Document:

ex10-2.htm

     

    
      

      

    

    
      Exhibit A to Securities
Purchase Agreement

       

      THIS NOTE
HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“ACT”), AND HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION
OF THIS NOTE OR OF THE COMMON STOCK ISSUABLE UPON THE CONVERSION HEREOF MAY BE
EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL IN A FORM REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT.

       

      CONVERTIBLE PROMISSORY
NOTE

       

       

      ETHOS
ENVIRONMENTAL, INC.

      
      

       

      
        	 $300,000 	
                 August 1,
      2008

              
	 	 
	 	
                 San Diego,
      CA

              

      

       

      For value received, Ethos
Environmental, Inc., a Nevada corporation (the “Company”), promises
to pay to MKM Opportunity Master Fund, Limited, a Cayman Islands corporation
(the “Holder”),
the principal sum of Three Hundred Thousand Dollars ($300,000), together with
interest as set forth herein. This Note is being issued pursuant to that certain
Securities Purchase Agreement dated concurrently herewith (the “Purchase Agreement”).
All capitalized terms used but not defined herein shall have the meanings given
to them in the Purchase Agreement. This Note is subject to the following terms
and conditions.

       

      1. Maturity;
Payment due upon Maturity; Default. Unless converted as
provided in Section 3, this Note will automatically mature and be due and
payable on the six month anniversary of the date hereof (the “Maturity
Date”).   The amount payable upon the maturity of this
Note shall be equal to one hundred twenty percent (120%) of the face value
hereof, or three hundred sixty thousand dollars ($360,000), in addition to any
accrued and unpaid interest as set forth in Section
2.  Notwithstanding anything in the foregoing, the entire unpaid
principal sum of this Note, together with accrued and unpaid interest thereon,
shall become immediately due and payable upon an “Event of Default”,
which is: the insolvency of the Company, the failure of the Company to pay
interest as set forth in Section 2 hereof, the commission of any act of
bankruptcy by the Company, the execution by the Company of a general assignment
for the benefit of creditors, the filing by or against the Company of a petition
in bankruptcy or any petition for relief under the federal bankruptcy act or the
continuation of such petition without dismissal for a period of ninety (90) days
or more, or the appointment of a receiver or trustee to take possession of the
property or assets of the Company.

       

      2. Interest.  Interest
upon this Note shall be payable in cash monthly, in arrears, at a rate of ten
percent (10%) per annum, equivalent to one eighth and one-third percent
(0.81/3%) or two
thousand five hundred dollars ($2,500) monthly.  Interest shall be
paid upon the first day of each month, commencing with September 1,
2008.

       

      3. Conversion.

       

      (a)           Conversion.

       

      (i)           Conversion
on Maturity.  Should the
Company not repay the Note in full prior to the Maturity Date, the entire
principal amount and accrued interest shall at the option of the Holder be
converted into shares of the Company’s common stock as of the Maturity Date at a
conversion rate of $0.25 per share or such other amount as determined in
accordance with Section 3(d) (such conversion rate, as adjusted, being the
“Conversion
Price”).

       

      (ii)           Conversion
upon Event of Default.  Should there
occur an Event of Default as defined in Section 2, the Holder may in its sole
discretion elect to convert any portion of the principal amount and accrued and
unpaid interest into shares of the Company’s common stock at Conversion
Price.

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

      (b)           Prepayment. The Company shall have
the right to prepay the principal and interest due under this Note, in full,
upon 10 days written notice to the Holder. During the 10 day notice period, the
Holder shall have the right to convert the entire principal amount of the Note
together with accrued interest into shares of the Company’s common stock. Should
the Holder elect to convert the entire principal and interest due under this
Note such conversion shall be at the Conversion Price.

       

       

      (c) Mechanics
and Effect of Conversion. Upon conversion of this
Note pursuant to this Section 3, the Holder shall surrender this Note at the
principal offices of the Company or any transfer agent of the Company. At its
expense, the Company will, as soon as practicable thereafter, issue and deliver
to such Holder a certificate or certificates for the number of shares to which
such Holder is entitled upon such conversion, together with any other securities
and property to which the Holder is entitled upon such conversion under the
terms of this Note, including a check payable to the Holder for any accrued
interest due. Upon conversion of this Note, the Company will be forever released
from all of its obligations and liabilities under this Note with regard to that
portion of the principal amount being converted including without limitation the
obligation to pay such portion of the principal amount and accrued
interest.

       

       

      (d)           Weighted-Average
Anti-Dilution Protection.

       

       

      (i) Stock
Dividends and Splits. If the Company, at any time while this Note is
outstanding: (A) pays a stock dividend or otherwise makes a distribution or
distributions on shares of its Common Stock or any other equity or equity
equivalent securities payable in shares of Common Stock (which, for avoidance of
doubt, shall not include any shares of Common Stock issued by the Company
pursuant to this Note or the other securities issued or to be issued in this
transaction), (B) subdivides outstanding shares of Common Stock into a larger
number of shares, (C) combines (including by way of reverse stock split)
outstanding shares of Common Stock into a smaller number of shares, or (D)
issues by reclassification of shares of the Common Stock any shares of capital
stock of the Company, then in each case the Conversion Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding immediately before such
event and of which the denominator shall be the number of shares of Common Stock
outstanding immediately after such event and the number of shares issuable upon
conversion of this Note shall be proportionately and equitably
adjusted.  Any adjustment made pursuant to this Section 3(d)(i) shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.

       

       

      (ii) Subsequent
Equity Sales. If at any time while this Note is outstanding the Company
shall offer, sell, grant any option to purchase or offer, sell or grant any
right to reprice its securities, or otherwise dispose of or issue (or announce
any offer, sale, grant or any option to purchase or other disposition) any
Common Stock or any securities of the Company or of any subsidiary of the
Company which would entitle the holder thereof to acquire at any time Common
Stock (hereinafter, “Common Stock
Equivalents”), including without limitation, any debt, preferred stock,
rights, options, warrants or other instrument that is at any time convertible
into or exchangeable for or otherwise entitles the holder thereof to receive
Common Stock, entitling any Person to acquire shares of Common Stock, at an
effective price per share less than the Conversion Price then in effect (such
issuances collectively, a “Dilutive Issuance”),
as adjusted hereunder (if the holder of the Common Stock or Common Stock
Equivalents so issued shall at any time, whether by operation of purchase price
adjustments, reset provisions, floating conversion, exercise or exchange prices
or otherwise, or due to warrants, options or rights per share which is issued in
connection with such issuance, be entitled to receive shares of Common Stock at
an effective price per share which is less than the Conversion Price, such
issuance shall be deemed to have occurred for less than the Conversion Price in
effect on such date of the Dilutive Issuance), then, the Conversion Price shall
be adjusted pursuant to the following formula:

       

      NP = OP x [OB +
(AMT/OP)]

      (OB+SI)

       

      where

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      NP is the
new Conversion Price;

       

       

      OP is the
Conversion Price in effect immediately prior to such adjustment;

       

       

      OB is the
number of shares of Common Stock outstanding prior to the Dilutive
Issuance;

       

       

      AMT is
the dollar amount of the Dilutive Issuance, and

       

       

      SI is the
number of shares of Common Stock issuable in the Dilutive Issuance.

       

      The
Company shall notify the Holder in writing, no later than the business day
following the issuance of any Common Stock or Common Stock Equivalents subject
to this section, indicating therein the applicable information required by the
formula above (such notice the “Dilutive Issuance
Notice”).

       

      (iii)           Pro Rata
Distributions.  If the Company, at any time during the term of
this Note, shall distribute to all holders of Common Stock evidences of its
indebtedness or assets (including cash and cash dividends) or rights or warrants
to subscribe for or purchase any security other than the Common Stock (which
shall be subject to Section 3(d)(ii) above), then in each such case the
Conversion Price shall be adjusted by multiplying the Conversion Price in effect
immediately prior to the record date fixed for determination of stockholders
entitled to receive such distribution by a fraction of which the denominator
shall be the Closing Price (defined below) determined as of the record date
mentioned above, and of which the numerator shall be such Closing Price on such
record date less the then per share fair market value at such record date of the
portion of such assets or evidence of indebtedness so distributed applicable to
one outstanding share of the Common Stock as determined by the Board of
Directors in good faith, or at the option of the Holder, by an independent
appraiser selected by the Holder. and reasonably acceptable to the
Company.  In either case the adjustments shall be described in a
statement provided by the Company to the Holder of the portion of assets or
evidences of indebtedness so distributed or such subscription rights applicable
to one share of Common Stock.  Such adjustment shall be made whenever
any such distribution is made and shall become effective immediately after the
record date mentioned above.  At the time of such adjustment, the
number of shares of common stock issuable following such adjustment shall be
equitably and proportionally adjusted upward.

       

      As used
herein, “Closing
Price”, shall mean the first of the following clauses that
applies:  (A) if, at the time of any such calculation, the Common
Stock is listed or quoted on the American Stock Exchange, or the New York Stock
Exchange, or the NASDAQ Market, the NASDAQ Capital Market or the Archipelago
Exchange, the Closing Price shall be the closing or last sale price reported for
the last business day immediately preceding the date of any such calculation;
(B) if, at the time of any such calculation, the Common Stock is quoted on the
OTC Bulletin Board or listed in the “Pink Sheets” published by the National
Quotation Bureau Inc. or a similar agency or organization succeeding to its
function or reporting prices, the Closing Price shall be the average of the high
closing bid and low ask prices reported for the last five (5) trading days
immediately preceding the date of any such calculation, or (C) in all other
cases, the Closing Price of a share of Common Stock shall be the price
determined by an independent appraiser selected in good faith by the Holder and
reasonably acceptable to the Company.

       

      (iv)           Adjustment
for Reorganization, Consolidation, Merger, etc.  In the event
that the Company shall (A) effect a reorganization, (B) consolidate
with or merge into any other entity or (C) transfer all or substantially
all of its properties or assets to any other entity under any plan or
arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition precedent to the consummation of such a transaction, proper
and adequate provision shall be made whereby the Holder of this Note, on the
conversion hereof as provided in this Section 3, at any time after the
consummation of any such reorganization, consolidation or merger or the
effective date of any such dissolution, shall receive in lieu of the shares of
Common Stock issuable on such conversion immediately prior to any such
consummation or effective date, the stock and other securities and property
(including cash) to which such Holder would have been entitled to receive upon
any such consummation or dissolution if the Holder had so converted this Note
immediately prior to such consummation or dissolution.

       

      (v) Certificate
as to Adjustments.  The computation of any adjustments
described in this Section shall be the sole responsibility of the Company, which
shall expeditiously prepare and mail to the Holder a notice setting forth the
nature of any necessary adjustment together with the basis thereof and the
calculations therefor.  The Company shall immediately notify the
Holder of any information which bears on any of the events referenced in this
Section 3 and which may have an effect on the conversion of this
Note.  If the Company issues a variable rate security, the Company
shall be deemed to have issued Common Stock or Common Stock Equivalents at the
lowest possible conversion or exercise price at which such securities may be
converted or exercised in the case of a Variable Rate Transaction (as defined
below).

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      As used
herein, the term “Variable Rate
Transaction” shall mean a transaction in which the Company issues or
sells (i) any debt or
equity securities that are convertible into, exchangeable or exercisable for, or
include the right to receive additional shares of Common Stock either (A) at a conversion, exercise
or exchange rate or other price that is based upon and/or varies with the
trading prices of or quotations for the shares of Common Stock at any time after
the initial issuance of such debt or equity securities, or (B) with a conversion,
exercise or exchange price that is subject to being reset at some future date
after the initial issuance of such debt or equity security or upon the
occurrence of specified or contingent events directly or indirectly related to
the business of the Company or the market for the Common Stock (other than
pursuant to standard anti-dilution features) or (ii) enters into any
agreement, including, but not limited to, an equity line of credit, whereby the
Company may sell securities at a future determined price

       

      (vi)           Calculations.
All calculations under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of this Section 3
the number of shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock (excluding
treasury shares, if any) issued and outstanding.

       

      (vii)           Voluntary
Adjustment By Company. The Company may at any time during the term of
this Note reduce (but not increase) the then-current Conversion Price, as the
case may be, to any amount and for any period of time deemed appropriate by the
Board of Directors of the Company.

       

      (viii)           Notice to
Allow Conversion by Holder. If (A) the Company shall declare a dividend
(or any other distribution) on the Common Stock; or (B) the Company shall
declare a special nonrecurring cash dividend on or a redemption of the Common
Stock; or (C) the Company shall authorize the granting to all holders of the
Common Stock rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any rights; or (D) the approval of any
stockholders of the Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially all of the
assets of the Company, of any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property; or (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or winding up of
the affairs of the Company; then, in each case, the Company shall cause to be
mailed to the Holder at its last address as it shall appear upon the books and
records of the Company, at least 20 calendar days prior to the applicable record
or effective date hereinafter specified, a notice stating (y) the date on which a
survey of the holders of record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of the Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (z) the
date on which such reclassification, consolidation, merger, sale, transfer or
share exchange is expected to become effective or close, and the date as of
which it is expected that holders of the Common Stock of record shall be
entitled to exchange their shares of the Common Stock for securities, cash or
other property deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange; provided, that the
unintentional failure to mail such notice or any unintentional defect therein or
in the mailing thereof shall not affect the validity of the corporate action
required to be specified in such notice.  The Holder is entitled to
convert this Note during the 20-day period commencing on the date of such notice
to the effective date of the event triggering such notice.

       

      (ix)  Excluded
Events. Notwithstanding any other provision in this Section 3, the
Conversion Price shall not be adjusted by virtue of (a) the issuance of capital
stock to employees, consultants, officers or directors of the Company for
services and/or pursuant to stock purchase or stock option plans or agreements
approved by the Board (but not exceeding 20% of the Company's Common Stock
outstanding as of the date hereof for all such issuances in the aggregate), (b)
the issuance of securities to financial institutions, suppliers or lessors in
connection with commercial credit arrangements, equipment financings or similar
transactions in the ordinary course of business, or (c) 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).

       

      4. Payment. All payments shall be
made in lawful money of the United States of America at such place as the Holder
hereof may from time to time designate in writing to the Company. Payment shall
be credited first to the accrued interest then due and payable and the remainder
applied to principal.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      5. Transfer;
Successors and Assigns. The terms and conditions
of this Note shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Notwithstanding the foregoing, the Holder
may not assign, pledge, or otherwise transfer this Note without the prior
written consent of the Company. Subject to the preceding sentence, this Note may
be transferred only upon surrender of the original Note for registration of
transfer, duly endorsed, or accompanied by a duly executed written instrument of
transfer in form satisfactory to the Company. Thereupon, a new note for the same
principal amount and interest will be issued to, and registered in the name of,
the transferee. Interest and principal are payable only to the registered holder
of this Note.

       

      6. Governing
Law.  This
Note shall be governed by, and construed in accordance with, the laws of the
State of New York, without regard to the conflicts of laws provisions
thereof.  The Company hereby irrevocably and unconditionally submits,
for itself and its property, to the nonexclusive jurisdiction of the Supreme
Court of the State of New York sitting in New York County and of the United
States District Court of the Southern District of New York, and any appellate
court from any thereof, in any action or proceeding arising out of or relating
to this Note, or for recognition or enforcement of any judgment, and hereby
irrevocably and unconditionally agrees that all claims in respect of any such
action or proceeding may be heard and determined in such New York State or, to
the extent permitted by law, in such Federal court.  The Company
hereby agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law.  The Company hereby irrevocably
and unconditionally waives, to the fullest extent it may legally and effectively
do so, any objection which it may now or hereafter have to the laying of venue
of any suit, action or proceeding arising out of or relating to this Note in any
court referred to above, and hereby irrevocably waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the maintenance of
such action or proceeding in any such court.

       

      7.  Notices. All notices and other
communications in respect of this Note (including, without limitation, any
modifications of, or requests, waivers or consents under, this Note) shall be
given or made in writing (including, without limitation, by facsimile) (a) in
the case of the Company, at the “Address for Notices” specified below its name
on the signature page hereof and (b) in the case of the Holder, at the address
for such purpose as shall have been most recently specified to the Company by
the Holder; or, as to either the Company or the Holder, at such other address as
shall be designated by such party in a notice to the other
party.  Except as otherwise provided in this Note, all such
communications shall be deemed to have been duly given when transmitted by
facsimile or personally delivered or, in the case of a mailed notice, upon
receipt, in each case given or addressed as aforesaid.

       

      8.  Amendments
and Waivers. No provision of this
Note may be waived or amended except in a written instrument signed, in the case
of an amendment, by the Company and the Holder, or in the case of a waiver, by
the party against whom enforcement of any such waiver is sought.  No
waiver of any default with respect to any provision shall be deemed to be a
continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right.

       

      9.  Stockholders,
Officers and Directors Not Liable. In no event shall any
stockholder, officer or director of the Company be liable for any amounts due or
payable pursuant to this Note.

       

      10. [This
Section 10 is intentionally left blank]

       

      11. Rank;
Subsequent Financing.  The Company
expressly acknowledges that the indebtedness evidenced by this Note shall rank
senior in right of payment to all other existing indebtedness of the
Company.  The Company may not issue any debt or warrants senior to or
pari passu with this
Note without the prior consent of the Holder.

       

      12. Action to
Collect on Note. If action is instituted
to collect on this Note, the Company promises to pay all costs and expenses,
including reasonable attorney’s fees, incurred in connection with such
action.

       

      13. Successors
and Assigns.  All agreements of
the Company in this Note shall bind its successors and permitted
assigns.  This Note shall inure to the benefit of the Holder and its
permitted successors and assigns.  The Company shall not delegate any
of its obligations hereunder without the prior written consent of
Holder.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      14. Loss of
Note. Upon
receipt by the Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of this Note or any Note exchanged for it, and
indemnity reasonably satisfactory to the Company (in case of loss, theft or
destruction) or surrender and cancellation of such Note (in the case of
mutilation), the Company will make and deliver in lieu of such Note a new Note
of like tenor, at the Company’s expense.

       

       

       

      [SIGNATURE
PAGE FOLLOWS]

        
          
             

          

          
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        	 	COMPANY:
	 	ETHOS ENVIRONMENTAL,
      INC.
	 	 By:	 	 
	 	 	Enrique de Vilmorin,
      CEO
	 	
                 

                
                   

                  Address
      & Fax for Notice:

                  6800
      Gateway Park Drive

                  San
      Diego, Ca 92154

                  Fax:
      619.575.9300

                

              

      

      
      

      
        
           

        

        
          7ex10-3.htm

     

    
      

      

    

    
      STOCK PURCHASE
AGREEMENT

      

      This Stock Purchase Agreement dated as
of August 1, 2008, is by and between Ethos Environmental, Inc., a Nevada
corporation (the “Company”), MKM Opportunity Master Fund, Limited, a Cayman
Islands corporation (the "Purchaser").

      

      RECITALS

      

      A.           Whereas,
the Company wishes to obtain equity financing through the issuance and sale of
shares of the common stock of the Company, par value $0.0001 per share (the
“Common Stock”); and

      

      B.           Whereas,
the Purchaser is willing on the terms and conditions set forth in this Agreement
to purchase $300,000 worth of common stock at a purchase price of $0.33 per
share (equivalent to 909,091 shares of Common Stock) .

      

      AGREEMENT

      

      NOW,
THEREFORE, based upon the foregoing and the mutual covenants and agreements
herein contained, and for other good and sufficient consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto, intending
to be legally bound, hereby agree as follows:

      

      ARTICLE
I.

      

      DEFINED
TERMS

      

      1.1            Certain
Defined Terms. When used in this Agreement, the following terms shall
have the following meanings:

      

      “Affiliate” means, with respect to any
specified Person, any other Person which, directly or indirectly, controls, is
under common control with, or is owned or controlled by, such specified Person.
For purposes of this definition, (i) “control” means, with respect to any
specified Person, either (x) the beneficial ownership of 10% percent or more of
any class of equity securities or (y) the power to direct the management and
policies of the specified Person through the ownership of voting securities or
other equity interests, by contract or otherwise, (ii) the terms “controlling”,
“control with” and “controlled by”, etc. shall have meanings correlative to the
foregoing, (iii) the officers, directors and shareholders of the Company shall
be deemed to be Affiliates of the Company and (iv) with respect to any
Purchaser, any investment manager (or similar Person) having voting or
disposition power over the Common Stock of such Purchaser shall be deemed to be
an Affiliate of such Purchaser.

      

      “Agreement” shall mean this Stock
Purchase Agreement, as it may be amended or otherwise modified from time to
time.

      

      “Material Adverse Effect” means, as
to any Person, a material adverse effect on the business, condition (financial
or otherwise), operations, performance, or properties or prospects of such
Person and its Subsidiaries, taken as a whole.

      

      “Person” means any individual,
corporation, general or limited partnership, joint venture, association, limited
liability company, joint stock company, trust, business trust, bank, trust
company, estate (including any beneficiaries thereof), unincorporated
organization, cooperative, association or government branch, agency or political
subdivision thereof.

      

      “Purchaser” has the meaning set forth
in the preamble of this Agreement, and shall include any Person which becomes a
“Purchaser” after the Closing Date pursuant to Section 2.2 and any partner of a
Purchaser who receives shares of Common Stock pursuant to a distribution from or
a liquidation of such Purchaser.

      

      “Restricted Securities” means the
Common Stock.  The Restricted Securities, shall cease to be Restricted
Securities when they have (a) been effectively registered under the 33 Act and
disposed of in accordance with the registration statement covering them, (b)
become eligible for sale pursuant to Rule 144 (or any similar provision then in
force) under the 33 Act or (c) been otherwise transferred and new certificates
shall have been issued for them not bearing the 33 Act legend. Whenever the
securities cease to be Restricted Securities, the holder thereof shall be
entitled to receive from the Company, without expense, new securities of like
tenor not bearing a restrictive legend.

      

      
        
           

        

        
          1

          
            

          

        

        
           

        

      

      “SEC” means the United States
Securities and Exchange Commission.

      

      “Subsidiary” or “Subsidiaries” of any
Person means any corporation or other entity of which securities or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other Persons performing similar functions are at the time
directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person.

      

      “Transfer
Agent” means the transfer agent of the Company or such other person who is then
serving as the transfer agent for the Company in respect of the Common
Stock.

      

      “33 Act”
means the Securities Act of 1933, as amended, and the rules and regulations
issued in respect thereto.

      ARTICLE
II.

      

      PURCHASE AND SALE
TERMS

      

      2.1           Purchase
and Sale.  Subject to the terms of this Agreement, the Company
shall authorize, issue and sell to Purchaser, and Purchaser shall purchase from
the Company at the Closing, the total number of shares of Common Stock for $0.33
per share, for the aggregate purchase price set forth opposite such Purchaser's
name on Schedule 2.1 hereto.

      

      2.2           The
Closing. The closing of the purchase and sale of the Common Stock (the
“Closing”) shall take place at the offices of the Company, on or before August
1, 2008, or at such other time as shall be agreed upon by the Company and the
Purchaser (the “Closing Date”).  It is anticipated that this Agreement
will be signed on the date of and immediately before the Closing.  All
actions to be taken and all documents to be executed and delivered by the
parties at the Closing shall be deemed to have been taken and executed
simultaneously and no actions shall be deemed taken or any documents deemed
executed or delivered until all have been taken and delivered.

      

      2.3           Payment
and Delivery. The amount of the purchase price to be paid by the
Purchaser on the Closing Date shall be as set forth opposite such Purchaser's
name on Schedule 2.1 hereto. At the time of the Closing, the Purchaser shall pay
the purchase price of the Common Stock purchased by it in full, in cash, by wire
transfer of immediately available funds to an account which the Company shall
designate in writing not less than two days prior to Closing
Date.  Within five business days of delivery of funds by Purchaser on
the Closing Date, the Company shall deliver to Purchaser stock certificates
evidencing the total amount of Common Stock to be purchased by it hereunder,
registered in the name of such Purchaser or its nominee.  The stock
certificate representing the Common Stock shall bear the restrictive legend(s)
set forth in Section 5.1 hereof.

      

      2.4           Restricted
Securities. The shares of Common Stock sold pursuant to this Agreement
shall be Restricted Securities and shall be issued pursuant an exemption from
registration provided under Section 4(2) and 4(6) of the 33 Act, as
amended.

      

      2.5.           Use of
Proceeds. The Company shall use the net cash proceeds of its sale of the
Common Stock solely for (i) the payment of $30,000 (or such greater amount as
consented to by the Company) to the Purchaser for the Purchaser’s legal fees and
other out-of-pocket expenses incurred in connection with this transaction; and,
(ii) the Company's ongoing working capital purpose, in its ordinary course of
business.

       

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      ARTICLE
III.

      

      REPRESENTATIONS AND
WARRANTIES OF THE COMPANY

      

      As an
inducement to Purchaser to enter into this Agreement, the Company hereby
represents and warrants that:

      

      3.1           Organization
and Corporate Power.  The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada and is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which its ownership of property or the
nature of the business conducted by it makes such qualification necessary,
except to the extent that the failure to be so qualified or be in good standing
does not or will not have a material adverse effect on the
Company.  The Company has all requisite corporate power and authority
to own and operate its properties, to carry on its businesses as they are now
conducted and to consummate the transactions contemplated by this
Agreement.

      

      3.2           [This
Section 3.2 is intentionally left blank]

      

      3.3           Authorization;
No Breach.  The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action of the
Company.  This Agreement constitutes a valid and binding obligation of
the Company enforceable in accordance with its terms. The execution and delivery
of this Agreement by the Company  and the consummation of the
transactions contemplated hereby and thereby do not and will not (i) conflict
with or result in a breach of the terms, conditions or provisions of, (ii)
constitute a default under, (iii) result in the creation of any lien, security
interest, charge or encumbrance upon the Company's capital stock or assets
pursuant to, (iv) give any third party the right to accelerate any obligation
under, (v) result in a violation of, or (vi) require any authorization, consent,
approval, exemption or other action by or notice to any court or administrative
or governmental body pursuant to, the Company's Certificate of Incorporation or
By-laws, each as amended, or any law, statute, rule or regulation to which the
Company is subject, or any agreement, instrument, order, judgment or decree to
which the Company  is subject.

      

      3.4           SEC
Reports.  To the best of the Company’s knowledge each of the
financial statements (including the related notes) included in the Company’s
annual, quarterly, periodic or other reports filed with the SEC present fairly,
in all material respects, the consolidated financial position and consolidated
results of operations and cash flows of the Company and its consolidated
Subsidiaries as of the respective dates or for the respective periods set forth
therein, all in conformity with United States generally accepted accounting
principles (“GAAP”) consistently applied during the periods involved except as
otherwise noted therein, and subject, in the case of the unaudited interim
financial statements, to the absence of notes and normal year-end adjustments
that have not been and are not expected to be material in amount.

      

      3.5           No
Adverse Changes.  As of the Closing, other than as described in
this Agreement, there will not have occurred any one or more changes or events
which in the aggregate would have a Material Adverse Effect upon the financial
condition, operations or prospects of the Company and its subsidiaries taken as
a whole, excluding for the purposes hereof, any economic or competitive
conditions applicable to the United States economy as a whole.

      

      3.6           Tax
Matters.  The Company has filed all Federal, state and other
tax returns and reports required to be filed by it and such returns are
complete; no extensions of time to file any returns and reports are in effect,
and the Company  has paid all taxes shown on such returns including
all deficiency assessments, if any; to the extent tax liabilities have accrued
but have not become payable, they have been adequately reflected as liabilities
on the books of the Company. The Federal tax returns of the Company are not
currently under examination by the Internal Revenue Service.  No issue
has been raised in any prior examination which, by application of similar
principles, can reasonably be expected to result in assertion of a deficiency
for any year not examined nor is the Company aware of any fact which would
constitute the grounds for the assessment of any further tax liability with
respect to any such year.

      

      3.7           Litigation.  To
the best of the Company’s knowledge, there is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company or any of its Subsidiaries, threatened against or affecting the Company,
the Common Stock or any of the Company's Subsidiaries or any of the Company's or
the Company's Subsidiaries' officers or directors in their capacities as such,
which could reasonably be expected to have a Material Adverse
Effect.

      

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      3.8           No
General Solicitation. Neither the Company, nor any of its officers or
directors, nor any person acting on its or their behalf, has engaged in any form
of general solicitation or general advertising (within the meaning of Regulation
D under the 33 Act) in connection with the offer or sale of the securities as
described herein.

      

      3.9           Intellectual
Property Rights. The Company and its Subsidiaries own or possess adequate
rights or licenses to use all material trademarks, trade names, service marks,
service mark registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade secrets and
rights necessary to conduct their respective businesses as now conducted, none
of the Company's material trademarks, trade names, service marks, service mark
registrations, service names, patents, patent rights, copyrights, inventions,
licenses, approvals, government authorizations, trade secrets or other
intellectual property rights have expired or terminated, or, by the terms and
conditions thereof, could expire or terminate within two years from the date of
this Agreement. The Company and its Subsidiaries do not have any knowledge of
any infringement by the Company or its Subsidiaries of any material trademark,
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service mark registrations, trade secret or other
similar rights of others, or of any such development of similar or identical
trade secrets or technical information by others and, there is no claim, action
or proceeding being made or brought against, or to the Company's knowledge,
being threatened against, the Company or its Subsidiaries regarding trademark,
trade name, patents, patent rights, invention, copyright, license, service
names, service marks, service mark registrations, trade secret or other
infringement, which could reasonably be expected to have a Material Adverse
Effect.

      

      3.10           Title.
To the best of the Company’s knowledge it has good and marketable title in fee
simple to all real property and good and marketable title to all personal
property owned by them which are material to the business of the Company and its
Subsidiaries, in each case free and clear of all liens, encumbrances and
defects. Any real property and facilities held under lease by the Company and
any of its Subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere with the
use made and proposed to be made of such property and buildings by the Company
and its Subsidiaries.

      

      3.11           Transactions
with Affiliates. To the best of the Company's knowledge, none of the
officers, directors, or employees of the Company is presently a party to any
transaction with the Company or any of its Subsidiaries (other than for services
as employees, officers and directors), including any contract, agreement or
other arrangement providing for the furnishing of services to or by, providing
for rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the knowledge
of the Company, any corporation, partnership, trust or other entity in which any
officer, director, or any such employee has an interest or is an officer,
director, trustee or partner.

      

      3.12 Disclosure.  The
Company has fully provided Purchaser with all the information that such
Purchaser has requested for deciding whether to purchase the
Shares.  To the Company’s knowledge, no document, information or
certificates made or delivered in connection with this Agreement contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements herein or therein not misleading.

      

      3.13 Securities
Rights and Options.  Except for the
securities deliverable upon the exercise and/or conversion of the warrant and
note issued in accordance with the Securities Purchase Agreement of even date
herewith by and between the parties hereto (the “Securities Purchase
Agreement”), except as disclosed in Schedule 3.13, there are no outstanding
rights or options to purchase shares of the Company’s Common Stock.

      

      3.14 Consents.  The execution,
delivery and performance by Company of this Stock Purchase Agreement and the
other agreements contemplated by this transaction and the issuance or delivery
of shares of Common Stock or other securities hereunder or in connection
therewith, does not and will not require the approval or consent of, or any
filing with, any governmental authority or agency other than those required by
Regulation D as promulgated under the Securities Act of 1933, as
amended.

      

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

      ARTICLE
IV.

      

      REPRESENTATIONS AND
WARRANTIES OF THE PURCHASER

      

      Purchaser
represents and warrants to the Company, at and as of the Closing Date, as
follows:

      

      4.1            Power and
Authority. Such Purchaser has full power and authority and has taken all
required corporate (or trust or partnership, as the case may be) and other
action necessary to permit it to execute and deliver this Agreement and each
other document or instrument related hereto or contemplated by the transactions
with the Purchaser, and to carry out the terms hereof and thereof. None of the
foregoing actions will (i) violate any provision of such Purchaser's by-laws,
charter or other similar organizational documents, if applicable, (ii) result in
the breach of or constitute a default under any contract, agreement or
instrument to which such Purchaser is a party or by which it is bound or (iii)
violate any order, writ, judgment, injunction, decree, statute, rule or
regulation of any court, tribunal or governmental entity or authority applicable
to or bearing upon such Purchaser or any of its assets or business except, as to
(iii) above, as would not have a Material Adverse Effect.

      

      4.2            Enforceability,
etc. This Agreement has been duly executed and delivered by the Purchaser
and is within the power and authority of the Purchaser, and constitutes the
legal, valid and binding obligation of the Purchaser enforceable against it in
accordance with its respective terms, except as the enforceability thereof may
be limited by bankruptcy, insolvency, moratorium, reorganization or other
similar laws affecting creditors' rights generally and subject to general
principles of equity (regardless of whether considered in a proceeding in equity
or at law).

      

      4.3            Investment
Representations.

      

      (a)           Purchaser
is an “Accredited Investor” as that term is defined in Rule 501(a) of Regulation
D of the 33 Act, as amended, and is able to bear the economic risk of its
purchase of the Common Stock for an indefinite period of time because the Common
Stock is being issued and sold under exemptions from registration provisions of
the 33 Act and under applicable state securities laws and, therefore, cannot be
sold unless subsequently registered under the 33 Act or applicable state
securities laws or an exemption from such registrations is
available.

      

      (b)           Purchaser
acknowledges that the shares of Common Stock have not been registered under the
33 Act, or qualified under the laws of any state, or any other applicable
blue-sky laws in reliance, in part, on the representations and warranties
herein.  Purchaser understands that the Common Stock is being offered
pursuant to the exemption from registration provided by Sections 4(2) and 4(6)
of the 33 Act, as amended. Purchaser is acquiring such shares of Common Stock
for investment purposes for Purchaser's own account, and not for resale or with
a view to distribution of all or any of shares of the Common
Stock.  No other person will have any direct or indirect beneficial
interest in the Common Stock.

      

      (c)           Purchaser
understands that the Common Stock is, and will be, “Restricted Securities” under
the federal securities laws in that such shares of Common Stock will be acquired
from the Company in a transaction not involving a public offering, and that
under such laws and applicable regulations such Common Stock may be resold
without registration under the Act only in certain limited circumstances and
that otherwise such Common Stock must be held indefinitely. In this connection,
Purchaser represents that Purchaser understand the resale limitations imposed by
the 33 Act and is familiar with Rule 144 of the 33 Act, as presently in effect,
and the condition which must be meet in order for that rule to be available for
resale of “Restricted Securities,” including the requirement that the Purchaser
Shares must be held for at least one year after purchase thereof from the
Company prior to resale (two years in the absence of publicly available
information about the Company) and the condition that there be available to the
public current information about the Company under certain
circumstances.

      

      4.4            Adequate
Access to Personnel and Materials. During the negotiation of the
transactions contemplated herein, the Purchaser and its representatives have
been afforded access to the Company's corporate books, financial statements and
records, have been afforded an opportunity to ask such questions of the
Company's officers and directors concerning the Company's business, operations,
financial condition, assets, liabilities and other relevant matters, and have
been given all such information as has been requested, in order to evaluate the
merits and risks of the prospective investment contemplated herein.

      

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

      ARTICLE
V.

      

      COVENANTS AND OTHER
AGREEMENTS OF THE PARTIES

      

      5.1           Stock
Certificate Legend.   Each certificate representing Common
Stock will be imprinted with a legend in substantially the following
form:

      

      
        	
                 
      

              	
                (a)

              	
                “THE SECURITIES REPRESENTED BY
      THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
      1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD,
      TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT PURSUANT TO A
      REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE
      UNDER SUCH ACT AND UNDER ANY APPLICABLE STATE SECURITIES LAWS UNLESS, IN
      THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, AN
      EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND STATE
      SECURITIES LAWS IS
AVAILABLE.”

              

      

      

      (b)           Any
legend required by applicable state securities laws.

      

      5.2           Purchaser’s
Right to Participate in Future Financing.  If the Company
should issue any debt or equity during the period commencing the day after the
Closing and for two years thereafter, the Purchaser shall have the right of
first refusal to participate therein on the same terms.  Should the
Company issue any Common Stock or securities convertible into Common Stock
during such period, the Purchaser shall be entitled to purchase that amount of
securities that would enable it to maintain the same percentage of Common Stock
in the Company that it had immediately following the Closing.  Should
the Company issue any debt securities, the Purchaser will be entitled to
purchase up to 18.75% of the principal amount of the debt being
offered.  The Company shall furnish to the Purchaser all of the
information being furnished to prospective participants in any offering
contemplated hereunder, and the Purchaser shall notify the Company of its
intentions not less than five days before the initially-scheduled closing date
for such offering.

      

      ARTICLE
VI.

      

      CLOSING
CONDITIONS

      

      6.1            Closing
Conditions. The obligation of Purchaser to purchase the Common Stock on
the Closing Date shall be subject to satisfaction of the following conditions on
or prior to such date:

      

      (a)           The
representations and warranties of the Company shall be true and correct in all
material respects as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date) and the Company
shall have performed, satisfied and complied with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing Date.

      

      (b)           The
Board of Directors of the Company shall have adopted resolutions authorizing the
transactions contemplated by this Agreement which shall be in full force and
effect without any amendment or supplement thereto as of the Closing
Date.

      

      (c)           As
of the Closing Date, the Company shall have reserved out of its authorized and
unissued Common Stock, shares of Common Stock solely for the purpose of and in
an amount sufficient for consummating the sale of the Common Stock
hereunder.

      

      (d)           No
Event of Default (as defined in Article VIII) has occurred, or any event which,
after notice and/or lapse of time, would become an event of default has
occurred.

      

      (e) The
Company shall have provided the Purchaser with the information requested by the
Purchaser in connection with its due diligence requests made prior to the
Closing.

      

      (f) The
Company shall have received additional capital of at least $500,000 for the
purchase of its Common Stock from sources other than the Purchaser, or in the
Purchaser’s sole discretion. a commitment to receive such additional capital of
at least $500,000 satisfactory to the Purchaser.

      

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

      ARTICLE
VII.

      

      INDEMNIFICATION

      

      7.1           Indemnification.
In consideration of the Purchaser's execution and delivery of this Agreement
acquiring the securities hereunder and in addition to all of the Company's other
obligations under this Agreement, the Company shall, to the fullest extent of
the law, defend, protect, indemnify and hold harmless the Purchaser and all of
its Affiliates, shareholders, officers, directors, employees and direct or
indirect investors and any of the foregoing person's agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
“Indemnitees”) from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses
arising out of, related to or in connection therewith, and including reasonable
attorneys' fees and disbursements (the “Indemnified Liabilities”), incurred by
any Indemnitee as a result of, or arising out of, or relating to or incurred in
connection with (a) any misrepresentation or breach of any representation or
warranty made by the Company in this Agreement or any other certificate,
instrument or document contemplated hereby or thereby, (b) any breach of any
covenant, agreement or obligation of the Company contained in this Agreement or
any other certificate, instrument or document contemplated hereby or thereby, or
(c) any cause of action, suit or claim brought or made against such Indemnitee
and arising out of or resulting from the execution, delivery, performance or
enforcement of this Agreement or any other certificate, instrument or document
contemplated hereby or thereby, other than with respect to Indemnified
Liabilities which directly and primarily result from the gross negligence or
willful misconduct of the Indemnitee. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities which is permissible under applicable
law.

      

      ARTICLE
VIII.

      

      [This
Article VIII has been intentionally left blank]

      

      

      ARTICLE
IX.

      

      TERMINATION

      

      9.1           Termination.
This Agreement may be terminated at any time prior to the Closing:

      

      (a)           by
mutual consent of the Company and the Purchaser;

      

      (b)           by
either the Company if the Closing shall not have occurred by August 15, 2008;
provided, however, that the failure to consummate the transactions contemplated
hereby is not a result of the failure by the party so electing to terminate this
Agreement to perform any of its obligations hereunder.

      

      (c)           If,
pursuant to or within the meaning of any applicable bankruptcy law, the Company
commences a voluntary case or any Person commences a proceeding against the
Company, a custodian is appointed for the Company or for all or substantially
all of its property, or the Company makes a general assignment for the benefit
of its creditors, (any of which would be an Event of Default as described in
Sections 8 hereof) this Agreement shall automatically terminate without any
liability or payment to the Company without further action or notice by any
Person.

      

      Any
termination of this Agreement pursuant to this Section 9.1 shall be effected by
written notice from the Company to the Purchaser, or the Purchaser to the
Company, as the case may be, setting forth the basis for the termination hereof.
The representations and warranties of the Company and the Purchaser contained in
this Agreement, the indemnification provisions set forth in Section 7.1 hereof
and the provisions set forth in Section 10, shall survive any termination of
this Agreement.

      

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

      ARTICLE
X.

      

      MISCELLANEOUS

      

      10.1           Headings.
The headings of this Agreement are for convenience of reference and shall not
form part of, or affect the interpretation of, this Agreement.

      

      10.2           Severability.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement.

      

      10.3           Entire
Agreement; Amendments and Waivers.  This Agreement represent
the entire agreement between the parties hereto with respect to the subject
matter hereof.  Neither this Agreement nor any term hereof may be
changed, waived, discharged or terminated except by an instrument in writing
signed by the party or parties against which enforcement of such change, waiver,
discharge or termination is sought.

      

      10.4           [This
Section 10.4 is intentionally left blank]

      

      10.5           Notices.  All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice.  Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur.  The
addresses for such communications shall be: (i) if to the Company: 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 (ii) if to the Purchaser:  MKM Opportunity Master Fund, Limited,
644 Broadway, Fourth Floor, New York, New York 10012, facsimile ____________,
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:
..

      

      10.6           No
Assignment.  No right or obligation of any party shall be
assigned without the prior written of the other.

      

      10.7           No Third
Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective permitted successors and assigns, and is not
for the benefit of, nor may any provision hereof be enforced by, any other
person.

      

      10.8           Further
Assurances. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.

      

      10.9           [This
Section 10.9 is intentionally left blank]

      

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

      10.10           Remedies,
Other Obligations, Breaches and Injunctive Relief. The Purchaser's
remedies provided in this Agreement shall be cumulative and in addition to all
other remedies available to the Purchaser under this Agreement, at law or in
equity (including a decree of specific performance and/or other injunctive
relief), no remedy of the Purchaser contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing herein
shall limit the Purchaser's right to pursue actual damages for any failure by
the Company to comply with the terms of this Agreement. The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm to
the Purchaser and that the remedy at law for any such breach may be inadequate.
The Company therefore agrees that, in the event of any such breach or threatened
breach, the Purchaser shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the necessity of
showing economic loss and without any bond or other security being
required.

      

      10.11           Attorneys'
Fees and Costs.  If this Agreement gives rise to a lawsuit or
other legal proceeding between any of the parties hereto, the prevailing party
shall be entitled to recover court costs, necessary disbursements (including
expert witnesses' fees) and reasonable attorneys' fees, in addition to any other
relief such party may be entitled.

      

      10.12           Failure
or Indulgence not Waiver. No failure or delay in the
exercise of any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege.

      

      10.13           Governing
Law; Jurisdiction.   This Agreement
shall be governed by and construed in accordance with the laws of the State of
New York, without regard to conflicts of laws principles
that would result in the application of the substantive laws of another
jurisdiction. Any action brought by any party against the others
concerning the transactions contemplated by this Agreement shall be brought only
in the state or federal courts located in the County of New York, State of New
York. All parties agree to submit to the jurisdiction of such courts. The
prevailing party or parties shall be entitled to recover from the losing party
or parties its reasonable attorney’s fees and costs. In the event that any
provision of this Agreement is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law.  Any such provision which may prove
invalid or unenforceable under any law shall not affect the validity or
enforceability of any other provision of this Agreement.  Nothing
contained herein shall be deemed or operate to preclude either party hereto from
bringing suit or taking other legal action against the other in any other
jurisdiction to enforce a judgment of any court located in New York County, City
and State of New York, in favor of the prevailing party.

      

      10.15           Counterparts.
This Agreement may be executed in two or more identical counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each party and delivered to the other
party; provided that a facsimile signature shall be considered due execution and
shall be binding upon the signatory thereto with the same force and effect as if
the signature were an original, not a facsimile signature.

      

      IN
WITNESS WHEREOF, Purchaser has executed, or caused this Agreement to be executed
by signing the attached Signature Page.

      
 

      
        
          	 	 	 Ethos
      Environmental, Inc.	 
	 Dated: 	 	 	
                   

                	 
	 	 	
                  By: Enrique
      de Vilmorin, CEO

                	 
	 	 	
                   

                	 

        

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

      
        STOCK
PURCHASE AGREEMENT - SIGNATURE PAGE

      

      

      This page
constitutes the Signature Page to the Stock Purchase Agreement. The undersigned
represents to the Company that the Undersigned has read and understands the
terms and conditions as set forth in the Stock Purchase Agreement and agrees to
be bound by such terms and conditions.  It is expressly agreed that
the parties may execute this Signature Page to the Stock Purchase Agreement in
counter parts and via facsimile signature and such facsimile signature pages
shall be treated as originals for all purposes.

       

      
        

        
          
            	 	 	 MKM
      Opportunity Master Fund, Limited	 
	Dated:    	 	 	
                     

                  	 
	 	 	
                    By: 

                  	 
	 	 	
                     

                  	 

          

        

      

      
 

      
        
           

        

        
          10

          
            

          

        

        
           

        

      

      SCHEDULE
2.1

      

      

       

      
        	
                 Purchaser’s
      Name and Address     

              	
                 Amount
      Purchased   

              	
                 Shares
      Purchased

              
	 
      
                MKM
      Opportunity Master Fund,
      Limited                                                                                                        

                644
      Broadway

                Fourth
      Floor,

                New
      York, New York 10012

              	
                $300,000 

              	
                 909,091

              
	
                 

                TOTAL

              	
                 

                $300,000 

              	
                 

                909,091

              

      

       

                   

      
        
           

        

        
          11

          
            

          

        

        
           

        

      

      
           SCHEDULE
3.13

      

      

      Securities Rights and
Options

      

      

      
        	
                1.

              	
                A
      warrant to purchase 1,900,000 shares of common stock at $2.50 per share
      has been issued to National Advisors, Inc. This Warrant expires March 31,
      2010.

              

      

      

      
        	
                2.

              	
                The
      Company is currently in negotiations with GreenBridge Capital Partners,
      LLC, (“GreenBridge”) to settle a pending matter by and between the Company
      and GreenBridge and it is anticipated that during the course of the
      negotiations the Company will issue to GreenBridge a Warrant as part of
      the settlement. The
      issuance of any such Warrant shall be deemed to have occurred prior to the
      execution of the Stock Purchase Agreement, for which this Schedule
      attached.

              

      

       

    

    
      
         

      

      
        12

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