Document:

ex10-2.htm

     

    
      

      

    

    
      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.

      
      

       

      
        	$550,000  	
                January
      ____, 2009

              
	 	 
	 	
                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 Five Hundred Fifty Thousand Dollars ($550,000), together
with interest as set forth herein. 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 September 30, 2009 (the “Maturity
Date”).   The amount payable upon the maturity of this
Note shall be equal to five hundred fifty thousand dollars
($550,000).  Notwithstanding anything in the foregoing, the entire
unpaid principal sum of this Note 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.  Simple
interest will accrue (on the basis of actual days elapsed in a 360-day year of
twelve 30-day months) at a rate equal to ten percent (10%) per annum on the
unpaid principal amount hereof beginning on January 1, 2009, until paid in full
or converted pursuant to Section 3, at which time the Company promises to pay
such interest (subject to the provisions of Section 3, if such payment is in
connection with a conversion of this Note).

       

      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 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 into shares of
the Company’s common stock at Conversion Price.

       

      (b)           Prepayment. The Company shall have
the right to prepay the principal 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
into shares of the Company’s common stock. Should the Holder elect to convert
the entire principal 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.

       

      
        
           

        

        
          1

          
            

          

        

        
           

        

      

      (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, Notes 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 Notes, 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

       

      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”).

       

      
        
           

        

        
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      (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 Notes 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).

       

      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.

       

      
        
           

        

        
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      (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 Notes 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 Notes, 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 Notes 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).

       

      (x)           Exercise Limitations.
The Company shall not effect any conversion of this Note, and Holder shall not
have the right to convert any portion of this Note, pursuant to Section 3 or
otherwise, to the extent that after giving effect to such issuance after
exercise as set forth on the applicable Notice of Exercise, the Holder (together
with the Holder’s Affiliates, and any other person or entity acting as a group
together with the Holder or any of the Holder’s Affiliates), would beneficially
own in excess of the Beneficial Ownership Limitation (as defined below). 
For purposes of the foregoing sentence, the number of shares of Common Stock
beneficially owned by the Holder and its Affiliates shall include the number of
shares of Common Stock issuable upon conversion of this Note with respect to
which such determination is being made, but shall exclude the number of shares
of Common Stock which would be issuable upon (A) exercise of the remaining,
non-converted portion of this Note beneficially owned by the Holder or any of
its Affiliates and (B) exercise or conversion of unexercised or nonconverted
portion of any other securities of the Company (including, without limitation,
any other  Common Stock Equivalents) subject to a limitation on
conversion or exercise analogous to the limitation contained herein beneficially
owned by the Holder or any of its affiliates.  Except as set forth in the
preceding sentence, for purposes of this Section 3(d)(x), beneficial ownership
shall be calculated in accordance with Section 13(d) of the Exchange Act and the
rules and regulations promulgated thereunder, it being acknowledged by the
Holder that the Company is not representing to the Holder that such calculation
is in compliance with Section 13(d) of the Exchange Act and the Holder is solely
responsible for any schedules required to be filed in accordance
therewith.   To the extent that the limitation contained in this
Section 3(d)(x) applies, the determination of whether this Note is convertible
(in relation to other securities owned by the Holder together with any
Affiliates) and of which portion of this Note is convertible shall be in the
sole discretion of the Holder, and the submission of a Notice of Conversion
shall be deemed to be the Holder’s determination of whether this Note is
convertible (in relation to other securities owned by the Holder together with
any Affiliates) and of which portion of this Note is convertible, in each case
subject to the Beneficial Ownership Limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such
determination.   In addition, a determination as to any group
status as contemplated above shall be determined in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated
thereunder.  For purposes of this Section 3(d)(x), in determining the
number of outstanding shares of Common Stock, a Holder may rely on the number of
outstanding shares of Common Stock as reflected in (x) the Company’s most recent
periodic or annual report, as the case may be, (y) a more recent public
announcement by the Company or (z) any other notice by the Company or the
Transfer Agent setting forth the number of shares of Common Stock
outstanding.  Upon the written or oral request of a Holder, the Company
shall within two Trading Days confirm orally and in writing to the Holder the
number of shares of Common Stock then outstanding.  In any case, the number
of outstanding shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company, including this Note, by
the Holder or its Affiliates since the date as of which such number of
outstanding shares of Common Stock was reported.  The “Beneficial Ownership
Limitation” shall be 9.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common
Stock issuable upon conversion of this Note.  The provisions of this
paragraph shall be construed and implemented in a manner otherwise than in
strict conformity with the terms of this Section 3(d)(x) to correct this
paragraph (or any portion hereof) which may be defective or inconsistent with
the intended Beneficial Ownership Limitation herein contained or to make changes
or supplements necessary or desirable to properly give effect to such
limitation. The limitations contained in this paragraph shall apply to a
successor holder of this Note.  Notwithstanding the forgoing, the
Holder at its sole discretion, may waive the Beneficial Ownership Limitation of
9.99% upon 61 days notice to the Company.

       

      
        
           

        

        
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      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.

       

      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. All questions concerning the construction, validity, enforcement and
interpretation of this Note shall be governed by and construed and enforced in
accordance with the internal laws of the State of California, without regard to
the principles of conflicts of law thereof.  Each party agrees that
all legal proceedings concerning the interpretations, enforcement and defense of
the transactions contemplated by this Note (whether brought against a party
hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of San Diego.  Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of Los San Diego for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
improper or is an inconvenient venue for such proceeding.  Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof
via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices and agrees that
such service shall constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way
any right to serve process in any other manner permitted by law.  If
either party shall commence an action or proceeding to enforce any provisions of
this Note, then the prevailing party in such action or proceeding shall be
reimbursed by the other party for its reasonable attorneys’ fees and other costs
and expenses incurred with the investigation, preparation and prosecution of
such action or procequestions concerning the construction, validity, enforcement
and interpretation of this Note.

       

      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. 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.

       

      11. 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.

       

      12. 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:	________________________	 	 
	 	Corey P.
      Schlossmann, CEO	 	 

      

       

      Address
& Fax for Notice:

      6800
Gateway Park Drive

      San
Diego, Ca 92154

      Fax:
619.575.9300

    

    
      
         

      

      
        6ex10-3.htm

     

    
      

      

    

    
      NEITHER
THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF
THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN SECURED BY SUCH SECURITIES.

       

      COMMON
STOCK PURCHASE WARRANT

      

       ETHOS
ENVIRONMENTAL, INC.

       

      
      

       

      
        	Warrant Shares:
      1,500,000 	
                 Initial
      Exercise Date: December   ___, 2008

              
	 	 

      

       

      THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies
that, for value received, MKM Opportunity Master Fund, Limited, a Cayman Islands
corporation (the “Holder”) is entitled,
upon the terms and subject to the limitations on exercise and the conditions
hereinafter set forth, at any time on or after the date hereof (the “Initial Exercise
Date”) and on or prior to the close of business on the fifth year
anniversary of the Initial Exercise Date (the “Termination Date”)
but not thereafter, to subscribe for and purchase from Ethos Environmental,
Inc., a Nevada corporation (the “Company”), up to
1,500,000 shares (the “Warrant Shares”) of
Common Stock.  The purchase price of one share of Common Stock under
this Warrant shall be equal to the Exercise Price, as defined in Section
2(b).

       

      Section
1.                      Definitions.

       

      “Affiliate” means any
Person that, directly or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with a Person, as such terms are
used in and construed under Rule 405 under the Securities Act.  With
respect to a Holder, any investment fund or managed account that is managed on a
discretionary basis by the same investment manager as such Holder will be deemed
to be an Affiliate of such Holder.

      

      “Board of Directors”
means the board of directors of the Company.

      

      “Business Day” means
any day except any Saturday, any Sunday, any day which is a federal legal
holiday in the United States or any day on which banking institutions in the
State of New York are authorized or required by law or other governmental action
to close.

      

      “Commission” means the
Securities and Exchange Commission.

      

      “Common Stock” means
the common stock of the Company, par value $0.001 per share, and any other class
of securities into which such securities may hereafter be reclassified or
changed into.

      

      “Common Stock
Equivalents” means any securities of the Company or the subsidiaries
which would entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into or exercisable
or exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.

      

      “Exchange Act” means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.

      

      
        
           

        

        
          1

          
            

          

        

        
           

        

      

      “Rule 144” means Rule
144 promulgated by the Commission pursuant to the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such
Rule.

       

      “Securities Act” means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.

       

      “Trading Day” means a
day on which the New York Stock Exchange is open for trading.

       

      “Trading Market” means
any market or exchanges on which the Common Stock is listed or quoted for
trading on the date in question.

       

      “Transfer Agent” means
Action Stock Transfer, the current transfer agent of the Company with a mailing
address of 7069 S. Highland Dr., Suite 300, Salt Lake City, UT 84121, and a
facsimile number of (801) 274-1099, and any successor transfer agent of the
Company.

       

      “Variable Rate
Transaction” means 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 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.

       

      “VWAP” means, for any
date, the price determined by the first of the following clauses that applies:
(a) if the Common Stock is then listed or quoted on a Trading Market, the daily
volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed
or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m.
New York City time to 4:02 p.m. New York City time); (b)  if the OTC
Bulletin Board is not a Trading Market, the volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the OTC Bulletin
Board; (c) if the Common Stock is not then listed or quoted on the OTC Bulletin
Board and if prices for the Common Stock are then reported in the “Pink Sheets”
published by Pink Sheets, LLC (or a similar organization or agency succeeding to
its functions of reporting prices), the most recent bid price per share of the
Common Stock so reported; or (d) in all other cases, the fair market value
of a share of Common Stock as determined by an independent appraiser selected in
good faith by the Purchasers of a majority in interest of the Securities then
outstanding and reasonably acceptable to the Company, the fees and expenses of
which shall be paid by the Company.

       

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      Section
2.                      Exercise.

       

      a) Exercise of
Warrant.  Exercise of the purchase rights represented by this
Warrant may be made, in whole or in part, at any time or times on or after the
Initial Exercise Date and on or before the Termination Date by delivery to the
Company of a duly executed facsimile copy of the Notice of Exercise Form annexed
hereto (or such other office or agency of the Company as it may designate by
notice in writing to the registered Holder at the address of the Holder
appearing on the books of the Company); and, within 3 Trading Days of the date
said Notice of Exercise is delivered to the Company, the Company shall have
received  payment of the aggregate Exercise Price of the shares
thereby purchased by wire transfer or cashier’s check drawn on a United States
bank. Notwithstanding anything herein to the contrary, the Holder shall not be
required to physically surrender this Warrant to the Company until the Holder
has purchased all of the Warrant Shares available hereunder and the Warrant has
been exercised in full, in which case, the Holder shall surrender this Warrant
to the Company for cancellation within 3 Trading Days of the date the final
Notice of Exercise is delivered to the Company.  Partial exercises of
this Warrant resulting in purchases of a portion of the total number of Warrant
Shares available hereunder shall have the effect of lowering the outstanding
number of Warrant Shares purchasable hereunder in an amount equal to the
applicable number of Warrant Shares purchased.  The Holder and the
Company shall maintain records showing the number of Warrant Shares purchased
and the date of such purchases.  The Company shall deliver any
objection to any Notice of Exercise Form within 1 Business Day of receipt of
such notice.  In the event of any dispute or discrepancy, the records
of the Holder shall be controlling and determinative in the absence of manifest
error. The Holder and any
assignee, by acceptance of this Warrant, acknowledge and agree that, by reason
of the provisions of this paragraph, following the purchase of a portion of the
Warrant Shares hereunder, the number of Warrant Shares available for purchase
hereunder at any given time may be less than the amount stated on the face
hereof.

       

      b) Exercise
Price.  The exercise price per share of the Common Stock under
this Warrant shall be $.25, subject to adjustment
hereunder (the “Exercise
Price”).

       

      

      c) Exercise Limitations.
The Company shall not effect any exercise of this Warrant, and a Holder shall
not have the right to exercise any portion of this Warrant, pursuant to Section
2 or otherwise, to the extent that after giving effect to such issuance after
exercise as set forth on the applicable Notice of Exercise, the Holder (together
with the Holder’s Affiliates, and any other person or entity acting as a group
together with the Holder or any of the Holder’s Affiliates), would beneficially
own in excess of the Beneficial Ownership Limitation (as defined below). 
For purposes of the foregoing sentence, the number of shares of Common Stock
beneficially owned by the Holder and its Affiliates shall include the number of
shares of Common Stock issuable upon exercise of this Warrant with respect to
which such determination is being made, but shall exclude the number of shares
of Common Stock which would be issuable upon (A) exercise of the remaining,
nonexercised portion of this Warrant beneficially owned by the Holder or any of
its Affiliates and (B) exercise or conversion of the unexercised or nonconverted
portion of any other securities of the Company (including, without limitation,
any other  Common Stock Equivalents) subject to a limitation on
conversion or exercise analogous to the limitation contained herein beneficially
owned by the Holder or any of its affiliates.  Except as set forth in the
preceding sentence, for purposes of this Section 2(c), beneficial ownership
shall be calculated in accordance with Section 13(d) of the Exchange Act and the
rules and regulations promulgated thereunder, it being acknowledged by the
Holder that the Company is not representing to the Holder that such calculation
is in compliance with Section 13(d) of the Exchange Act and the Holder is solely
responsible for any schedules required to be filed in accordance
therewith.   To the extent that the limitation contained in this
Section 2(c) applies, the determination of whether this Warrant is exercisable
(in relation to other securities owned by the Holder together with any
Affiliates) and of which portion of this Warrant is exercisable shall be in the
sole discretion of the Holder, and the submission of a Notice of Exercise shall
be deemed to be the Holder’s determination of whether this Warrant is
exercisable (in relation to other securities owned by the Holder together with
any Affiliates) and of which portion of this Warrant is exercisable, in each
case subject to the Beneficial Ownership Limitation, and the Company shall have
no obligation to verify or confirm the accuracy of such
determination.   In addition, a determination as to any group
status as contemplated above shall be determined in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated
thereunder.  For purposes of this Section 2(c), in determining the
number of outstanding shares of Common Stock, a Holder may rely on the number of
outstanding shares of Common Stock as reflected in (x) the Company’s most recent
periodic or annual report, as the case may be, (y) a more recent public
announcement by the Company or (z) any other notice by the Company or the
Transfer Agent setting forth the number of shares of Common Stock
outstanding.  Upon the written or oral request of a Holder, the Company
shall within two Trading Days confirm orally and in writing to the Holder the
number of shares of Common Stock then outstanding.  In any case, the number
of outstanding shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company, including this Warrant,
by the Holder or its Affiliates since the date as of which such number of
outstanding shares of Common Stock was reported.  The “Beneficial Ownership
Limitation” shall be 9.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common
Stock issuable upon exercise of this Warrant.  The Holder, upon not
less than 61 days’ prior notice to the Company, may increase or decrease the
Beneficial Ownership Limitation provisions of this Section 2(d), provided that
the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of
shares of the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock upon exercise of this Warrant held by the
Holder and the provisions of this Section 2(d) shall continue to
apply.  Any such increase or decrease will not be effective until the
61st
day after such notice is delivered to the Company.  The provisions of
this paragraph shall be construed and implemented in a manner otherwise than in
strict conformity with the terms of this Section 2(c) to correct this paragraph
(or any portion hereof) which may be defective or inconsistent with the intended
Beneficial Ownership Limitation herein contained or to make changes or
supplements necessary or desirable to properly give effect to such limitation.
The limitations contained in this paragraph shall apply to a successor holder of
this Warrant.  Notwithstanding the forgoing, the Holder at its sole
discretion, may waive the Beneficial Ownership Limitation of 9.99% upon 61 days
notice to the Company.

       

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      d) Mechanics of
Exercise.

       

      i. Delivery of Certificates
Upon Exercise.  Certificates for shares purchased hereunder
shall be transmitted by the Transfer Agent to the Holder by crediting the
account of the Holder’s prime broker with the Depository Trust Company through
its Deposit Withdrawal Agent Commission (“DWAC”) system if the
Company is a participant in such system and either (A) there is an effective
Registration Statement permitting the resale of the Warrant Shares by the Holder
or (B) the shares are eligible for resale without volume or manner-of-sale
limitations pursuant to Rule 144, and otherwise by physical delivery to the
address specified by the Holder in the Notice of Exercise within 3 Trading Days
from the delivery to the Company of the Notice of Exercise Form, surrender of
this Warrant (if required) and payment of the aggregate Exercise Price as set
forth above (“Warrant
Share Delivery Date”).  This Warrant shall be deemed to have
been exercised on the date the Exercise Price is received by the
Company.  The Warrant Shares shall be deemed to have been issued, and
Holder or any other person so designated to be named therein shall be deemed to
have become a holder of record of such shares for all purposes, as of the date
the Warrant has been exercised by payment to the Company of the Exercise Price
(or by cashless exercise) and all taxes required to be paid by the Holder, if
any, pursuant to Section 2(e)(vi) prior to the issuance of such shares, have
been paid..

       

      ii. Delivery of New Warrants
Upon Exercise.  If this Warrant shall have been exercised in
part, the Company shall, at the request of a Holder and upon surrender of this
Warrant certificate, at the time of delivery of the certificate or certificates
representing Warrant Shares, deliver to Holder a new Warrant evidencing the
rights of Holder to purchase the unpurchased Warrant Shares called for by this
Warrant, which new Warrant shall in all other respects be identical with this
Warrant.

       

      iii. Rescission
Rights.  If the Company fails to cause its the Transfer Agent
to transmit to the Holder a certificate or certificates representing the Warrant
Shares pursuant to Section 2(e)(i) by the Warrant Share Delivery Date, then the
Holder will have the right to rescind such exercise.

       

      iv. No Fractional Shares or
Scrip.  No fractional shares or scrip representing fractional
shares shall be issued upon the exercise of this Warrant.  As to any
fraction of a share which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall at its election, either pay a cash adjustment
in respect of such final fraction in an amount equal to such fraction multiplied
by the Exercise Price or round up to the next whole share.

       

      v. Charges, Taxes and
Expenses.  Issuance of certificates for Warrant Shares shall be
made without charge to the Holder for any issue or transfer tax or other
incidental expense in respect of the issuance of such certificate, all of which
taxes and expenses shall be paid by the Company, and such certificates shall be
issued in the name of the Holder or in such name or names as may be directed by
the Holder; provided, however, that in the
event certificates for Warrant Shares are to be issued in a name other than the
name of the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the Holder;
and the Company may require, as a condition thereto, the payment of a sum
sufficient to reimburse it for any transfer tax incidental thereto.

       

      vi. Closing of
Books.  The Company will not close its stockholder books or
records in any manner which prevents the timely exercise of this Warrant,
pursuant to the terms hereof.

       

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

      Section
3.                      Certain
Adjustments.

       

      a) Stock Dividends and
Splits. If the Company, at any time while this Warrant is outstanding:
(A) pays a stock dividend or otherwise make 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 upon exercise of this
Warrant), (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 Exercise 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
exercise of this Warrant shall be proportionately adjusted such that the
aggregate Exercise Price of this Warrant shall remain unchanged.  Any
adjustment made pursuant to this Section 3(a) 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.

       

      b) Subsequent Equity
Sales. If the Company or any Subsidiary thereof, as applicabe, shall sell
or grant any option to purchase, or sell or grant any right to reprice, or
otherwise dispose of or issue (or announce any offer, sale, grant or any option
to purchase or other disposition) any Common Stock or Common Stock Equivalents
entitling any Person to acquire shares of Common Stock, at an effective price
per share less than the then Exercise Price (such lower price, the “Base Share Price” and
such issuances collectively, a “Dilutive Issuance”)
(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 are 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 Exercise Price, such issuance shall be
deemed to have occurred for less than the Exercise Price on such date of the
Dilutive Issuance), then the Exercise Price shall be reduced and only reduced to
equal the Base Share Price and the number of Warrant Shares issuable hereunder
shall be increased such that the aggregate Exercise Price payable hereunder,
after taking into account the decrease in the Exercise Price, shall be equal to
the aggregate Exercise Price prior to such adjustment.  Such
adjustment shall be made whenever such Common Stock or Common Stock Equivalents
are issued.  The Company shall notify the Holder in writing, no later
than the Trading Day following the issuance of any Common Stock or Common Stock
Equivalents subject to this Section 3(b), indicating therein the applicable
issuance price, or applicable reset price, exchange price, conversion price and
other pricing terms (such notice the “Dilutive Issuance
Notice”).  For purposes of clarification, whether or not the
Company provides a Dilutive Issuance Notice pursuant to this Section 3(b), upon
the occurrence of any Dilutive Issuance, after the date of such Dilutive
Issuance the Holder is entitled to receive a number of Warrant Shares based upon
the Base Share Price regardless of whether the Holder accurately refers to the
Base Share Price in the Notice of Exercise.

       

      c) Subsequent Rights
Offerings.  If the Company, at any time while the Warrant is
outstanding, shall issue rights, options or warrants to all holders of Common
Stock (and not to Holders) entitling them to subscribe for or purchase shares of
Common Stock at a price per share less than the VWAP at the record date
mentioned below, then the Exercise Price shall be multiplied by a fraction, of
which the denominator shall be the number of shares of the Common Stock
outstanding on the date of issuance of such rights or warrants plus the number
of additional shares of Common Stock offered for subscription or purchase, and
of which the numerator shall be the number of shares of the Common Stock
outstanding on the date of issuance of such rights or warrants plus the number
of shares which the aggregate offering price of the total number of shares so
offered (assuming receipt by the Company in full of all consideration payable
upon exercise of such rights, options or warrants) would purchase at such
VWAP.  Such adjustment shall be made whenever such rights or warrants
are issued, and shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights, options or
warrants.

       

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

      d) Pro Rata
Distributions.  If the Company, at any time while this Warrant
is outstanding, shall distribute to all holders of Common Stock (and not to
Holders of the Warrants) 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(b)),
then in each such case the Exercise Price shall be adjusted by multiplying the
Exercise 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 VWAP determined as of the record
date mentioned above, and of which the numerator shall be such VWAP 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.  In either case the adjustments shall be
described in a statement provided 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.

       

      e) Fundamental
Transaction. If, at any time while this Warrant is outstanding, (A) the
Company effects any merger or consolidation of the Company with or into another
Person, (B) the Company effects any sale of all or substantially all of its
assets in one or a series of related transactions, (C) any tender offer or
exchange offer (whether by the Company or another Person) is completed pursuant
to which holders of Common Stock are permitted to tender or exchange their
shares for other securities, cash or property, or (D) the Company effects any
reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property (each “Fundamental
Transaction”), then, upon any subsequent exercise of this Warrant, the
Holder shall have the right to receive, for each Warrant Share that would have
been issuable upon such exercise immediately prior to the occurrence of such
Fundamental Transaction, the number of shares of Common Stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and any additional consideration (the “Alternate
Consideration”) receivable as a result of such merger, consolidation or
disposition of assets by a holder of the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such event. For purposes
of any such exercise, the determination of the Exercise Price shall be
appropriately adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall apportion the
Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration.  If holders of Common Stock are given any choice as to
the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration
it receives upon any exercise of this Warrant following such Fundamental
Transaction.  To the extent necessary to effectuate the foregoing
provisions, any successor to the Company or surviving entity in such Fundamental
Transaction shall issue to the Holder a new warrant consistent with the
foregoing provisions and evidencing the Holder’s right to exercise such warrant
into Alternate Consideration. The terms of any agreement pursuant to which a
Fundamental Transaction is effected shall include terms requiring any such
successor or surviving entity to comply with the provisions of this Section 3(e)
and insuring that this Warrant (or any such replacement security) will be
similarly adjusted upon any subsequent transaction analogous to a Fundamental
Transaction. Notwithstanding anything to the contrary, in the event of a
Fundamental Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3
transaction” as defined in Rule 13e-3 under the Exchange Act, or (3) a
Fundamental Transaction involving a person or entity not traded on a national
securities exchange, the Nasdaq Global Select Market, the Nasdaq Global Market,
or the Nasdaq Capital Market, the Company or any successor entity shall pay at
the Holder’s option, exercisable at any time concurrently with or within 30 days
after the consummation of the Fundamental Transaction, an amount of cash equal
to the value of this Warrant as determined in accordance with the Black Scholes
Option Pricing Model obtained from the “OV” function on Bloomberg L.P. using (i)
a price per share of Common Stock equal to the VWAP of the Common Stock for the
Trading Day immediately preceding the date of consummation of the
applicable  Fundamental Transaction, (ii) a risk-free interest rate
corresponding to the U.S. Treasury rate for a period equal to the remaining term
of this Warrant as of the date of consummation of the applicable Fundamental
Transaction and (iii) an expected volatility equal to the 100 day volatility
obtained from the “HVT” function on Bloomberg L.P. determined as of the Trading
Day immediately following the public announcement of the applicable Fundamental
Transaction.

       

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

      f) 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.

       

      g) Voluntary Adjustment By
Company. The Company may at any time during the term of this Warrant
reduce the then current Exercise Price to any amount and for any period of time
deemed appropriate by the Board of Directors of the Company.

       

      h) Notice to
Holder.

       

      i. Adjustment to Exercise
Price. Whenever the Exercise Price is adjusted pursuant to any provision
of this Section 3, the Company shall promptly mail to the Holder a notice
setting forth the Exercise Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment. If the Company enters into a
Variable Rate Transaction (as defined in the Purchase Agreement), despite the
prohibition thereon in the Purchase Agreement, 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.

       

      ii. Notice to Allow Exercise by
Holder. If (A) the Company shall declare a dividend (or any other
distribution in whatever form) on the Common Stock; (B) the Company shall
declare a special nonrecurring cash dividend on or a redemption of the Common
Stock; (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; (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; (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 Warrant Register of the Company,
at least 20 calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a 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 (y) 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 failure to mail such notice or any 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 exercise this Warrant during the period commencing on the date of
such notice to the effective date of the event triggering such
notice.

       

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

      Section
4.                      Transfer of
Warrant.

       

      a) Transferability.  Subject
to compliance with any applicable securities laws and the conditions set forth
in Section 4(d) hereof and to the provisions of Section 4.1 of the Purchase
Agreement, this Warrant and all rights hereunder (including, without limitation,
any registration rights) are transferable, in whole or in part, upon surrender
of this Warrant at the principal office of the Company or its designated agent,
together with a written assignment of this Warrant substantially in the form
attached hereto duly executed by the Holder or its agent or attorney and funds
sufficient to pay any transfer taxes payable upon the making of such
transfer.  Upon such surrender and, if required, such payment, the
Company shall execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees and in the denomination or denominations specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled.  A Warrant, if properly assigned, may be
exercised by a new holder for the purchase of Warrant Shares without having a
new Warrant issued.

       

      b) New Warrants. This
Warrant may be divided or combined with other Warrants upon presentation hereof
at the aforesaid office of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by the Holder or its agent or attorney.  Subject to compliance
with Section 4(a), as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice. All Warrants issued on transfers or exchanges shall be dated
the original Issue Date and shall be identical with this Warrant except as to
the number of Warrant Shares issuable pursuant thereto.

       

      c) Warrant Register. The
Company shall register this Warrant, upon records to be maintained by the
Company for that purpose (the “Warrant Register”),
in the name of the record Holder hereof from time to time.  The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, absent actual notice to the
contrary.

       

      d) Transfer
Restrictions. If, at the time of the surrender of this Warrant in connection with
any transfer of this Warrant, the transfer of this Warrant shall not be either
(i) registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws or
(ii) eligible for resale without volume or manner-of-sale restrictions pursuant
to Rule 144, the Company may require, as a condition of allowing such transfer,
that the Holder or transferee of this Warrant, as the case may be, comply with the provisions of Section 5.7 of the
Purchase Agreement.

       

      Section
5.                      Miscellaneous.

       

      a) No Rights as Shareholder
Until Exercise.  This Warrant does not entitle the Holder to
any voting rights or other rights as a shareholder of the Company prior to the
exercise hereof as set forth in Section 2(e)(i).

       

      b) Loss, Theft, Destruction or
Mutilation of Warrant. The Company covenants that upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant or any stock certificate relating to
the Warrant Shares, and in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it (which, in the case of the Warrant, shall
not include the posting of any bond), and upon surrender and cancellation of
such Warrant or stock certificate, if mutilated, the Company will make and
deliver a new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of such Warrant or stock certificate.

       

      c) Saturdays, Sundays,
Holidays, etc.  If the last or appointed day for the taking of
any action or the expiration of any right required or granted herein shall not
be a Business Day, then such action may be taken or such right may be exercised
on the next succeeding Business Day.

       

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

      d) Authorized
Shares.

       

      The
Company covenants that during the period the Warrant is outstanding, it will
reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of the Warrant Shares upon the exercise of
any purchase rights under this Warrant.  The Company further covenants
that its issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant.  The Company will
take all such reasonable action as may be necessary to assure that such Warrant
Shares may be issued as provided herein without violation of any applicable law
or regulation, or of any requirements of the Trading Market upon which the
Common Stock may be listed.  The Company covenants that all Warrant
Shares which may be issued upon the exercise of the purchase rights represented
by this Warrant will, upon exercise of the purchase rights represented by this
Warrant, be duly authorized, validly issued, fully paid and nonassessable and
free from all taxes, liens and charges created by the Company in respect of the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).

       

      Except
and to the extent as waived or consented to by the Holder, the Company shall not
by any action, including, without limitation, amending its certificate of
incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of Holder as set forth in this Warrant against
impairment.  Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to such increase in
par value, (b) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares upon the exercise of this Warrant, and (c) use commercially
reasonable efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as may be necessary
to enable the Company to perform its obligations under this
Warrant.

       

      Before
taking any action which would result in an adjustment in the number of Warrant
Shares for which this Warrant is exercisable or in the Exercise Price, the
Company shall obtain all such authorizations or exemptions thereof, or consents
thereto, as may be necessary from any public regulatory body or bodies having
jurisdiction thereof.

       

      e) Governing Law. All
questions concerning the construction, validity, enforcement and interpretation
of this Warrant shall be governed by and construed and enforced in accordance
with the internal laws of the State of California, without regard to the
principles of conflicts of law thereof.  Each party agrees that all
legal proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Warrant (whether brought against a party
hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of San Diego.  Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of Los San Diego for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
improper or is an inconvenient venue for such proceeding.  Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof
via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices and agrees that
such service shall constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way
any right to serve process in any other manner permitted by law.  If
either party shall commence an action or proceeding to enforce any provisions of
this Warrant, then the prevailing party in such action or proceeding shall be
reimbursed by the other party for its reasonable attorneys’ fees and other costs
and expenses incurred with the investigation, preparation and prosecution of
such action or procequestions concerning the construction, validity, enforcement
and interpretation of this Warrant.

       

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

      f) Restrictions.  The
Holder acknowledges that the Warrant Shares acquired upon the exercise of this
Warrant, if not registered or subject to resale pursuant to Rule 144, will have
restrictions upon resale imposed by state and federal securities
laws.

       

      g) Nonwaiver and
Expenses.  No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as a waiver of
such right or otherwise prejudice Holder’s rights, powers or remedies,
notwithstanding the fact that all rights hereunder terminate on the Termination
Date.  If the Company willfully and knowingly fails to comply with any
provision of this Warrant, which results in any material damages to the Holder,
the Company shall pay to Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys’ fees,
including those of appellate proceedings, incurred by Holder in collecting any
amounts due pursuant hereto or in otherwise enforcing any of its rights, powers
or remedies hereunder.

       

      h) Notices.  Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of (a) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number set forth on
the signature pages attached hereto prior to 5:30 p.m. (New York City time) on a
Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number set
forth on the signature pages attached hereto on a day that is not a Trading Day
or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second
Trading Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service, or (d) upon actual receipt by the party to whom such
notice is required to be given.  The address for such notices and
communications shall be:  (i) if to Holder, at its address of records
as contained in the Warrant Register, and (ii) if to Company, at its corporate
headquarters.

       

      i) Limitation of
Liability.  No provision hereof, in the absence of any
affirmative action by Holder to exercise this Warrant to purchase Warrant
Shares, and no enumeration herein of the rights or privileges of Holder, shall
give rise to any liability of Holder for the purchase price of any Common Stock
or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.

       

      j) Remedies.  Holder,
in addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Warrant.  The Company agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by it
of the provisions of this Warrant and hereby agrees to waive and not to assert
the defense in any action for specific performance that a remedy at law would be
adequate.

       

      k) Successors and
Assigns.  Subject to applicable securities laws, this Warrant
and the rights and obligations evidenced hereby shall inure to the benefit of
and be binding upon the successors of the Company and the successors and
permitted assigns of Holder.  The provisions of this Warrant are
intended to be for the benefit of all Holders from time to time of this Warrant
and shall be enforceable by the Holder or holder of Warrant Shares.

       

      l) Amendment.  This
Warrant may be modified or amended or the provisions hereof waived with the
written consent of the Company and the Holder.

       

      m) Severability.  Wherever
possible, each provision of this Warrant shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Warrant shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Warrant.

       

      n) Headings.  The
headings used in this Warrant are for the convenience of reference only and
shall not, for any purpose, be deemed a part of this Warrant.

       

       

          IN WITNESS
WHEREOF, the Company has caused this Warrant to be executed by its officer
thereunto duly authorized as of the date first above indicated.

       

      
        	
                ETHOS
      ENVIRONMENTAL, INC.

                 

              
	
                By:__________________________________________

                     Name:
      Corey Schlossmann

                     Title:
      CEO

                 

              
	 
      

      

      

        
          
             

          

          
            10

            
              

            

          

           

        
NOTICE
OF EXERCISE

      

      TO:           ETHOS
ENVIRONMENTAL, INC.

      

      (1) The
undersigned hereby elects to purchase ________ Warrant Shares of the Company
pursuant to the terms of the attached Warrant (only if exercised in full), and
tenders herewith payment of the exercise price in full, together with all
applicable transfer taxes, if any.

       

      (2) Payment
shall take the form of (check applicable box):

       

      [  ]
in lawful money of the United States; or

       

      [ ] the
cancellation of such number of Warrant Shares as is necessary, in accordance
with the formula set forth in subsection 2(c), to exercise this Warrant with
respect to the maximum number of Warrant Shares purchasable pursuant to the
cashless exercise procedure set forth in subsection 2(c).

       

      (3) Please
issue a certificate or certificates representing said Warrant Shares in the name
of the undersigned or in such other name as is specified below:

       

      _______________________________

      

      

      The
Warrant Shares shall be delivered to the following DWAC Account Number or by
physical delivery of a certificate to:

      

      _______________________________

      

      _______________________________

      

      _______________________________

      

      (4)  Accredited
Investor.  The undersigned is an “accredited investor” as
defined in Regulation D promulgated under the Securities Act of 1933, as
amended.

      

      [SIGNATURE
OF HOLDER]

      

      Name of
Investing Entity:
________________________________________________________________________

      Signature of Authorized Signatory of
Investing Entity:
_________________________________________________

      Name of
Authorized Signatory:
___________________________________________________________________

      Title of
Authorized Signatory:
____________________________________________________________________

      Date:
________________________________________________________________________________________

      

        
          
             

          

          
            11

            
              

            

          

           

        
ASSIGNMENT
FORM

      

      (To
assign the foregoing warrant, execute

      this form
and supply required information.

      Do not
use this form to exercise the warrant.)

      

      FOR VALUE
RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all
rights evidenced thereby are hereby assigned to

      
 

      _______________________________________________
whose address is

      

      _______________________________________________________________.

       

      _______________________________________________________________

      

      Dated:  ______________,
_______

      

      

      Holder’s
Signature:                                           _____________________________

      

      Holder’s
Address:                                _____________________________

      

      _____________________________

      

      

      

      Signature
Guaranteed:  ___________________________________________

      

      

      NOTE:  The
signature to this Assignment Form must correspond with the name as it appears on
the face of the Warrant, without alteration or enlargement or any change
whatsoever, and must be guaranteed by a bank or trust
company.  Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.

        
          
             

          

          
            12

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