall be binding upon all of the parties thereto and the Holders hold not
        less
        than two thirds of the Registrable Shares (as defined in that
        agreement);

       

      
        
          
          

        

        
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      NOW,
        THEREFORE, in consideration of the mutual agreements and covenants contained
        herein and for other good and valuable consideration, the receipt of which
        is
        hereby acknowledged, the Company and the Holders hereby agree that the January
        30, 2006 registration Rights Agreement shall be amended and restated in its
        entirety by this Agreement, which shall provide as follows:

       

      1.  Definitions.
        As used
        herein:

       

      (a)  The
        term
“Holder” means any person owning or having the right to acquire Registrable
        Shares or any assignee thereof in accordance with Section 2(k)
        hereof.

       

      (b)  The
        terms
“register,” “registered,” and “registration” refer to a registration effected by
        preparing and filing a registration statement in compliance with the Securities
        Act (as defined below) and the applicable rules and regulations thereunder,
        and
        the declaration or ordering of the effectiveness of such registration
        statement.

       

      (c)  For
        the
        purposes hereof, the term “Registrable Shares” means and includes (i) the
        shares of common stock of the Company issued or issuable under the Warrant,
        (ii) the shares of common stock of the Company transferred or transferable
        to Rodrigue upon his exercise of his option rights under the SO Agreement,
        (iii) any shares of common stock of the Company issued or issuable to
        Rodrigue under the Rights Agreement and (iv) other security which is issued
        as a result of a stock split, dividend or other distribution with respect
        to or
        in exchange for or in replacement of the shares referenced in (i), (ii) or
        (iii)
        above, excluding in all cases, however, any Registrable Shares sold by a
        person
        in a transaction in which his or her rights under Section 2 are not
        assigned.

       

      (d)  The
        term
“Ownership Percentage” means and includes, with respect to each Holder of
        Registrable Shares requesting inclusion of Registrable Shares in an offering
        pursuant to this Agreement, the number of Registrable Shares held by such
        Holder
        divided by the aggregate of (i) all Registrable Shares held by all Holders
        requesting registration in such offering and (ii) the total number of all
        other securities entitled to registration pursuant to any agreement with
        the
        Company approved by the Board of Directors and held by others participating
        in
        the underwriting.

       

      (e)  The
        term
“Securities Act” means the Securities Act of 1933, as amended.

       

      
        
          
          

        

        
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      (f)  The
        term
“Public Offering” means and includes the closing of an underwritten public
        offering pursuant to an effective registration statement under the Securities
        Act, covering the offer and sale of securities to the general public for
        the
        account of the Company.

       

      2.  Registration
        Rights.

       

      (a)  “Piggy
        Back” Registration.
        If at
        any time the Company shall determine to register under the Securities Act
        (including pursuant to a demand of any stockholder of the Company exercising
        registration rights) any of its common stock held by a Holder (other than
        a
        registration relating solely to the sale of securities to participants in
        a
        Company employee benefits plan, a registration on any form which does not
        include substantially the same information (except as to the selling Holders)
        as
        would be required to be included in a registration statement covering the
        sale
        of the Registrable Shares or a registration in which the only common stock
        being
        registered is common stock issuable upon conversion of debt securities which
        are
        also being registered), it shall send to each Holder written notice of such
        determination and, if within twenty (20) days after receipt of such notice,
        such
        Holder shall so request in writing, the Company shall include in such
        registration statement all or any part of the Registrable Shares that such
        Holder requests to be registered. If any Holder disapproves of the terms
        of any
        underwriting referred to in this section, he may elect to withdraw therefrom
        by
        written notice to the Company and the underwriter. Notwithstanding the
        foregoing, if, in connection with any offering involving an underwriting
        of
        common stock to be issued by the Company, the managing underwriter shall
        impose
        a limitation on the number of shares of common stock included in any such
        registration statement because, in such underwriter’s judgment, such limitation
        is necessary based on market conditions: (a) if the registration statement
        is for the Initial Public Offering of the Company’s securities, the Company may
        exclude, to the extent so advised by the underwriters, the Registrable Shares
        from the underwriting; provided, however, that if the underwriters do not
        entirely exclude the Registrable Shares from such Initial Public Offering,
        the
        Company shall be obligated to include in such registration statement, with
        respect to the requesting Holder, an amount of Registrable Shares equal to
        the
        product of (i) the number of Registrable Shares that remain available for
        registration after the underwriter’s cut back and (ii) such Holder’s
        Ownership Percentage, as that term is defined in Section 1(d); and (b) if
        the registration statement is not for the Initial Public Offering of the
        Company’s securities, the Company shall be obligated to include in such
        registration statement, with respect to the requesting Holder, an amount
        of
        Registrable Shares equal to the product of (i) the number of Registrable
        Shares that remain available for registration after the underwriter’s cut back
        and (ii) such Holder’s Ownership Percentage, as that term is defined in
        Section 1(d); provided, however, that the aggregate value of Registrable
        Shares to be included in such registration may not be so reduced to less
        than
        twenty percent (20%) of the total value of all securities included in such
        registration. If any Holder disapproves of the terms of any underwriting
        referred to in this section, he may elect to withdraw therefrom by written
        notice to the Company and the underwriter. No incidental right under this
        Section 2(a) shall be construed to limit any registration required under
        Section 2(b).

       

      
        
          
          

        

        
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      (b)  Registration
        on Form S-3.
        This
        provision is applicable once the Company commences a Public Offering. Thereupon,
        in case the Company shall receive from one or more Holder or Holders of at
        least
        twenty percent (20%) of the Registrable Shares a written request or requests
        that the Company effect a registration on Form S-3 (or any similar form
        promulgated by the Securities and Exchange Commission) and any related
        qualification or compliance with respect to all or a part of the Registrable
        Securities owned by such Holder or Holders, the Company will:

       

      (i)  within
        ten (10) days of the receipt after such notice give written notice of the
        proposed registration, and any related qualification or compliance, to all
        other
        Holders; and

       

      (ii)  as
        soon
        as practicable, effect such registration and all such qualifications and
        compliances as may be so requested and as would permit or facilitate the
        sale
        and distribution of all or such portion of such Holder’s or Holders’ Registrable
        Shares as are specified in such request, together with all or such portion
        of
        the Registrable Shares of any other Holder or Holders joining in such request
        as
        are specified in a written request given within twenty (20) days after receipt
        of such written notice from the Company; provided, however, that the Company
        shall not be obligated to effect any such registration, qualification or
        compliance, pursuant to this Section 2(b): (1) if Form S-3 or a
        similar form is not available for such offering by the Holders; (2) if the
        Company shall furnish to the Holders a certificate signed by the President
        of
        the Company stating that in the good faith judgment of the Board of Directors
        of
        the Company, it would be seriously detrimental to the Company and its
        stockholders for such Form S-3 Registration to be effected at such time,
        in
        which event the Company shall have the right to defer the filing of the Form
        S-3
        registration statement for a period of not more than sixty (60) days after
        receipt of the request of the Holder or Holders under this Section 2(b);
        provided, however, that the Company shall not utilize this right more than
        once
        in any twelve (12) month period; (3) if the Holders are otherwise eligible
        to sell all of their Registrable Shares within a 90 day period under Rule
        144 of
        the Securities Act; (4) if such Form S-3 Registration covers an offering of
        less than $500,000 of Registrable Shares, or (5) if the Company has, within
        the twelve (12) month period preceding the date of such request, already
        effected two registrations on Form S-3 for the Holders pursuant to this
        Section 2(b); (6) in any particular jurisdiction in which the Company
        would be required to qualify to do business or to execute a general consent
        to
        service of process in effecting such registration, qualification or compliance;
        or (7) the Company has already effected three (3) registrations on Form S-3
        for the Holders pursuant to this Section 2(b).

       

      (iii)  Subject
        to the foregoing, the Company shall file a registration statement covering
        the
        Registrable Shares and other securities so requested to be registered as
        soon as
        practicable after receipt of the request or requests of the Holders.


       

      (c)  Effectiveness.

       

      (i)  The
        Company shall use its reasonable best efforts to maintain the effectiveness
        for
        up to nine (9) months of any registration statement it files pursuant to
        which
        any of the Registrable Shares are being offered; provided, however, that:
        (i) such nine-month period shall be extended for a period of time equal to
        the period the Holder refrains from selling any securities included in such
        registration at the request of an underwriter of common stock (or other
        securities) of the Company and (ii) in the case of any registration of
        Registrable Shares on Form S-3 or any similar form which are intended to
        be
        offered on a continuous or delayed basis, such nine-month period shall be
        extended, if necessary, to keep the registration statement effective until
        the
        earlier to occur of (A) twenty-four (24) months following the effectiveness
        of the registration statement, or (B) the date that all such Registrable
        Shares are sold, provided that Rule 415, or any successor rule under the
        Act, permits an offering on a continuous or delayed basis.

       

      (ii)  The
        Company will from time to time amend or supplement such registration statement
        it files and the prospectus contained therein as and to the extent necessary
        to
        comply with the Securities Act and any applicable state securities statute
        or
        regulation.

       

      
        
          
          

        

        
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      (d)  Indemnification.

       

      (i)  Indemnification
        of Holders.
        In the
        event that the Company registers any of the Registrable Shares under the
        Securities Act, the Company will indemnify and hold harmless each Holder
        and
        each underwriter of the Registrable Shares so registered (including any broker
        or dealer through which such shares may be sold) and each person, if any, who
        controls such Holder or any such underwriter within the meaning of
        Section 15 of the Securities Act from and against any and all losses,
        claims, damages, expenses or liabilities (or any action in respect thereof),
        joint or several, to which they or any of them become subject under the
        Securities Act or under any other statute or at common law or otherwise,
        and,
        except as hereinafter provided, will reimburse each such Holder, each such
        underwriter and each such controlling person, if any, for any legal or other
        expenses reasonably incurred by them or any of them, as such expenses are
        incurred, in connection with investigating or defending any actions whether
        or
        not resulting in any liability, insofar as such losses, claims, damages,
        expenses, liabilities or actions arise out of or are based upon (i) any
        untrue statement or alleged untrue statement of a material fact contained
        in the
        registration statement, in any preliminary or amended preliminary prospectus
        or
        in the prospectus (or the registration statement or prospectus as from time
        to
        time amended or supplemented by the Company); (ii) arise out of or are
        based upon the omission or alleged omission to state therein a material fact
        required to be stated therein or necessary in order to make the statements
        therein not misleading; or (iii) any violation by the Company of the
        Securities Act, the Securities Exchange Act of 1934, as amended (the “Exchange
        Act”), a state securities law or any rule or regulation under the Securities
        Act, the Exchange Act or any state securities law; provided, however, that
        the
        indemnity contained in this Section 2(d)(i) will not apply where such
        untrue statement or omission was made in such registration statement,
        preliminary or amended, preliminary prospectus or prospectus in reliance
        upon
        and in conformity with information furnished in writing to the Company in
        connection therewith by such Holder of Registrable Shares, any such underwriter
        or any such controlling person expressly for use therein. Promptly after
        receipt
        by any Holder of Registrable Shares, any underwriter or any controlling person
        of notice of the commencement of any action in respect of which indemnity
        may be
        sought against the Company, such Holder of Registrable Shares, or such
        underwriter or such controlling person, as the case may be, will notify the
        Company in writing of the commencement thereof, and, subject to the provisions
        hereinafter stated, the Company shall assume the defense of such action
        (including the employment of counsel, who shall be counsel reasonably
        satisfactory to such Holder of Registrable Shares, such underwriter or such
        controlling person, as the case may be), and the payment of expenses insofar
        as
        such action shall relate to any alleged liability in respect of which indemnity
        may be sought against the Company. Such Holder of Registrable Shares, any
        such
        underwriter or any such controlling person shall have the right to employ
        separate counsel in any such action and to participate in the defense thereof
        in
        the event the representation of such Holder, underwriter or controlling person
        by counsel retained by or on the behalf of the Company would be inappropriate
        due to conflicts of interest between any such person and any other party
        represented by such counsel in such proceeding or action, in which case the
        Company shall pay, as incurred, the fees and expenses of such separate counsel.
        The Company shall not be liable to indemnify any person under this Section
        2(d)(i) for any settlement of any such action effected without the Company’s
        consent (which consent shall not be unreasonably withheld). The Company shall
        not, except with the approval of each party being indemnified under this
        Section
        2(d)(i) (which approval will not be unreasonably withheld), consent to entry
        of
        any judgment or enter into any settlement that does not include as an
        unconditional term thereof the giving by the claimant or plaintiff to the
        parties being so indemnified of a release from all liability in respect to
        such
        claim or litigation.

       

      
        
          
          

        

        
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      (ii)  Indemnification
        of Company.
        In the
        event that the Company registers any of the Registrable Shares under the
        Securities Act, each Holder of the Registrable Shares so registered will
        indemnify and hold harmless the Company, each of its directors, each of its
        officers who have signed the registration statement, each underwriter of
        the
        Registrable Shares so registered (including any broker or dealer through
        which
        any of such shares may be sold) and each person, if any, who controls the
        Company within the meaning of Section 15 of the Securities Act from and against
        any and all losses, claims, damages, expenses or liabilities (or any action
        in
        respect thereof), joint or several, to which they or any of them may become
        subject under the Securities Act or under any other statute or at common
        law or
        otherwise, and, except as hereinafter provided, will reimburse the Company
        and
        each such director, officer, underwriter or controlling person for any legal
        or
        other expenses reasonably incurred by them or any of them, as such expenses
        are
        incurred, in connection with investigating or defending any actions whether
        or
        not resulting in any liability, insofar as such losses, claims, damages,
        expenses, liabilities or actions arise out of or are based upon any untrue
        statement or alleged untrue statement of a material fact contained in the
        registration statement, in any preliminary or amended preliminary prospectus
        or
        in the prospectus (or the registration statement or prospectus as from time
        to
        time amended or supplemented) or arise out of or are based upon the omission
        or
        alleged omission to state therein a material fact required to be stated therein
        or necessary in order to make the statements therein not misleading, but
        only
        insofar as any such statement or omission was made in reliance upon and in
        conformity with information furnished in writing to the Company in connection
        therewith by such Holder, expressly for use therein; provided, however, that
        such Holder’s obligations hereunder shall be limited to an amount equal to the
        proceeds to such Holder of the Registrable Shares sold in such registration.
        Promptly after receipt of notice of the commencement of any action in respect
        of
        which indemnity may be sought against such Holder of Registrable Shares,
        the
        Company will notify such Holder of Registrable Shares in writing of the
        commencement thereof, and such Holder of Registrable Shares shall, subject
        to
        the provisions hereinafter stated, assume the defense of such action (including
        the employment of counsel, who shall be counsel satisfactory to the Company)
        and
        the payment of expenses insofar as such action shall relate to the alleged
        liability in respect of which indemnity may be sought against such Holder
        of
        Registrable Shares. The Company and each such director, officer, underwriter
        or
        controlling person shall have the right to employ separate counsel in any
        such
        action and to participate in the defense thereof in the event the representation
        of the Company, any of its officers or directors or any underwriter or
        controlling person by counsel retained by or on the behalf of such Holder
        would
        be inappropriate due to conflicts of interest between any such person and
        any
        other party represented by such counsel in such proceeding or action, in
        which
        case such Holder shall pay, as incurred, the fees and expenses of such separate
        counsel. Notwithstanding the two preceding sentences, if the action is one
        in
        which the Company may be obligated to indemnify any Holder of Registrable
        Shares
        pursuant to Section 2(d), the Company shall have the right to assume the
        defense of such action, subject to the right of such Holders to participate
        therein as permitted by Section 2(d). Such Holder shall not be liable to
        indemnify any person for any settlement of any such action effected without
        such
        Holder’s consent (which consent shall not be unreasonably withheld). Such Holder
        shall not, except with the approval of the Company (which approval shall
        not be
        unreasonably withheld), consent to entry of any judgment or enter into any
        settlement that does not include as an unconditional term thereof the giving
        by
        the claimant or plaintiff to the party being so indemnified of a release
        from
        all liability in respect to such claim or litigation.

       

      
        
          
          

        

        
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      (e)  Contribution.
        If the
        indemnification provided for in Section 2(d) is held by a court of
        competent jurisdiction to be unavailable to an indemnified party with respect
        to
        any loss, liability, claim, damage, or expense referred to therein, then
        the
        indemnifying party, in lieu of indemnifying such indemnified party hereunder,
        shall contribute to the amount paid or payable by such indemnified party
        as a
        result of such loss, liability, claim, damage, or expense in such proportion
        as
        is appropriate to reflect the relative fault of the indemnifying party on
        the
        one hand and of the indemnified party on the other in connection with the
        statements or omissions that resulted in such loss, liability, claim, damage,
        or
        expense as well as any other relevant equitable considerations. The relative
        fault of the indemnifying party and of the indemnified party shall be determined
        by reference to, among other things, whether the untrue or alleged untrue
        statement of a material fact or the omission to state a material fact relates
        to
        information supplied by the indemnifying party or by the indemnified party
        and
        the parties’ relative intent, knowledge, access to information, and opportunity
        to correct or prevent such statement or omission.

       

      (f)  Exchange
        Act Registration.
        With a
        view to making available to the Holders the benefits of Rule 144 promulgated
        under the Act and any other rule or regulation of the Securities Exchange
        Commission (the “SEC”) that may at any time permit a Holder to sell securities
        of the Company to the public without registration or pursuant to a registration
        on Form S-3, the Company agrees to:

       

      (i)  make
        and
        keep public information available, as those terms are understood and defined
        in
        SEC Rule 144, at all times after ninety (90) days after the effective date
        of the first registration statement filed by the Company for the offering
        of its
        securities to the general public;

       

      (ii)  take
        such
        reasonable action, including the voluntary registration of its common stock
        under Section 12 of the 1934 Act, as is necessary to enable the Holders to
        utilize Form S-3 or a similar form for the sale of their Registrable Shares,
        at
        all times after the effective date of the first registration statement filed
        by
        the Company for the offering of its securities to the general
        public;

       

      (iii)  file
        on a
        timely basis with the Securities and Exchange Commission all information
        that
        the Commission may require under either of Section 13 or Section 15(d)
        of the Exchange Act and, so long as it is required to file such information,
        take all action that may be required as a condition to the availability of
        Rule 144 under the Securities Act (or any successor exemptive rule
        hereinafter in effect) with respect to the Company’s common stock;
        and

       

      (iv)  furnish
        to any Holder forthwith upon request (i) a written statement by the Company
        as to its compliance with the reporting requirements of Rule 144,
        (ii) a copy of the most recent annual or quarterly report of the Company as
        filed with the Securities and Exchange Commission, and (iii) any other
        reports and documents that a Holder may reasonably request in order to avail
        itself of any rule or regulation of the Securities and Exchange Commission
        allowing a Holder to sell any such Registrable Shares without
        registration.

       

      (g)  Further
        Obligations of the Company.
        Whenever the Company is required hereunder to register Registrable Shares,
        it
        agrees that it shall also do the following:

       

      (i)  Furnish
        to each selling Holder such copies of each preliminary and final prospectus
        and
        any other documents that such Holder may reasonably request to facilitate
        the
        public offering of its Registrable Shares;

       

      (ii)  Use
        its
        reasonable best efforts to register or qualify the Registrable Shares to
        be
        registered pursuant to this Agreement under the applicable securities or
“blue
        sky” laws of such jurisdictions as any selling Holder may reasonably request;
        provided, however, that the Company shall not be obligated to qualify to
        do
        business in any jurisdiction where it is not then so qualified or to take
        any
        action that would subject it to the service of process in suits other than
        those
        arising out of the offer or sale of the securities covered by the registration
        statement in any jurisdiction where it is not then so subject;

       

      
        
          
          

        

        
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      (iii)  Notify
        each Holder of Registrable Shares covered by such registration statement
        at any
        time when a prospectus relating thereto is required to be delivered under
        the
        Act of the happening of any event as a result of which the prospectus included
        in such registration statement, as then in effect, includes an untrue statement
        of a material fact or omits to state a material fact required to be stated
        therein or necessary to make the statements therein not misleading in the
        light
        of the circumstances then existing;

       

      (iv)  Use
        its
        reasonable best efforts to cause all such Registrable Shares registered
        hereunder to be listed on each securities exchange on which similar securities
        issued by the Company are then listed;

       

      (v)  Provide
        a
        transfer agent and registrar for all Registrable Shares registered pursuant
        hereunder and a CUSIP number for all such Registrable Shares, in each case
        not
        later than the effective date of such registration;

       

      (vi)  In
        the
        event of any underwritten public offering, enter into and perform its
        obligations under an underwriting agreement, in usual and customary form,
        with
        the managing underwriter of such offering. Each Holder participating in such
        underwriting shall also enter into and perform its obligations under such
        an
        agreement;

       

      (vii)  Furnish,
        at the request of any Holder requesting registration of Registrable Shares
        pursuant to this Section 2, on the date that such Registrable Shares are
        delivered to the underwriters for sale in connection with a registration
        pursuant to this Section 2, if such securities are being sold through
        underwriters:

       

      (1)  an
        opinion, dated such date, of the counsel representing the Company for the
        purposes of such registration, in form and substance as is customarily given
        to
        underwriters in an underwritten public offering, addressed to the underwriters,
        if any, and to the Holders requesting registration of Registrable Shares;
        and

       

      
        
          
          

        

        
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      (2)  “comfort”
        letters signed by the Company’s independent public accountants who have examined
        and reported on the Company’s financial statements included in the registration
        statement, to the extent permitted by the standards of the American Institute
        of
        Certified Public Accountants, covering substantially the same matters with
        respect to the registration statement (and the prospectus included therein)
        and
        (in the case of the accountants’ “comfort” letters) with respect to events
        subsequent to the date of the financial statements, as are customarily covered
        in opinions of issuer’s counsel and in accountants’ “comfort” letters delivered
        to the underwriters in underwritten public offerings of securities, but only
        if
        and to the extent that the Company is required to deliver or cause the delivery
        of such opinion or “comfort” letters to the underwriters in an underwritten
        public offering of securities;

       

      (viii)  Permit
        each selling Holder or his counsel or other representatives to inspect and
        copy
        such corporate documents and records as may reasonably be requested by them,
        subject to appropriate confidentiality restrictions; and

       

      (ix)  Furnish
        to each selling Holder, upon request, a copy of all documents filed and all
        correspondence from or to the Securities and Exchange Commission in connection
        with any such offering unless confidential treatment of such information
        has
        been requested of the Securities and Exchange Commission.

       

      (h)  Obligations
        of the Holders.
        In
        connection with the registration of the Registrable Shares, the Holders shall
        have the following obligations:

       

      (i)  It
        shall
        be a condition precedent to the obligations of the Company to complete the
        registration pursuant to this Agreement with respect to the Registrable Shares
        of a particular Holder that such Holder shall furnish to the Company such
        information regarding itself, the Registrable Shares held by it, and the
        intended method of disposition of the Registrable Shares held by it, as shall
        be
        reasonably required to effect the registration of such Registrable Shares
        and
        shall execute such documents in connection with such registration as the
        Company
        may reasonably request. At least twenty (20) days prior to the first anticipated
        filing date of the registration statement, the Company shall notify each
        Holder
        of the information the Company requires from each such Holder (the “Requested
        Information”) if such Holder has any Registrable Shares included in the
        registration statement. If at least two (2) business days prior to the filing
        date the Company has not received the Requested Information from a Holder
        (a
“Non-Responsive Holder”), then the Company may file the registration statement
        without including Registrable Shares of such Non-Responsive Holder;

       

      (ii)  Each
        Holder, by such Holder’s acceptance of the Registrable Shares, agrees to
        cooperate with the Company as reasonably requested by the Company in connection
        with the preparation and filing of the registration statement hereunder,
        unless
        such Holder has notified the Company in writing of such Holder’s election to
        exclude all of such Holder’s Registrable Shares from the registration statement;
        and

       

      (iii)  Each
        Holder agrees that, upon receipt of any notice from the Company of the happening
        of any event of the kind described in Section 2(g)(iii), above, such Holder
        will immediately discontinue disposition of Registrable Shares pursuant to
        the
        registration statement covering such Registrable Shares until such Holder’s
        receipt of copies of the supplemented or amended prospectus and, if so directed
        by the Company, such Holder shall deliver to the Company (at the expense
        of the
        Company) or destroy (and deliver to the Company a certificate of destruction)
        all copies in such Holder’s possession, of the prospectus covering such
        Registrable Shares current at the time of receipt of such notice; provided
        that
        such Holder may retain one copy of each such prospectus for its
        files.

       

      (i)  Expenses.
        In the
        case of a registration under Sections 2(a) or 2(b), the Company shall bear
        all costs and expenses of each such registration, including, but not limited
        to,
        printing, legal and accounting expenses, Securities and Exchange Commission
        filing fees and “blue sky” fees and expenses; provided, however, that the
        Company shall have no obligation to pay or otherwise bear (i) any portion
        of the fees or disbursements of more than one counsel for the Holders in
        connection with the registration of their Registrable Shares, which in no
        event
        shall exceed a reasonable fee, (ii) any portion of the underwriter’s
        commissions or discounts attributable to the Registrable Shares being offered
        and sold by the Holders of Registrable Shares, or (iii) any of such
        expenses if the payment of such expenses by the Company is prohibited by
        the
        laws of a state in which such offering is qualified and only to the extent
        so
        prohibited.

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      (j)  Transfer
        of Registration Rights.
        The
        registration rights of a Holder of Registrable Shares under this Agreement
        may
        be transferred as set forth below (provided (1) the transferee is bound by
        the terms of this Agreement and (2) the Company is given written notice
        prior to such transfer) to: (i) any partner or affiliate of a Holder;
        (ii) in the case of an individual, any member of the immediate family of
        such individual or to any trust for the benefit of the individual or any
        such
        family member or members; or (iii) any other transferee which receives the
        lesser of (A) at least 50,000 Registrable Shares, or (B) all of the
        Registrable Shares held by the Holder.

       

      (k)  No
        Superior Rights.
        The
        Company hereby warrants and represents to Essel that there are no other
        registration rights outstanding granted by the Company to any person or entity.
        Furthermore, the Company will not grant registration rights to any person
        or
        entity that are superior to the rights granted hereunder without first obtaining
        the prior written consent of the Holders of a majority of the Registrable
        Shares. In the event that the Company grants rights superior to the rights
        granted hereunder after obtaining such written consent, any superior rights
        granted to other persons or entities shall apply to the Holders and shall
        be
        deemed to be incorporated into this Agreement. The Company may grant subordinate
        and piggy-back registration rights to the rights granted hereunder without
        any
        such consent.

       

      (l)  Market
        Stand-Off Agreement.
        Provided that all Holders are treated equally and all officers and directors
        of
        the Company are also so bound, no Holder shall, to the extent requested by
        any
        managing underwriter of the Company, sell or otherwise transfer or dispose
        of
        (other than to donees who agree to be similarly bound) any Registrable Shares
        during a period (the “Stand-Off Period”) (i) 180 days following the
        effective date of a registration statement of the Company’s Initial Public
        Offering filed under the Securities Act, and (ii) 120 days following the
        effective date of a registration statement of any secondary offering of the
        Company under the Securities Act, (or in each case such shorter period as
        the
        Company or managing underwriter may authorize), and except in each case,
        for
        securities sold as part of the offering covered by such registration statement
        in accordance with the provisions of this Agreement. In order to enforce
        the
        foregoing covenant, the Company may impose stock transfer restrictions with
        respect to the Registrable Shares of each Holder until the end of the Stand-Off
        Period. Notwithstanding the foregoing, the obligations described in this
        Section 2(l) shall not apply to a registration relating solely to employee
        benefit plans on Form S-8 or similar forms which may be promulgated in the
        future, or a registration relating solely to an SEC Rule 145 transaction
        on Form
        S-4 or similar forms which may be promulgated in the future.

       

      (m)  Termination
        of Registration Rights.
        The
        obligations of the Company to register any Holder’s Registrable Shares pursuant
        to this Section 2 shall terminate five (5) years after the Company’s
        Initial Public Offering with aggregate proceeds of at least $20 million at
        a
        public offering price of at least ten dollars per share or, with respect
        to any
        Holder, at such time as all of the Registrable Securities of such Holder
        may be
        sold within a three month period under Securities and Exchange Commission
        Rule
        144.

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      3.  Assignability.
        Subject
        to the provisions of Section 2(j), this Agreement shall be binding upon and
        inure to the benefit of the respective heirs, successors and assigns of the
        parties hereto.

       

      4.  Law.
        This
        Agreement 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
        Agreement, such California law or laws shall be disregarded with the effect
        that
        the remaining laws of the State of California shall nonetheless
        apply.

       

      5.  Amendment.
        Any
        modification, amendment, or waiver of this Agreement or any provision hereof,
        either retroactively or prospectively, shall be in writing and executed by
        the
        Company and the Holders of not less than two-thirds (2/3’s) of the Registrable
        Shares which shall be binding upon all of the parties hereto; provided however,
        that no such modification, amendment or waiver shall reduce the aforesaid
        percentage of Registrable Shares without the consent of the record or beneficial
        holders of no less than seventy-five percent (75%) of the Registrable
        Shares.

       

      6.  Counterparts.
        This
        Agreement may be executed in any number of counterparts, each of which shall
        be
        an original, but all of which together shall constitute one
        instrument.

       

      7.  Notice.
        Any
        notice required or permitted to be given under this Agreement shall be in
        writing and either shall be mailed by certified mail, postage prepaid, return
        receipt requested, or sent by overnight courier service, or personally delivered
        to a representative of the receiving party, or sent by telecopy. Notices
        shall
        mailed, sent, delivered, addressed as follows or to such other address as
        a
        party may designate by proper notice hereunder:

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

         

      

      
        	If to any Holder:    	
                National Advisors, Inc.

                3712 Riviera Drive

                San Diego, CA 92109

                Attn: Mr. Dennis Schmucker

                Facsimile: (619) 531-0969

              
	 	
              
	with a copy to:	
                Greenberg Traurig LLP

                650 Town Center Drive,

                17th Floor

                Costa Mesa, California 92626

                Attn: John j. Giovannone, Esq.

                Facsimile: (714) 708-6501

              
	 	 
	If to the Company:	
                Ethos Environmental, Inc.

                6800 Gateway Park

                San Diego, California 92154

                Attn: Mr. Enrique de Vilmorin

                Facsimile (619) 575-9300

              
	 	 
	with a copy to:	
                Law Offices of Lawrence H. Davidson

                537 Newport Center Drive, Suite 537

                Newport Beach, Californai 92660

                Attn: Lawrence H. Davidson, Esq.

                Facsimile: (949) 500-6275

              
	 	 
	with a copy to:	
                SteadyLaw Group LLP

                501 W. Broadway, Suite 800

                San Diego, California 92101

                Attn: Luis Carrillo, Esq.

                Facsimile: (619)-330-1888

              


      

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      Any
        communication so addressed and mailed shall be deemed to be given on the
        earliest of (a) when actually delivered, (b) on the first business day
        after deposit with an overnight courier service, or (c) on the third
        business day after deposit in the United States mail, postage prepaid, in
        each
        case to the address of the intended addressee, and any communication so
        delivered in person shall be deemed to be given when receipted for by, or
        actually received by, Essel or the Company, as the case may be. If given
        by
        telecopy, a notice shall be deemed given and received when the telecopy is
        transmitted to the party’s telecopy number and confirmation of complete receipt
        is received by the transmitting party during normal business hours or on
        the
        next business day if not confirmed during normal business hours. Any party
        may
        designate a change of address by written notice to the other by giving at
        least
        ten (10) days prior written notice of such change of address. 

       

      8.  Severability.
        In
        case
        any provision of this Agreement shall be invalid, illegal, or unenforceable,
        it
        shall, to the extent practicable, be modified so as to make it valid, legal
        and
        enforceable and to retain as nearly as practicable the intent of the parties;
        and the validity, legality, and enforceability of the remaining provisions
        shall
        not in any way be affected or impaired thereby.

       

      9.  Entire
        Agreement.
        This
        Agreement constitutes the entire agreement and understanding of the parties
        with
        respect to the matters contemplated herein. This Agreement supersedes any
        and
        all prior agreements and understandings between the parties as to the subject
        matter of this Agreement. Accordingly, this Agreement may not be contradicted
        by
        evidence of prior, contemporaneous or subsequent oral agreements of the parties.
        There are no unwritten oral agreements between the parties.

       

      10.  Headings.
        The
        headings in this Agreement are for purposes of reference only and shall not
        limit or otherwise affect any of the terms hereof.

       

      IN
        WITNESS WHEREOF, the parties hereto have caused this Registration Rights
        Agreement to be executed by their respective officers thereunto duly authorized,
        as of the date first above written.

       

      
        	 	
                 

                “COMPANY”

                ETHOS
                  ENVIRONMENTAL, INC.

                By:      

                Its:      

              
	 	
                 

                “NATIONAL”

                NATIONAL
                  ADVISORS, INC.

                By:      

                Its:      

              
	 	
                 

                Jon
                  P. Rodrigue, as nominee