Exhibit 10.1
SECURITIES
PURCHASE AGREEMENT
This SECURITIES
PURCHASE AGREEMENT (this “Agreement”), executed on
this ___ day of May, 2009, is made and entered into by and between
Ethos Environmental, Inc., a Nevada corporation, with its principal executive offices located at 6800 Gateway Park Drive San Diego,
California 92154 (the “Company”), and each
purchaser identified on the signature pages hereto (each, including
its successors and assigns, a “ Purchaser ” and
collectively the “ Purchasers ”).
WHEREAS
, subject to the terms
and conditions set forth in this Agreement and pursuant to Section
4(2) of the Securities Act of 1933, as amended (the “
Securities Act ”), and Rule 506 of Regulation D
promulgated thereunder, the Company desires to issue and sell to
Purchaser, and Purchaser desires to purchase from the Company,
securities of the Company as more fully described in this
Agreement; and,
WHEREAS
, the Purchasers,
severally and not jointly, desire to purchase and the Company
desires to issue and sell to the Purchasers, in each case upon the
terms and subject to the conditions set forth in this Agreement:
(i) 10% convertible promissory notes of the Company in the
aggregate principal amount of up to Two-Hundred Thousand Dollars
($200,000) (a “Note” or the “Notes”), and
(ii) common stock purchase warrants to purchase shares of the
Company’s par value $.0001 common stock (a
“Warrant” or the “Warrants”).
NOW
THEREFORE ,
in consideration of the foregoing and the representations,
warranties, covenants and agreements herein contained, the Company
and each of the Purchasers severally (and not jointly) hereby agree
as follows:
1.
Purchase and Sale
of Units .
(a)
Sale and Issuance
of Units . Subject to the terms and
conditions of this Agreement, each Purchaser agrees to purchase at
the Closing (as defined below), and upon payment of the Purchase
Price (as defined below), the Company agrees to sell and issue to
each Purchaser a unit or units (the “Units”). Each Unit
shall consist of the following:
(i)
a convertible
promissory note in substantially the form attached to this
Agreement as Exhibit A (the “ Note ”),
with a term of two years, which may be convertible into common
stock of the Company on the terms stated therein;
(ii)
a common stock purchase
warrant, in the form of Exhibit B (the “
Warrant ”), for the right to purchase that number of
shares of Company Common Stock equal to 50,000 shares per Unit
purchased, which shall be exercisable immediately and have a two
year term of exercise at an exercise price of $0.40 per share;
and,
(iii)
an incentive bonus
allotment of 10,000 shares of the Company’s common stock (the
“Incentive Shares”).
(b)
Form of
Payment .
On the Closing Date: (i) each Purchaser shall pay the
Purchase Price (as hereinafter defined) for each Unit at the
Closing (as defined below) by wire transfer of immediately
available funds to the Company, in accordance with the
Company’s written wiring instructions, and (ii) the
Company shall deliver such Notes and Warrants duly executed on
behalf of the Company, to such Purchaser, against delivery of such
Purchase Price.
(c)
Closing
Date .
Subject to the satisfaction (or written waiver) of the
conditions thereto set forth in Section 5 and Section 6 below, the
date and time of the issuance and sale of the Notes and the
Warrants pursuant to this Agreement (the “Closing
Date”) shall be 10:00 a.m., Pacific time, on the date first
written above, or such other mutually agreed upon time. The
closing of the transactions contemplated by this Agreement (the
“Closing”) shall occur on the Closing Date at such
location as may be agreed to by the parties and may be undertaken
remotely by facsimile or other electronic transmission.
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(d)
Separate Agreements
and Sales .
The Company’s agreements with each of the Purchasers
are separate agreements, and the sales of the Units to each of the
Purchasers are separate sales.
(e)
Purchase Price;
Minimum and Maximum . The Purchase Price per
Unit is $25,000.00 (the “ Purchase Price ”) and
the Company is offering 8 Units for gross proceeds of
$200,000.00.
2.
Representations
and Warranties of the Purchasers . Each Purchaser severally
(and not jointly) represents and warrants to the Company solely as
to such Purchaser that:
(a)
Investment
Purpose .
As of the date hereof, the Purchaser is purchasing the Notes
and the Warrants and the shares of Common Stock issuable upon
exercise thereof (the “Warrant Shares” and,
collectively the Notes, Warrants, and Bonus Shares the
“Securities”) for its own account and not with a view
towards the public sale or distribution thereof, except pursuant to
sales registered or exempted from registration under the Securities
Act; provided, however , that by making the representations
herein, the Purchaser does not agree to hold any of the Securities
for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or
pursuant to a registration statement or an exemption under the
Securities Act.
(b)
Accredited Investor
Status .
The Purchaser is an “accredited investor,” as
that term is defined in Rule 501(a) of Regulation D promulgated
under the Securities Act (an “ Accredited Investor
”), and Purchaser has completed the “Investor
Questionnaire” as attached hereto as Annex B
.
(c)
Reliance on
Exemptions .
The Purchaser understands that the Securities are being
offered and sold to it in reliance upon specific exemptions from
the registration requirements of United States federal and state
securities laws and that the Company is relying upon the truth and
accuracy of, and the Purchaser’s compliance with, the
representations, warranties, agreements, acknowledgments and
understandings of the Purchaser set forth herein in order to
determine the availability of such exemptions and the eligibility
of the Purchaser to acquire the Securities.
(d)
Information . The Purchaser and its
advisors, if any, have been furnished with all materials relating
to the business, finances and operations of the Company and
materials relating to the offer and sale of the Securities which
have been requested by the Purchaser or its advisors. The
Purchaser and its advisors, if any, have been afforded the
opportunity to ask questions of the Company. Notwithstanding the
foregoing representations, neither such inquiries nor any other due
diligence investigation conducted by Purchaser or any of its
advisors or representatives shall modify, amend or affect
Purchaser’s right to rely on the Company’s
representations and warranties contained in Section 3 below.
(e)
No Governmental
Review .
The Purchaser understands that no United States federal or
state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the
Securities.
(f)
Transfer or
Resale .
The Purchaser understands that:
(i)
the sale or resale of
the Securities has not been and is not being registered under the
Securities Act or any applicable state securities laws, and the
Securities may not be transferred unless:
(A)
the Securities are sold
pursuant to an effective registration statement under the
Securities Act,
(B)
the Purchaser shall
have delivered to the Company, at the cost of the Company, a
customary opinion of counsel that shall be in form, substance and
scope reasonably acceptable to the Company, to the effect that the
Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration,
(C)
the Securities are sold
or transferred to an “affiliate” (as defined in Rule
144 promulgated under the Securities Act (or a successor rule)
(“Rule 144”)) of the Purchaser who agrees to sell or
otherwise transfer the Securities only in accordance with this
Section 2(f) and who is an Accredited Investor,
(D)
the Securities are sold
pursuant to Rule 144, or
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(E)
the Securities are sold
pursuant to Regulation S under the Securities Act (or a successor
rule) (“Regulation S”),
and, in each case, the
Purchaser shall have delivered to the Company, at the cost of the
Company, a customary opinion of counsel, in form, substance and
scope reasonably acceptable to the Company;
(ii)
neither the Company nor
any other person is under any obligation to register such
Securities under the Securities Act or any state securities laws or
to comply with the terms and conditions of any exemption
thereunder.
(g)
Legends
. The Purchaser
understands that the Securities shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be
placed against transfer of the certificates for such
Securities):
“The securities
represented by this certificate have not been registered under the
Securities Act of 1933, as amended. The securities may not be
sold, transferred or assigned in the absence of an effective
registration statement for the securities under said Act, or an
opinion of counsel, in form, substance and scope customary for
opinions of counsel in comparable transactions, that registration
is not required under said Act or unless sold pursuant to Rule 144
or Regulation S under said Act.”
The legend set forth
above shall be removed and the Company shall issue a certificate
without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by applicable state
securities laws: (i) such Security is registered for sale under an
effective registration statement filed under the Securities Act or
otherwise may be sold pursuant to Rule 144 or Regulation S without
any restriction as to the number of securities as of a particular
date that can then be immediately sold or (ii) such holder provides
the Company with a reasonable and customary opinion of counsel to
the effect that a public sale or transfer of such Security may be
made without registration under the Securities Act. The
Purchaser agrees to sell all Securities, including those
represented by a certificate(s) from which the legend has been
removed, in compliance with applicable prospectus delivery
requirements, if any.
(h)
Authorization;
Enforcement . Each document to
which the Purchaser is a party: (i) has been duly and validly
authorized, (ii) has been duly executed and delivered on behalf of
the Purchaser, and (iii) will constitute, upon execution and
delivery by the Purchaser thereof and the Company, the valid and
binding agreements of the Purchaser enforceable in accordance with
their terms, except to the extent limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors’ rights and
general principles of equity that restrict the availability of
equitable or legal remedies.
(i)
Residency
. The Purchaser is
a resident of the jurisdiction set forth immediately below such
Purchaser’s name on the signature pages hereto.
3.
Representations
and Warranties of the Company . The Company hereby
represents and warrants to each Purchaser as of the date hereof
(unless the context specifically indicates otherwise)
that:
(a)
Organization and
Qualification . The Company is a corporation
or other entity duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is
incorporated or organized, with full power and authority (corporate
and other) to own, lease, use and operate its properties and to
carry on its business as and where now owned, leased, used,
operated and conducted.
(b)
Authorization
. All corporate
action on the part of the Company, its officers and directors
necessary for the authorization, execution and delivery of this
Agreement and the authorization, sale, issuance and delivery of the
Units, and the performance of all obligations of the Company
hereunder and thereunder has been taken or will be taken prior to
the Closing. This Agreement when executed and delivered by
the Company, shall constitute valid and legally binding obligations
of the Company, enforceable against the Company in accordance with
their respective terms except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, and
other laws of general application affecting enforcement of
creditors’ rights generally, and as limited by laws relating
to the availability of specific performance, injunctive relief, or
other equitable remedies.
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(c)
SEC Documents;
Financial Statements . The Company has filed all
reports, schedules, forms, statements and other documents required
to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”) (all of the foregoing filed prior
to the date hereof and all exhibits included therein and financial
statements and schedules thereto and documents incorporated by
reference therein, being hereinafter referred to herein as the
“ SEC Documents ”). The SEC Documents are
in the form available to the public via the SEC’s EDGAR
system. As of the date hereof the Company has informed
Purchaser that the Company’s previously filed SEC Documents,
specifically, all financial statements filed since and including
the Annual Report on Form 10-KSB for the year ended December 31,
2006 may not be relied upon and that presently the Company is
undertaking to have all of such previously filed financial
statements restated to accurately reflect the Company’s
financial situation. Such restatement may have an adverse effect on
the Company.
(d)
No General
Solicitation . Neither the Company nor any person
participating on the Company’s behalf in the transactions
contemplated hereby has conducted any “general
solicitation,” as such term is defined in Regulation D
promulgated under the Securities Act, with respect to any of the
Securities being offered hereby.
(e)
Finder’s
Fee .
The Company may pay, where applicable, a reasonable
finder's fee (the “Fee”), not to exceed 10% of the
Purchase Price.
4.
Covenants
. In addition to
the other agreements and covenants set forth herein, the applicable
parties hereto hereby covenant as follows:
(a)
Stop
Orders .
The Company will advise each Purchaser promptly after it
receives notice of issuance by the SEC, any state securities
commission or any other regulatory authority of any stop order or
of any order preventing or suspending any offering of the
Securities, or of the suspension of the qualification of the Common
Stock of the Company for offering or sale in any jurisdiction, or
the initiation of any proceeding for any such purpose.
(b)
Form D; Blue Sky
Laws .
The Company agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy
thereof to each Purchaser promptly after such filing. The
Company shall, on or before the Closing Date, take such action as
the Company shall reasonably determine is necessary to qualify the
Securities for sale to the Purchasers at the applicable closing
pursuant to this Agreement under applicable securities or
“blue sky” laws of the states of the United States (or
to obtain an exemption from such qualification), and shall provide
evidence of any such action so taken to each Purchaser on or prior
to the Closing Date.
(c)
Authorization and
Reservation of Shares . The Company shall at all
times have authorized, and reserved for the purpose of issuance, a
sufficient number of shares of Common Stock to provide for the full
conversion or exercise of the outstanding Notes and Warrants and
issuance of the Warrant Shares in connection therewith (based on
the Exercise Price of the Warrants in effect from time to time) and
as otherwise required by the Notes (collectively, the
“Reserved Amount”). The Company shall not reduce
the number of shares of Common Stock reserved for issuance upon
exercise of the Warrants. If at any time the number of shares
of Common Stock authorized and reserved for issuance
(“Authorized and Reserved Shares”) is below the
Reserved Amount, the Company will promptly take all corporate
action nec
