Document:

ex10-4.htm

     

    
      

      

    

    
      SETTLEMENT
AGREEMENT

      AND

      
        MUTUAL
GENERAL RELEASE

      

      

      This
Settlement Agreement and Mutual General Release (hereinafter referred to as the
“Settlement Agreement”), is effective as of January ___, 2009, and is made by
and between Ethos Environmental, Inc., a Nevada corporation (the “Company”) and
Dick F. Chase, an individual (“Chase”). Ethos and Chase shall hereinafter
collectively be referred to as “the Parties.”  This Agreement is made
in consideration of the following facts and recitals:

      

      BACKGROUND
INFORMATION

      

      A.           Whereas,
on March 31, 2008, the Company issued a Promissory Note to Chase in the
principal amount of $300,000 and bearing interest at 12% per annum, payable
monthly in arrears (the “2008 Note”). The 2008 Note is due in full on March 31,
2009.

      

      B.           Whereas,
the Company is currently offering $1,000,000 of 12% Convertible Debentures,
pursuant to a private placement (the “Private Placement”). The Private Placement
is comprised of 20 Units (each a “Unit”) offered at $50,000 per Unit, each Units
includes the 12% Convertible Debenture, a Common Stock Purchase Warrant for the
purchase of 100,000 shares of the Company’s Common Stock at $0.25 per share and
33,000 shares of the Company’s Common Stock are included as incentive shares for
the purchase of each Unit.

      

      C.           Whereas,
the Parties wish to: (i) amend the 2008 Note and convert $50,000 of the
principal amount due under the 2008 Note into one Unit under the Private
Placement; (ii) the Company and Chase shall enter into those documents
evidencing the Private Placement, including a Securities Purchase
Agreement,  Convertible Debenture, Common Stock Purchase Warrant and
Security Agreement; (iii) the Company shall issue a new note in the principal
amount of $250,000 bearing interest at 12% per annum, due in full on or before
December 31, 2009 (the “New Note”); and, the New Note shall provide that Chase
shall have the right to convert any amounts due under the New Note into
additional Units based on each new Unit purchased by entities or individuals
introduced to or referred by Chase to the Company.

      

      D.           Whereas,
as a result of negotiations between the Parties the foregoing resolution is
deemed by each Party to be fair and equitable, and by this Settlement Agreement
wish to compromise, resolve, waive and release any and all claims, known or
unknown, which exist or may exist between them today, except for any claims that
are intended to survive this Settlement Agreement as set forth herein, on the
terms set forth herein.

      

      AGREEMENT

      

      Now,
wherefore, for good and valuable consideration, the Parties hereto agree as
follows:

      

      1.           Mutual General
Release.

      

       

      1.1           Release
By the Company.  Except as to such rights or claims as may be
created by this Settlement Agreement or any agreement executed by the Parties
pursuant to this Settlement Agreement, and subject to and conditioned upon the
performance and completion of the undertakings by Chase as set forth in Section
2, below, the Company hereby discharges and releases Chase, and his assigns,
agents, representatives, attorneys, predecessors and successors in interest,
from any and all claims, demands, obligations, or causes of action heretofore or
hereafter arising out of, connected with, or incidental to Chase’s relationship
with the Company.

       

      
        
           

        

        
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      1.2           Release
by Chase.  Except as to such rights or claims as may be created
by this Settlement Agreement or any agreement executed by the Parties pursuant
to this Settlement Agreement, and subject to and conditioned upon the
performance and completion of the undertakings by Company as set forth in
Section 2, below, Chase hereby discharges and releases the Company, and the
Company’s current and former officers, directors, employees, shareholders, note
holders, attorneys, assigns, agents, representatives, predecessors and
successors in interest, from any and all claims, demands, obligations, or causes
of action heretofore or hereafter arising out of, connected with, or incidental
to Chase’s relationship with the Company prior to the effective date
hereof.

       

       

      1.3           Release
of Unknown Claims.   The Parties
acknowledge and agree that this release applies to all claims for any injuries,
damages, losses or claims, whether known or unknown, foreseen or unforeseen,
patent or latent, that the Parties hereto now have or may acquire, and each
Party hereto hereby waives application of California Civil Code
Section 1542, and any and all provisions, rights and benefits conferred by any
law of any state or territory of te United States, or principle of common law,
which is similar, comparable or equivalent to California Civil Code Section
1542.

       

      (a) Each
Party hereto certifies that such party is aware of the provisions of California Civil Code
Section 1542 which states:

      

      A
GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH
IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH
THE DEBTOR.

      

      (b) The
Parties understand and acknowledge the significance and consequences of the
waiver of California
Civil Code Section 1542; and that this release and waiver of California Civil Code
1542 is a significant material part of the consideration of entering into this
Settlement Agreement. The Parties expressly
acknowledge that this Settlement Agreement except for ongoing obligations set
forth in the attached agreements, is intended to include a release, without
limitation, of all claims, and acknowledges that the execution of this
Settlement Agreement is entered into for the purpose of extinguishing any such
claim or claims.

      

      (c) The
Parties further understand and acknowledge that if any party hereto, or such
Parties respective officers, directors, employees, shareholders, attorneys,
assigns, agents, representatives, predecessors and successors in interest,
eventually discover additional damages or claims arising out of the facts and
claims released herein, that Party will not be able to make any claim for any
such losses or damages.  Furthermore, the Parties acknowledge that
they intend these consequences even as to claims for losses or damages that may
exist as of the date of this Settlement Agreement but which the Parties hereto
do not presently know to exist, and which if known, would have materially
affected the Party’s decision to execute this Settlement Agreement.

      

       

      1.4           The
Parties understand and agree the word “claims” to include all actions, claims,
and grievances, whether actual or potential, known or unknown, and specifically
but not exclusively all claims arising and relating directly or indirectly out
of any of the facts, acts, omissions, events, damages and/or injuries arising
from or relating in any way to any litigation which is pending between the
Parties, that have arisen, or may arise in the future, or from or relating
directly or indirectly from any and all events or relationships between the
Parties.  All such claims (including related fines, penalties,
interest, attorneys’ fees and costs, rights of injunctive relief) are forever
barred by this Agreement and without regard to whether those claims are based on
any alleged breach of a duty arising in a statute, contract, or tort; any
alleged unlawful act, including, without limitation, fraud and deceit, negligent
misrepresentation, conversion of labor, breach of partnership, intentional
interference with business contract, breach of contract; or any other claim or
cause of action; and regardless of the forum in which it might be
brought.

       

      
        
           

        

        
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      2.           Agreements
and Undertakings of the Parties. Concurrently with the execution of this
Settlement Agreement, and as a conditioned precedent to the settlement of the
Parties contemplated by this Settlement Agreement, the Parties shall enter into
the following agreements and undertakings:

      

      2.1           Execution
of Private Placement Documents.  The Company and
Chase shall enter into those certain Agreements comprising the Company’s Private
Placement, including a Securities Purchase Agreement attached hereto as Exhibit 2.1.1, the
Convertible Promissory Note attached hereto as Exhibit 2.1.2, the
Common Stock Purchase Warrant attached hereto as Exhibit 2.1.3, and
the Security Agreement attached hereto as Exhibit
2.1.4.

      

      2.2           Execution
of Promissory Note.  The Company and
Chase shall enter into that certain New Note, as attached hereto as Exhibit 2.2
evidencing the remaining $250,000 due and payable to Chase and including the
right to convert any such principal and interest due and owing into additional
Units based on any Units sold by the Company to an individual or entity referred
to or introduced by Chase to the Company.

      

      3.           Representations, Warranties
and Covenants of Chase.

      

      3.1           Acknowledgment
of Potential Increase in Share Value and/or Sale of the
Company.

      

      (a)           Chase
acknowledges that the sale price for the shares of the Company’s Common Stock
has been determined based on negotiations and the terms of this settlement and
not on actual market value of the shares.

      

      (b)           Chase
acknowledges that Chase is not relying upon any person, firm or corporation, in
making his decision to purchase pursuant to the Private Placement.

      

      (c)           Chase
further acknowledges and represents that he understands that the shares of
common stock of the Company could depreciate in value considerably in the near
term or otherwise in the future and notwithstanding such possibility Chase
desires to enter into this Settlement Agreement and the related agreements
identified herein.

      

      3.2           Authority.   Chase
represents and warrants that he has all requisite power and authority to execute
and deliver this Settlement Agreement, and any of the related agreements and
documents, and to consummate any of the transactions contemplated
hereby.  This Settlement Agreement when duly executed and delivered by
Chase, assumes the due authorization, execution, and delivery thereof Chase, and
constitutes the legal, valid, and binding obligation of Chase in accordance with
its terms.

      

      4.           Representations, Warranties
and Covenants of the Company

      

      4.1           Authority.   The
Compnay represents and warrant that it has all requisite power and authority to
execute and deliver this Settlement Agreement, and any of the related agreements
and documents, and to consummate any of the transactions contemplated hereby or
thereby.  The execution and delivery of this Settlement Agreement and
the consummation of the transactions contemplated hereby has been duly
authorized by all necessary corporate action, and no other proceedings on the
part of the Company is necessary to authorize this Settlement Agreement or to
consummate the transactions contemplated hereby.

      

      5.           Notices.  All
notices, requests, demands and other communications under this Agreement,
including any request or demand for indemnification under paragraph 3, shall be
in writing and shall be deemed to have been duly given on the date of service if
served personally on the party to whom notice is to be given or within five (5)
business days if mailed to the party to whom notice is to be given, by
first-class mail, registered, or certified, postage prepaid and properly
addressed as follows:

      

      
        
           

        

        
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      If to the
Company:               
Ethos Environmental, Inc.

      6800
Gateway Park Drive

      San
Diego, Ca 92154

      Attention:
Mr. Corey P. Schlossmann, Chairman and CEO

      Telephone:
619-575-6800

      Facsimile:  619.575.9300

      

      
        	
                If to
    Chase:

              	
                To
      the address and fax number set forth on the signature pages
      hereto.

              

      

      

      Any
notice mailed to any party hereunder will be deemed effective within five
business days of deposit in the United States mail.

      

      6.           Disclaimer
of Liability. It is understood and
agreed that this Settlement Agreement is a compromise of disputed claims, and
that neither the mutual release specified above nor the negotiation of this
settlement shall be considered as admissions of any liability whatsoever by
anyone.  It is understood that the Parties deny, any past or present
wrongdoing, and no wrongdoing shall be implied from any negotiations or entry
into this Agreement.

      

      7.           Payment
of Costs and Expenses; Attorney’s Fees.  Each party hereto
shall be responsible for the payment of its own costs, expenses and attorneys’
fees in conjunction with the matters referred to herein. However, in the event
litigation is commenced to interpret or enforce any of the provisions of this
Agreement, to recover damages for the breach of any of the provisions of this
Settlement Agreement, or to obtain declaratory relief in connection with any of
the provisions of this Settlement Agreement, the prevailing party shall be
entitled to recover its reasonable attorneys’ fees and costs from the other
party.

      

      8.           Confidentiality
of Entire Agreement.

      

      8.1           The
Parties and their attorneys, and each of their agents or persons acting for
them, are prohibited from disclosing the nature and substance of the claims
involved, settlement terms and conditions, and the history, background,
negotiations, terms and conditions of all settlements with any individual other
than their attorneys of record and/or advisers for income tax or other legal
purposes.  The Parties may make such disclosures to their attorneys or
to any other person or entity such as accountants, auditors or insurers,
shareholders, or any other similar entity or individual to whom such disclosure
is required in the ordinary course of the business, or to any potential
financing source, acquirer, investor or partner of the Company, or to anyone to
whom disclosure is required by subpoena or other legal process or operation of
law.

      

      8.2           The
Parties and their attorneys, and each of their agents or persons acting for
them, may not make any statements, either directly or indirectly, by implication
or innuendo, to the press or media, concerning the fact or amount of settlement,
the nature and substance of the claims resolved herein or describe or
characterize the settlement in any way.  The Parties and their
attorneys, and each of their agents or persons acting for them, may not use
their involvement in this settlement as the basis for speeches, interviews,
seminars, articles, books or promotional materials of any kind.  Any
inquiry made of the Parties and their attorneys, and each of their agents or
persons acting for them, into the subject matter of these settlement terms, by
anyone, including the press or media, will be met by a statement that the
disagreements were disposed of to the mutual satisfaction of the parties’ and
that they have no further comment.

      

      9.           Further
Assurances.  Each of the Parties to this Agreement agrees to
perform such further acts and to execute and deliver any and all further
documents that may reasonably be necessary or desirable to effectuate the
purpose of this Agreement.

      

      
        
           

        

        
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      10.           Representation of
Comprehension of Document, Undertakings and Representations and
Warranties.

      

      10.1           In
entering into this Agreement, the Parties hereto represent that they have read
the contents of this Agreement, that the terms of this Agreement have been
explained to them by their attorney, that those terms are fully understood and
voluntarily accepted by them, that they have relied upon the legal advice of
their respective attorney, who is an attorney of their own choosing, and that
hereafter no such party shall deny the validity of this Agreement on the ground
that he, she or it did not have adequate advice of counsel.

      

      10.2           Each
party to this Agreement has made such investigation of the facts pertaining to
this Agreement and of all the matters pertaining thereto as it deems
necessary.  In entering into this Agreement provided for herein, each
party assumes the risk of any misrepresentation, concealment, or
mistake.  If any party should subsequently discover that any fact
relied upon by it in entering into this Agreement was untrue, or that any fact
was concealed from it, or that its understanding of the facts or of the law was
incorrect, such party shall not be entitled to any relief in connection
therewith, including, without limitation on the generality of the foregoing, any
alleged right or claim to set aside or rescind this Agreement.  This
Agreement is intended to be and is final and binding between the parties hereto,
regardless of any claims of misrepresentation, promise made without the
intention of performing, concealment of fact, mistake of fact or law, or of any
other circumstance whatsoever.

      

      10.3           Each
party is aware that it may hereafter discover claims or facts in addition to or
different from those it now knows or believes to be true with respect to the
matters related herein.  Nevertheless, it is the intention of the
Parties to fully, finally, and forever settle and release all such matters and
claims relative thereto, which do now exist, may exist, or heretofore have
existed between them.  In furtherance of such intention, the releases
given herein shall be and remain in effect as full and complete mutual releases
of all such matters, notwithstanding the discovery or existence of any
additional or different claims or facts relative thereto.

      

      11.           Entire
Agreement.  This Settlement Agreement, together with Exhibits
2.1.1, 2.1.2, 2.1.3, 2.1.4 and 2.2, constitutes the entire written agreement
between the Parties, and with the exception of this agreements and instruments
to be executed pursuant to the terms of this Settlement Agreement, there are no
other agreements modifying its terms.  The terms of this Settlement
Agreement can only be modified by a writing signed by all of the parties which
expressly states that such modification is intended, and this Settlement
Agreement cannot be amended by a partially or fully executed oral
modification.

      

      12.           Governing
Law.  This Agreement is being executed and delivered, and is
intended to be performed, in the State of California, and to the extent
permitted by law, the execution, validity, construction, and performance of this
Agreement shall be construed and enforced in accordance with the laws of the
State of California without giving effect to conflict of law
principles.  This Agreement shall be deemed made and entered into in
San Diego County, State of California, United States of America; however, it is
intended to resolve all claims, known or unknown, between the Parties in any
jurisdiction.

      

      13.           Waiver of
Jury Trial.  The Parties
hereto hereby voluntarily and irrevocably waives trial by jury in any Proceeding
brought in connection with this Settlement Agreement, any of the related
agreements and documents, or any of the transactions contemplated hereby or
thereby. For purposes of this Settlement Agreement, “Proceeding” includes any
threatened, pending, or completed action, suit, arbitration, alternate dispute
resolution mechanism, investigation, inquiry, administrative hearing, or any
other actual, threatened, or completed proceeding, whether brought by or in the
right of any party or otherwise and whether civil, criminal, administrative, or
investigative, in which an Indemnified Party was, is, or will be involved as a
party or otherwise.

      

      
        
           

        

        
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      14.           Interpretation
of Agreement. This Settlement
Agreement shall not be construed against any party on the basis that his, her or
its attorney drafted it as each Party and their respective legal counsel has had
an opportunity to review, make comments, changes and modifications to the
Settlement Agreement prior to its execution.

      

      15.           Signature
in Counterpart;
Facsimile Signatures. This Settlement
Agreement may be executed in counterparts, each of which shall be deemed to be
an original, but all of which together shall constitute one and the same
instrument. Facsimile signatures shall be sufficient for execution of this
Agreement.

      

      16.           Independent
Advice of Counsel. The Parties hereto, and
each of them, represent and declare that in executing this Settlement Agreement
they relied solely upon their own judgment, belief, knowledge and the advice and
recommendations of their own independently selected counsel, concerning he
nature, extent, and duration of their rights and claims, and that they have not
been influenced to any extent whatsoever in executing the Settlement Agreement
by any representations or statements covering any matters made by any other
party or that party’s representatives hereto.

      

      17.           Successors.  This
Settlement Agreement shall be binding upon the Parties and their heirs,
representatives, administrators, successors and assigns, and shall inure to the
benefit of the released parties and each of them, and to their heirs,
representative, successors and assigns.

      

      18.           Severability.  If
any provision of this Settlement Agreement is held by a Court of competent
jurisdiction to be invalid, void or unenforceable, the remaining provisions
shall nevertheless continue in full force without being impaired or invalidated
in any way.

      

      19.           Exhibits.
All of the Exhibits hereto are material provisions of this Settlement Agreement,
and the terms of those Exhibits are expressly made part of this Settlement
Agreement.

      

      IN
WITNESS THEREOF, each of the undersigned has executed this Settlement Agreement
and General Mutual Release.

      

                                      ETHOS ENVIRONMENTAL,
INC.

      

      

      Dated:
_______________                                                _______________________________

      By: Corey
P. Schlossmann

      Its:
President

      

      

      

      DICK F. CHASE

      
 

      

      Dated:
_______________                                                _______________________________

      Dick F.
Chase

      

       

      
        
           

        

        
          6ex10-5.htm

     

    
      

      

    

    
      
        	
                USD$250,000

              	
                  

              	
                San
      Diego, California

              
	 
      	
                  

              	
                January
      ___, 2009

              

      

       

      PROMISSORY
NOTE

       

          FOR VALUE RECEIVED,
Ethos Environmental, Inc., a Nevada corporation (the “Payor”) hereby
unconditionally promises to pay to the order of Dick F. Chase (the “Payee”), the
principal amount of TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000). All amounts
payable hereunder shall be payable to Payee in United States dollars at such
bank account as shall be designated by the Payee in immediately available funds
or as otherwise specified to Payor in writing. The principal amount is due and
payable on December 31, 2009 (the “Maturity Date”).

       

          INTEREST
RATE:  The Promissory Note (the “Note”) shall bear interest an
annual rate of 12% payable monthly in arrears and be payable in monthly
installments of two thousand five hundred dollars ($2500.00) beginning January
1, 2009 and continuing the Maturity Date.

       

          BORROWER'S PRE-PAYMENT
RIGHT:  Payor may at any time and from time to time prepay the
principal amount, in whole or in part, without premium or penalty.

       

          PLACE FOR PAYMENT. 
Borrower promises to pay to the order of Payee at the place for payment and
according to the terms for payment the principal amount plus interest at the
rates stated above. All unpaid amounts shall be due by the final scheduled
payment date.

       

          DEFAULT AND ACCELERATION
CLAUSE.  If Borrower defaults in the payment of this Note or in the
performance of any obligation, and the default continues after Payee gives
Borrower notice of the default, all sums owing on this Note shall bear interest
until paid in full at a rate per annum equal to the Interest Rate plus ten
percent (10.00%) (the “Default Rate”).

       

          FORM OF PAYMENT. 
Any check, draft, Money Order, or other instrument given in payment of all or
any portion hereof may be accepted by the holder and handled in collection in
the customary manner, but the same shall not constitute payment hereunder or
diminish any rights of the holder hereof except to the extent that actual cash
proceeds of such instruments are unconditionally received by the payee and
applied to this indebtedness in the manner elsewhere herein
provided.

       

          ATTORNEY'S FEES. 
If this Note is given to an attorney for collection or enforcement, or if suit
is brought for collection or enforcement, or if it is collected or enforced
through probate, bankruptcy, or other judicial proceeding, then Borrower shall
pay Payee all costs of collection and enforcement, including reasonable
attorney's fees and court costs in addition to other amounts due.

       

      SEVERABILITY.  If any
provision of this Note or the application thereof shall, for any reason and to
any extent, be invalid or unenforceable, neither the remainder of this Note nor
the application of the provision to other persons, entities or circumstances
shall be affected thereby, but instead shall be enforced to the maximum extent
permitted by law.

       

      BINDING EFFECT.  The
covenants, obligations and conditions herein contained shall be binding on and
inure to the benefit of the heirs, legal representatives, and assigns of the
parties hereto.

       

      DESCRIPTIVE HEADINGS. 
The descriptive headings used herein are for convenience of reference only and
they are not intended to have any effect whatsoever in determining the rights or
obligations under this Note.

       

      CONSTRUCTION.  The
pronouns used herein shall include, where appropriate, either gender or both,
singular and plural.

       

      GOVERNING LAW.  This Note
shall be governed, construed and interpreted by, through and under the Laws of
the State of California.  

       IN
WITNESS THEREOF, each of the undersigned has executed this Promissory Note in
favor of the Payee.

      

      ETHOS
ENVIRONMENTAL, INC.

      

      

      Dated:
_______________                                                _______________________________

      By: Corey
Schlossmann

      Its:
President

      

        
          
             

          

          
            1

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