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ex4_4.htm

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT
SECURED BY THE SECURITIES.

Principal Amount: $40,000.00                                                                                                Issue
Date: March 12, 2010

Purchase Price: $40,000.00

CONVERTIBLE PROMISSORY NOTE

FOR VALUE RECEIVED, FLINT TELECOM GROUP, INC., a Nevada corporation (hereinafter called the “Borrower”), hereby promises to pay to the order of SEL NOMINEES LIMITED,
an Irish corporation, or registered assigns (the “Holder”) the sum of Forty Thousand Dollars ($40,000.00) together with any interest as set forth herein, on or before March 12, 2011 (the “Maturity Date”), and to make interest only payments each month on the unpaid principal balance hereof at the rate of eighteen percent (18%) (the “Interest Rate”) per month from the date hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon
acceleration or by prepayment or otherwise.  This Note may be prepaid in whole or in part at any time. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty five percent (25%) per month from the due date thereof until the same is paid (“Default Interest”).  Interest shall commence accruing on the Issue Date, shall be computed on the basis of a 365-day year and the actual number of days elapsed.  All payments
due hereunder (to the extent not converted into common stock, $0.01 par value per share (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of America.  All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note.  Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business
day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date.  As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York
are authorized or required by law or executive order to remain closed.

  

  

  

This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.

The following terms shall apply to this Note:

ARTICLE I. CONVERSION RIGHTS

1.1           Conversion Right.  The Holder shall have the right from time to time, and at any time on or prior to the later of: (i) the Maturity Date; and (ii) the date of payment of the Default Amount (as
defined in Article III) pursuant to Section 1.6(a) or Article III, each in respect of the remaining outstanding principal amount of this Note to convert all or any part of the outstanding and unpaid principal amount of this Note into fully paid and non- assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the conversion price  (the
“Conversion Price”) determined as provided herein (a “Conversion”).  The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower by the Holder in accordance with Section 1.4
below; provided that the Notice of Conversion is submitted by facsimile (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New York, New York time on such conversion date (the “Conversion Date”).  The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2)
at the Borrower’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, provided, however, that the Company shall have the right to pay any or all interest in cash plus (3) at the Borrower’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4)
at the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.

1.2           Conversion Price.

(a)           Calculation of Conversion Price.  The Conversion Price shall be the Variable Conversion Price (as defined herein) (subject, in each case, to equitable adjustments for stock splits, stock dividends
or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events).  The “Variable Conversion Price” shall mean the Applicable Percentage (as defined herein) multiplied by the Market Price (as defined herein).  “Market Price” means the average of the lowest three (3) Trading Prices (as defined below) for
the Common Stock during the ten (10) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sent by the Holder to the Borrower via facsimile (the “Conversion Date”).  “Trading Price” means, for any security as of any date, the closing bid price on the Over-the-Counter Bulletin Board, or applicable trading market (the

  

  

  

“OTCBB”) as reported by a reliable reporting service (“Reporting Service”) mutually acceptable to Borrower and Holder and hereafter designated by Holders of a majority in interest of the Notes and the Borrower or, if the OTCBB is not the principal trading market for such security, the closing bid price of such security
on the principal securities exchange or trading market where such security is listed or traded or, if no closing bid price of such security is available in any of the foregoing manners, the average of the closing bid prices of any market makers for such security that are listed in the “pink sheets” by the National Quotation Bureau, Inc.  If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value
as mutually determined by the Borrower and the holders of a majority in interest of the Notes being converted for which the calculation of the Trading Price is required in order to determine the Conversion Price of such Notes.  “Trading Day” shall mean any day on which the Common Stock is traded for any period on the OTCBB, or on the principal securities exchange or other securities market on which the Common Stock is then being traded.  “Applicable Percentage” shall
mean 50%.

 

(b)           Conversion Price During Major Announcements.  Notwithstanding anything contained in Section 1.2(a) to the contrary, in the event the Borrower (i) makes a public announcement that it intends to
consolidate or merge with any other corporation (other than a merger in which the Borrower is the surviving or continuing corporation and its capital stock is unchanged) or sell or transfer all or substantially all of the assets of the Borrower or (ii) any person, group or entity (including the Borrower) publicly announces a tender offer to purchase 50% or more of the Borrower’s Common Stock (or any other takeover scheme) (the date of the announcement referred to in clause (i) or (ii) is hereinafter referred
to as the  “Announcement Date”), then the Conversion Price shall, effective upon the Announcement Date and continuing through the Adjusted Conversion Price Termination Date (as defined below), be equal to the lower of (x) the Conversion Price which would have been applicable for a Conversion occurring on the Announcement Date and (y) the Conversion Price that would otherwise be in effect. From and after the Adjusted Conversion Price Termination Date, the Conversion Price shall be determined
as set forth in this Section 1.2(a).  For purposes hereof,  “Adjusted Conversion Price Termination Date” shall mean, with respect to any proposed transaction or tender offer (or takeover scheme) for which a public announcement as contemplated by this Section 1.2(b) has been made, the date upon which the Borrower (in the case of clause (i) above) or the person, group or entity (in the case of clause (ii) above) consummates or publicly announces the termination or abandonment of
the proposed transaction or tender offer (or takeover scheme) which caused this Section 1.2(b) to become operative.

1.3           Authorized Shares.  The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares,
free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note issued pursuant to the Purchase Agreement.  The Borrower is required at all times to have authorized and reserved two times the number of shares that is actually issuable upon full conversion of the Note (based on the Conversion Price of the Notes in effect from time to time; initially 10,000,000 shares) (the “Reserved Amount”).  The Reserved Amount shall be increased
from time to time in accordance with the Borrower’s obligations pursuant to Section 4(g) of the Purchase Agreement.  The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable.  In

  

  

  

addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which the Notes shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient
number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Notes.  The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates
for shares of Common Stock in accordance with the terms and conditions of this Note.

 

If, at any time a Holder of this Note submits a Notice of Conversion, and the Borrower does not have sufficient authorized but unissued shares of Common Stock available to effect such conversion in accordance with the provisions of this Article I (a “Conversion Default”), the Borrower shall issue to the Holder all of the shares
of Common Stock which are then available to effect such conversion.  The portion of this Note which the Holder included in its Conversion Notice and which exceeds the amount which is then convertible into available shares of Common Stock (the “Excess Amount”) shall, notwithstanding anything to the contrary contained herein, not be convertible into Common Stock in accordance with the terms hereof until (and at the Holder’s option at any time after) the date additional shares of Common
Stock are authorized by the Borrower to permit such conversion, at which time the Conversion Price in respect thereof shall be the lesser of (i) the Conversion Price on the Conversion Default Date (as defined below) and (ii) the Conversion Price on the Conversion Date thereafter elected by the Holder in respect thereof.  In addition, the Borrower shall pay to the Holder payments (“Conversion Default Payments”) for a Conversion Default in the amount of (x) the sum
of (1) the then outstanding principal amount of this Note plus (2) accrued and unpaid interest on the unpaid principal amount of this Note through the Authorization Date (as defined below) plus (3) Default Interest, if any, on the amounts referred to in clauses (1) and/or (2), multiplied by (y) .24, multiplied
by (z) (N/365), where N = the number of days from the day the holder submits a Notice of Conversion giving rise to a Conversion Default (the “Conversion Default Date”) to the date (the “Authorization Date”) that the Borrower authorizes a sufficient number of shares of Common Stock to effect conversion of the full outstanding principal balance of this Note.  The Borrower shall use its best efforts to authorize a sufficient number of shares of Common Stock as soon as practicable
following the earlier of (i) such time that the Holder notifies the Borrower or that the Borrower otherwise becomes aware that there are or likely will be insufficient authorized and unissued shares to allow full conversion thereof and (ii) a Conversion Default.  The Borrower shall send notice to the Holder of the authorization of additional shares of Common Stock, the Authorization Date and the amount of Holder’s accrued Conversion Default Payments.  The accrued Conversion Default Payments
for each calendar month shall be paid in cash or shall be convertible into Common Stock (at such time as there are sufficient authorized shares of Common Stock) at the applicable Conversion Price, at the Borrower’s option, as follows:

(a)           In the event Holder elects to take such payment in cash, cash payment shall be made to Holder by the fifth (5th) day of the month following the month in which it has accrued; and

  

  

  

 

(b)           In the event Holder elects to take such payment in Common Stock, the Holder may convert such payment amount into Common Stock at the Conversion Price (as in effect at the time of conversion) at any time after the fifth day of the month following the month in which it
has accrued in accordance with the terms of this Article I (so long as there is then a sufficient number of authorized shares of Common Stock).

The Holder’s election shall be made in writing to the Borrower at any time prior to 6:00 p.m., New York, New York time, on the third day of the month following the month in which Conversion Default payments have accrued.  If no election is made, the Holder shall be deemed to have elected to receive cash.  Nothing
herein shall limit the Holder’s right to pursue actual damages (to the extent in excess of the Conversion Default Payments) for the Borrower’s failure to maintain a sufficient number of authorized shares of Common Stock, and each holder shall have the right to pursue all remedies available at law or in equity (including degree of specific performance and/or injunctive relief).

1.4           Method of Conversion.

(a)           Mechanics of Conversion.  Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at any time from time to time after the Issue Date, by (A) submitting to the
Borrower a Notice of Conversion (by facsimile or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower.

(b)           Surrender of Note Upon Conversion.  Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required
to physically surrender this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted.  The Holder and the Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion.  In the event of any dispute or discrepancy, such records of the Borrower shall, prima facie, be
controlling and determinative in the absence of manifest error.  Notwithstanding the foregoing, if any portion of this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder (upon payment by the Holder of any applicable transfer taxes) may request, representing in the aggregate the
remaining unpaid principal amount of this Note.  The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.

(c)           Payment of Taxes.  The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock or other securities
or property on conversion of this Note in a name other than

  

  

  

that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the Holder’s account) requesting the issuance thereof
shall have paid to the Borrower the amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid.

 

(d)           Delivery of Common Stock Upon Conversion.  Upon receipt by the Borrower from the Holder of a facsimile transmission (or other reasonable means of communication) of a Notice of Conversion meeting
the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common Stock issuable upon such conversion within three (3) business days after such receipt (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) (such second business day being hereinafter referred to as the “Deadline”) in accordance with the terms hereof
and the Purchase Agreement (including, without limitation, in accordance with the requirements of [Section 2(g)] of the Purchase Agreement that certificates for shares of Common Stock issued on or after the effective date of the Registration Statement upon conversion of this Note shall not bear any restrictive legend).

(e)           Obligation of Borrower to Deliver Common Stock.  Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon
such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations under this Article I, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion.  If the Holder shall have given a Notice of Conversion
as provided herein, the Borrower’s obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation
or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion.  The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of Conversion is received by the Borrower before 6:00 p.m., New York, New York time, on such date.

(f)           Delivery of Common Stock by Electronic Transfer.  In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Borrower’s transfer agent
is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions contained in Section 1.1 and in this Section 1.4, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock

  

  

  

issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system.

 

(g)           Failure to Deliver Common Stock Prior to Deadline.  Without in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties
agree that if delivery of the Common Stock issuable upon conversion of this Note is more than three (3) business days after the Deadline (other than a failure due to the circumstances described in Section 1.3 above, which failure shall be governed by such Section) the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock.  Such cash amount shall be paid to Holder by the fifth day of the month following the month
in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note.

1.5           Concerning the Shares.  The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless  (i) such shares are sold pursuant to an effective registration
statement under the Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of  counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act (or a successor rule) (“Rule 144”) or (iv)
such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined in the Purchase Agreement).  Except as otherwise provided in the Purchase Agreement (and subject to the removal provisions set forth below), until such time as the shares of Common Stock issuable upon conversion of this Note have been registered under the Act or otherwise
may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold, each certificate for shares of Common Stock issuable upon conversion of this Note that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS

  

  

  

SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

The legend set forth above shall be removed and the Borrower shall issue to the Holder a new certificate therefor free of any transfer legend if (i) the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that
a public sale or transfer of such Common Stock may be made without registration under the Act and the shares are so sold or transferred, (ii) such Holder provides the Borrower or its transfer agent with reasonable assurances that the Common Stock issuable upon conversion of this Note (to the extent such securities are deemed to have been acquired on the same date) can be sold pursuant to Rule 144 or (iii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale
by the Holder under an effective registration statement filed under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold.

1.6           Effect of Certain Events.

(a)           Effect of Merger, Consolidation, Etc.  At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower, the effectuation by the Borrower
of a transaction or series of related transactions in which more than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall either:  (i) be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such
transaction an amount equal to the Default Amount (as defined in Article III) or (ii) be treated pursuant to Section 1.6(b) hereof.  “Person” shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization.

(b)           Adjustment Due to Merger, Consolidation, Etc.  If, at any time when this Note is issued and outstanding and prior to conversion of all of the Notes, there shall be any merger, consolidation, exchange
of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to
receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect
to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion

  

  

  

Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof.  The Borrower shall not affect any transaction described in this Section 1.6(b) unless (a) it first gives,
to the extent practicable, thirty (30) days prior written notice (but in any event at least fifteen (15) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the
Borrower) assumes by written instrument the obligations of this Section 1.6(b).  The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.

 

(c)           Adjustment Due to Distribution.  If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase,
by way of return of capital or otherwise (including any dividend or distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to
the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.

(d)           Adjustment Due to Dilutive Issuance.  If, at any time when any Notes are issued and outstanding, the Borrower issues or sells, or in accordance with this Section 1.6(d) hereof is deemed to have
issued or sold, any shares of Common Stock for no consideration or for a consideration per share (before deduction of reasonable expenses or commissions or underwriting discounts or allowances in connection therewith) less than the Conversion Price in effect on the date of such issuance (or deemed issuance) of such shares of Common Stock (a “Dilutive Issuance”), then immediately upon the Dilutive Issuance, the Conversion Price will be reduced to the amount of the consideration per share received by
the Borrower in such Dilutive Issuance.

The Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or grants any warrants, rights or options (not including employee stock option plans), whether or not immediately exercisable, to subscribe for or to purchase Common Stock or other securities convertible into or exchangeable
for Common Stock (“Convertible Securities”) (such warrants, rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as “Options”) and the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share.  For purposes of the preceding sentence, the “price per share for which Common Stock is issuable
upon the exercise of such Options” is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or granting of all such Options, plus the minimum aggregate amount of additional consideration, if any, payable to the

  

  

  

Borrower upon the exercise of all such Options, plus, in the case of Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of additional consideration payable upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum
total number of shares of Common Stock issuable upon the exercise of all such Options (assuming full conversion of Convertible Securities, if applicable).  No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon exercise of such Options.

Additionally, the Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or sells any Convertible Securities, whether or not immediately convertible (other than where the same are issuable upon the exercise of Options), and the price per share for which Common Stock is issuable upon
such conversion or exchange is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share.  For the purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon such conversion or exchange” is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or sale of all such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Borrower upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities.  No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities.

(e)           Purchase Rights.  If, at any time when any Notes are issued and outstanding, the Borrower issues any convertible securities or rights to purchase stock, warrants, securities or other property
(the “Purchase Rights”) pro rata to the record holders of any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion contained herein) immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

(f)           Notice of Adjustments.  Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result of the events described in this Section 1.6, the Borrower, at its expense, shall
promptly compute such adjustment or readjustment and prepare and furnish to the Holder of a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based.  The Borrower shall, upon the written request at any time of the Holder, furnish to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the
amount, if any, of other securities or property which at the time would be received upon conversion of the Note.

  

  

  

 

1.7           Trading Market Limitations.  Unless permitted by the applicable rules and regulations of the principal securities market on which the Common Stock is then listed or traded, in no event shall the
Borrower issue upon conversion of or otherwise pursuant to this Note more than the maximum number of shares of Common Stock that the Borrower can issue pursuant to any rule of the principal United States securities market on which the Common Stock is then traded (the “Maximum Share Amount”), which shall be 4.99% of the total shares outstanding on the Closing Date, subject to equitable adjustment from time to time for stock splits, stock dividends, combinations, capital reorganizations and similar
events relating to the Common Stock occurring after the date hereof.  Once the Maximum Share Amount has been issued (the date of which is hereinafter referred to as the “Maximum Conversion Date”), the Borrower will use its best efforts to seek and obtain Shareholder Approval (or obtain such other relief as will allow conversions hereunder in excess of the Maximum Share Amount) as soon as practicable following the issuance of the Maximum Share Amount.  As used herein, “Shareholder
Approval” means approval by the shareholders of the Borrower to authorize the issuance of the full number of shares of Common Stock which would be issuable upon full conversion of the then outstanding Notes but for the Maximum Share Amount.

1.8           Status as Shareholder.  Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other than the shares, if any, which cannot be issued because their issuance would
exceed such Holder’s allocated portion of the Reserved Amount or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Borrower to comply with the terms  of this
Note.  Notwithstanding the foregoing, if a Holder has not received certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect to a conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted portions of this Note and the Borrower
shall, as soon as practicable, return such unconverted Note to the Holder or, if the Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted.  In all cases, the Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive Conversion Default Payments pursuant to Section 1.3 to the extent required thereby for such Conversion Default and any subsequent Conversion Default and (ii) the right to have
the Conversion Price with respect to subsequent conversions determined in accordance with Section 1.3) for the Borrower’s failure to convert this Note.

ARTICLE II.  CERTAIN COVENANTS

2.1           Distributions on Capital Stock.  So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent (a) pay, declare or set apart
for such payment, any dividend or other distribution (whether in cash, property or other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional shares of Common Stock or (b) directly or indirectly or

  

  

  

through any subsidiary make any other payment or distribution in respect of its capital stock except for distributions pursuant to any shareholders’ rights plan which is approved by a majority of the Borrower’s disinterested directors.

 

2.2           Restriction on Stock Repurchases.  So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent redeem, repurchase or otherwise
acquire (whether for cash or in exchange for property or other securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the Borrower or any warrants, rights or options to purchase or acquire any such shares.

2.3           Borrowings.  So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, create, incur, assume or suffer to exist any
liability for borrowed money, except (a) borrowings in existence or committed on the date hereof and of which the Borrower has informed Holder in writing prior to the date hereof, (b) indebtedness to trade creditors or financial institutions incurred in the ordinary course of business or (c) borrowings, the proceeds of which shall be used to repay this Note.

2.4           Sale of Assets.  So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, sell, lease or otherwise dispose of any significant
portion of its assets outside the ordinary course of business.  Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.

2.5           Advances and Loans.  So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, lend money, give credit or make advances
to any person, firm, joint venture or corporation, including, without limitation, officers, directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits or advances (a) in existence or committed on the date hereof and which the Borrower has informed Holder in writing prior to the date hereof, (b) made in the ordinary course of business or (c) not in excess of $50,000.

2.6           Contingent Liabilities.  So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, which shall not be unreasonably withheld,
assume, guarantee, endorse, contingently agree to purchase or otherwise become liable upon the obligation of any person, firm, partnership, joint venture or corporation, except by the endorsement of negotiable instruments for deposit or collection and except assumptions, guarantees, endorsements and contingencies (a) in existence or committed on the date hereof and which the Borrower has informed Holder in writing prior to the date hereof, and (b) similar transactions in the ordinary course of business.

 

ARTICLE III.  EVENTS OF DEFAULT

If any of the following events of default (each, an “Event of Default”) shall occur:

  

  

  

3.1           Failure to Pay Principal or Interest.  The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity, upon a Trading Market Prepayment Event pursuant
to Section 1.7, upon acceleration or otherwise;

3.2           Conversion and the Shares.  The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens that it will not honor its obligation to do so) upon exercise by the Holder
of the conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder
upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for three (3) days after the Borrower shall have been notified thereof in writing by the Holder;

3.3           Breach of Covenants.  The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents including but not limited to the Purchase
Agreement and such breach continues for a period of ten (10) days after written notice thereof to the Borrower from the Holder;

3.4           Breach of Representations and Warranties.  Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection
herewith, shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note;

3.5           Receiver or Trustee.  The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for
it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed;

3.6           Judgments.  Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or any of its property or other assets for more than $50,000,
and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld;

3.7           Bankruptcy.  Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors
shall be instituted by or against the Borrower or any subsidiary of the Borrower;

  

  

  

 

3.8           Delisting of Common Stock.  The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTCBB or an equivalent replacement exchange, the Nasdaq National Market, the
Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock Exchange;

3.9           Failure to Comply with the Exchange Act.  The Borrower shall fail to comply with the reporting requirements of the Exchange Act; and/or the Borrower shall cease to be subject to the reporting requirements
of the Exchange Act; or

3.10           Liquidation.                      Any dissolution, liquidation, or winding up of Borrower or
any substantial portion of its business.

3.11           Cessation of Operations.                                           Any
cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.

3.12           Maintenance of Assets.                                           The
failure by Borrower to maintain any material intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future).

3.13           Financial Statement Restatement.                                                      The
restatement of any financial statements filed by the Borrower with the SEC for any date or period from two years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement would, by comparison to the unrestated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

3.14           Reverse Splits.                                           The
Borrower effectuates a reverse split of its Common Stock without twenty (20) days prior written notice to the Holder.

Upon the occurrence and during the continuation of any Event of Default specified in Section 3.1, 3.2, 3.3, 3.4, 3.6, 3.8, or 3.8 exercisable through the delivery of written notice to the Borrower by such Holders (the “Default Notice”), and upon the occurrence of an Event of Default specified the remaining sections of Articles
III, the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the greater of (i) 150% times the sum of (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal
amount of this Note to the date of payment (the “Mandatory Prepayment Date”) plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof (the then outstanding principal amount of this Note to the date of payment plus the
amounts referred to in clauses (x), (y) and (z) shall collectively be known as the “Default Sum”) or (ii) the “parity value” of the Default Sum to be prepaid, where parity value means (a) the highest number of shares of Common Stock issuable upon conversion of or otherwise pursuant to such Default Sum in accordance with Article I,

  

  

  

treating the Trading Day immediately preceding the Mandatory Prepayment Date as the “Conversion Date” for purposes of determining the lowest applicable Conversion Price, unless the Default Event arises as a result of a breach in respect of a specific Conversion Date in which case such Conversion Date shall be the Conversion
Date), multiplied by (b) the highest Closing Price for the Common Stock during the period beginning on the date of first occurrence of the Event of Default and ending one day prior to the Mandatory Prepayment Date (the “Default Amount”) and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including,
without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity.  If the Borrower fails to pay the Default Amount within five (5) business days of written notice that such amount is due and payable, then the Holder shall have the right at any time, so long as the Borrower remains in default (and so long and to the extent that there are sufficient authorized shares), to require the Borrower, upon written
notice, to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect.

 

ARTICLE IV. MISCELLANEOUS

4.1           Failure or Indulgence Not Waiver.  No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges.  All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

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

If to the Borrower, to:

FLINT TELECOM GROUP, INC.

375 N. Stephanie St., Suite 1411

  

  

  

Henderson, NV 89014

Attn: Vincent Browne, Chief Executive Officer

facsimile: [enter fax number]

If to the Holder:

SEL NOMINEES LIMITED

Attn:

facsimile: [enter fax number]

facsimile: [enter fax number]

4.3           Amendments.  This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder.  The term “Note” and all reference thereto,
as used throughout this instrument, shall mean this instrument (and the other Notes issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then as so amended or supplemented.

4.4           Assignability.  This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns.  Each transferee
of this Note must be an “accredited investor” (as defined in Rule 501(a) of the 1933 Act).  Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement.

4.5           Cost of Collection.  If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees.

4.6           Governing Law.  This Note shall be governed by and construed in accordance with the laws of the State of Nevada without regard to principles of conflicts of laws.  Any action brought
by either party against the other concerning the transactions contemplated by this Note shall be brought only in the state courts of Nevada or in the federal courts located in the state of Nevada.  The parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens.  The Company
and Holder waive trial by jury.  The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs.  In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law.  Any
such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement.   Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document 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 to it under this Agreement 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.

 

4.7           Certain Amounts.  Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding principal amount (or the portion thereof required to be paid at that time)
plus accrued and unpaid interest plus Default Interest on such interest, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty and is intended to compensate the Holder in part for loss of the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock acquired upon conversion of this Note at
a price in excess of the price paid for such shares pursuant to this Note.  The Borrower and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of Common Stock.

4.8           Denominations.  At the request of the Holder, upon surrender of this Note, the Borrower shall promptly issue new Notes in the aggregate outstanding principal amount hereof, in the form hereof,
in such denominations of at least $5,000 as the Holder shall request.

4.9           Purchase Agreement.  By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement.

4.10           Notice of Corporate Events.  Except as otherwise provided below, the Holder of this Note shall have no rights as a Holder of Common Stock unless and only to the extent that it converts this Note
into Common Stock. The Borrower shall provide the Holder with prior notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information sent to shareholders).  In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation,
reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any proposed sale, lease or conveyance of all or substantially all of the assets of the Borrower or any proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date specified therein (or thirty
(30) days prior to the consummation of the transaction or event, whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time.  The Borrower shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with the notification
to the Holder in accordance with the terms of this Section 4.10.

  

  

  

 

4.11           Remedies.  The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated
hereby.  Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically
the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

  

  

  

IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer this March 12, 2010.

FLINT TELECOM GROUP, INC.

By:  /s/ Vincent Browne

Vincent Browne

Chief Executive OfficerSECURITIES SUBSCRIPTION AGREEMENT

         THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR THE SECURITIES COMMISSION OF ANY STATE UNDER ANY STATE
SECURITIES LAW. THEY ARE BEING OFFERED PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER REGULATION D ("REGULATION D") PROMULGATED UNDER THE ACT. THE
SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS THE
SECURITIES ARE REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, OR
SUCH OFFERS, SALES AND TRANSFERS ARE MADE PURSUANT TO AVAILABLE EXEMPTIONS FROM
THE REGISTRATION REQUIREMENTS OF THE ACT AND THOSE LAWS.

         THIS SUBSCRIPTION AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED HEREBY BY OR TO
ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL. INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. IN
MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND THE RISKS
INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED OR DETERMINED THE ACCURACY OR ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

         This Securities Subscription Agreement (the "AGREEMENT" or the
"SUBSCRIPTION AGREEMENT") is executed by __________________ (the "SUBSCRIBER")
in connection with the subscription by the Subscriber for 9% Convertible
Debentures (the "CONVERTIBLE DEBENTURES") of Environmental Solutions Worldwide,
Inc., a Florida corporation (the "COMPANY"). The Company is offering an
aggregate face amount of a minimum of $2 million and up to a maximum of $3
million (U.S.) of Convertible Debentures convertible into common stock $0.001
par value per share, of the Company ("SHARES"). The terms of the Convertible
Debentures, including the terms on which the Convertible Debentures may be
converted into Shares, are set forth in the form of Convertible Debentures
attached hereto as EXHIBIT A. The solicitation of this Subscription and, if
accepted by the Company, the offer and sale of Convertible Debentures are being
made in reliance upon the provisions of the Securities Act of 1933, as amended
(the "ACT"). The Convertible Debentures and the Shares issuable upon conversion
or exercise thereof are sometimes referred to herein as the "SECURITIES". The
Subscriber wishes to subscribe for the principal amount of the Convertible
Debentures set forth in Section 19 in accordance with the terms and conditions
of this Agreement. It is agreed as follows:

                                      -1-
<PAGE>

1.       OFFER TO SUBSCRIBE; PURCHASE PRICE

         The Subscriber hereby offers to purchase and subscribe for the
principal amount of Convertible Debentures and at the price, set out in Section
19 of this Agreement. The Closing shall be deemed to occur when this Agreement
has been executed by both of the Subscriber and the Company (the "CLOSING") and
payment shall have been made by the Subscriber, by wire transfer, as directed in
writing by the Company on the day so directed, to an escrow agent in accord with
the Escrow Agreement (as defined in Section 6.4), against the Company's delivery
of Convertible Debentures subscribed for. If the Closing does not occur by 5PM
Eastern Daylight Time on March ___, 2010 the funds of the Subscriber shall be
returned immediately from escrow. The terms and conditions of the escrow are set
forth in an Escrow Agreement, the form of which is attached hereto as EXHIBIT B
hereto. The payment shall be made by delivering same day funds in United States
Dollars as designated above.

2.       SUBSCRIBER REPRESENTATIONS; ACCESS TO INFORMATION INDEPENDENT
         INVESTIGATION

         The Subscriber represents and warrants to, and covenants with, the
Company, on its own behalf and on behalf of each person or entity for which the
Subscriber is acting as a fiduciary, as follows:

         2.1 EXEMPT TRANSACTION. The Subscriber represents and warrants to the
Company that (i) the Subscriber is an accredited investor as the term is defined
in Rule 501(a) under the Act, (ii) the Subscriber is purchasing the Securities
for its own account and not with a view of reselling the Securities in violation
of the Securities Act, (iii) the Subscriber is not an affiliate of the Company
as the term is defined under the Act, and (iv) subscriber does not possess any
material non-public information about the Company.

         2.2 INDEPENDENT INVESTIGATION. The Subscriber, in offering to subscribe
for the Securities hereunder, has relied upon an independent investigation made
by it and has, prior to the date hereof, been given access to and the
opportunity to examine all books and records of the Company, and all material
contracts and documents of the Company; PROVIDED, that such investigation shall
not affect the Subscriber's ability to rely on the accuracy of the
representations and warranties of the Company set forth herein. The Subscriber
will keep confidential all non-public information regarding the Company that the
Subscriber receives from the Company unless disclosure of such information is
compelled by a court or other administrative body or, in the opinion of the
Subscriber's counsel, to comply with applicable law. In making the investment
decision to purchase the Convertible Debentures the Subscriber is not relying on

                                      -2-
<PAGE>

any oral or written representations or assurances from the Company or any other
person or any representation of the Company or any other person other than as
set forth in this Agreement, the public filings of the Company or in a document
executed by a duly authorized representative of the Company making reference to
this Agreement. The Subscriber has such experience in business and financial
matters that it is capable of evaluating the risk of its investment and
determining the suitability of its investment. The Subscriber is a sophisticated
investor, and an accredited investor as defined in Rule 501 of Regulation D. The
Subscriber has obtained and reviewed the copies of the Company's Form 10-K
Annual Report for the most recent year ended December 31, 2008, and Form 10-Q
for the most recent fiscal quarter ended September 30, 2009 and copies of all
Form 8-K Reports from the beginning of the past fiscal year to the date hereof
and is aware that the Company has continued to sustain losses.

         2.3 ECONOMIC RISK. The Subscriber understands and acknowledges that an
investment in the Convertible Debentures involves a high degree of risk,
including a possible total loss of investment. The Subscriber represents that it
is able to bear the economic risk of the investment. In making this statement,
the Subscriber hereby represents and warrants that the Subscriber has adequate
means of providing for the Subscriber's current needs and contingencies; the
Subscriber is able to afford to hold the Securities for an indefinite period and
the Subscriber further represents that the Subscriber has such knowledge and
experience in financial and business matters that the Subscriber is capable of
evaluating the merits and risks of the investment in the Securities to be
received by the Subscriber. Further, the Subscriber represents that it has no
present need for liquidity in such Convertible Debentures.

         2.4 NO GOVERNMENT RECOMMENDATION OR APPROVAL. The Subscriber
understands that no United States federal or state agency or similar agency of
any other country has passed upon or made any recommendation or endorsement of
the Company, this transaction or the subscription of the Securities.

         2.5 NO REGISTRATION. The Subscriber understands that the Securities and
the common stock issuable upon conversion of the Convertible Debentures have not
been registered under the Act and are being offered and sold pursuant to an
exemption from registration contained in the Act based in part upon the
representations of the Subscriber contained herein.

         2.6 NO PUBLIC SOLICITATION. Without conducting any independent
investigation, the Subscriber knows of no public solicitation or advertisement
of an offer in connection with the proposed issuance and sale of the Securities.

                                      -3-
<PAGE>

         2.7 INVESTMENT INTENT. The Subscriber is acquiring the Securities to be
issued and sold hereunder (and the Shares issuable upon conversion or exercise
as the case may be) for the Subscriber's own account (or for beneficiaries'
accounts over which the Subscriber has investment discretion). The Subscriber
has made no predetermined arrangements to sell the Convertible Debentures or
Shares. The Subscriber currently has no short position in the Shares.

         2.8 INCORPORATION AND AUTHORITY. The Subscriber has the full power and
authority to execute, deliver and perform this Agreement and to perform its
obligations hereunder. This Agreement has been duly approved by all necessary
action of the Subscriber, has been executed by persons duly authorized by the
Subscriber, and constitutes a valid and legally binding obligation of the
Subscriber, enforceable in accordance with its terms.

         2.9 NO RELIANCE ON TAX ADVICE. The Subscriber has reviewed with his,
her or its own tax advisors the foreign, federal, state and local tax
consequences of this investment, where applicable, and the transactions
contemplated by this Agreement. The Subscriber is relying solely on such
advisors and not on any statements or representations of the Company or any of
its agents and understands that the Subscriber (and not the Company) shall be
responsible for the Subscriber own income tax liability that may arise as a
result of this investment or the transactions contemplated by this Agreement.

         2.10 INDEPENDENT LEGAL ADVICE. The Subscriber and the Company
acknowledge that each has had the opportunity to review this Agreement and the
transactions contemplated by this Agreement and has consulted with its own legal
counsel, and other advisors prior to execution of the within Agreement.

         2.11 ACKNOWLEDGMENT. The Subscriber understands that the Securities are
being offered and sold to it in reliance of specific exemptions from the
registration requirements of Federal and State Securities laws and that the
Company is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of the Subscriber set
forth herein in order to determine the applicability of such exemptions and the
suitability of the Subscriber to acquire the Securities.

                                      -4-
<PAGE>

3.       RESALES

         The Subscriber acknowledges and agrees that the Securities may and will
only be resold (a) pursuant to a Registration Statement under the Act; or (b)
pursuant to an exemption from registration under the Act.

4.       LEGENDS; SUBSEQUENT TRANSFER OF SECURITIES

         4.1 LEGENDS. The certificate(s) representing the Convertible Debentures
shall bear a legend similar to the legend set forth below and any other legend,
if such legend or legends are reasonably required to comply with state, federal
or foreign law. Assuming that there are no changes in the material facts set
forth in Section 2 of this Agreement or applicable law from the date hereof
until the date of conversion, and subject to the Company's transfer agent's
receipt of a legal opinion from legal counsel, all certificates representing the
Shares into which the Convertible Debentures are converted shall bear a legend.

                  "THE CONVERTIBLE DEBENTURES OF ENVIRONMENTAL SOLUTIONS
                  WORLDWIDE, INC. (THE "ISSUER") REPRESENTED BY THIS CERTIFICATE
                  HAVE BEEN ISSUED PURSUANT TO REGULATION D, PROMULGATED UNDER
                  THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND HAVE
                  NOT BEEN REGISTERED UNDER THE ACT OR ANY APPLICABLE STATE
                  SECURITIES LAWS. THESE SHARES MAY NOT BE OFFERED OR SOLD
                  EXCEPT WITH AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES
                  OR AN APPLICABLE EXEMPTION UNDER THE SECURITIES ACT."

5.       REPRESENTATIONS, WARRANTIES AND COVENANTS OF COMPANY

         The Company represents and warrants to, and covenants with, the
Subscriber as follows:

         5.1 ORGANIZATION, GOOD STANDING, AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Florida and has all requisite corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. The
Company and its subsidiaries are duly qualified to transact business and are in
good standing as foreign corporations or other entities in each jurisdiction in
which the nature of the business conducted or property owned by them makes such
qualification necessary, except where the failure to so qualify would not,
individually or in the aggregate, have a material adverse effect on the
business, condition (financial or otherwise), earnings, properties, prospects or
results of operations of the Company or any of its subsidiaries (a "MATERIAL
ADVERSE EFFECT"). The Company and its subsidiaries are not the subject of any
pending or, to their knowledge, threatened investigation or administrative or
legal proceeding by the Internal Revenue Service, the taxing authorities of any
state or local jurisdiction, or the Securities and Exchange Commission (the
"COMMISSION") or any state securities commission which have not been disclosed
in the reports referred to in Section 5.5 below.

                                      -5-
<PAGE>

         5.2 CORPORATE CONDITION. None of the Company's filings made with the
Commission (such filings, the "SEC REPORTS"), including, but not limited to,
those reports referenced in Section 5.5 below, contains any untrue statement of
a material fact or omits to state a material fact necessary in order to make the
statements made, in light of the circumstances under which they were made, not
misleading. There have been no material adverse changes in the Company's
business, properties, results of operations, condition (financial or otherwise)
or prospects since the date of those reports which have not been disclosed to
the Subscriber in writing; PROVIDED, that the Subscriber is aware that the
Company has continued to sustain losses since the date of the most recent Report
on Form 10-Q for the quarter ended September 30, 2009. Further, all material
non-public information (other than the specific information respecting the sale
of the Securities themselves) respecting the Company, its business and its
financial condition, as the same would be required to be disclosed in an SEC
Report or registration statement (or corresponding prospectus) if the Securities
were otherwise being registered for sale by the Company, has been so publicly
reported or disclosed prior to the sale of the Securities as contemplated
herein.

         5.3 AUTHORIZATION. The transaction contemplated by this Agreement and
the Transaction Documents (as hereinafter defined) have been approved by a
majority of disinterested directors. The Company has sufficient shares of Common
Stock on a fully diluted basis for issuance upon conversion of the Convertible
Debenture. The Transaction Documents constitute valid and legally binding
obligations of the Company, enforceable in accordance with their respective
terms. "TRANSACTION DOCUMENTS" means, collectively, this Agreement, the Escrow
Agreement, the Registration Rights Agreement and the Convertible Debentures and
each of the other documents entered into or delivered by the parties hereto in
connection with the transactions contemplated by this Agreement.

         5.4 VALID ISSUANCE OF CONVERTIBLE DEBENTURE AND COMMON STOCK. When
executed and delivered in accordance with the terms hereof for the consideration
expressed herein, the Convertible Debentures will have been issued in compliance
with all applicable U.S. federal securities laws. Upon issue, the Subscriber
will acquire good and marketable title to the Convertible Debentures, free and
clear of all liens, claims, encumbrances and pre-emptive rights. The Shares
issuable upon conversion of the Convertible Debentures, when issued in
accordance with the respective terms thereof, shall be duly and validly issued
and outstanding, fully paid and non-assessable, free and clear of any, liens
claims, encumbrances and pre-emptive rights, and will have been issued in
compliance with all applicable U.S. federal securities laws. Subject in part to
the truth and accuracy of the Subscriber's representations set forth in the
Subscription Agreement, the offer, sale and issuance of the Securities
contemplated by this Agreement are exempt from the registration of any
applicable securities laws, and neither the Company nor any authorized agent
acting on its behalf will take any action hereafter that would cause the loss of
such exemption.

                                      -6-
<PAGE>

         5.5 CURRENT PUBLIC INFORMATION. The Company represents and warrants to
the Subscriber that the Company is a "reporting issuer" and it has a class of
securities registered under Section 12(g) of the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), and has filed all the materials required
to be filed as reports pursuant to the Exchange Act for a period of at least
twelve (12) months preceding the date hereof (or for such shorter period as the
Company was required by law to file such material). All such reports (including,
without limitation, the SEC Reports) complied in all material respects with all
applicable requirements of Federal securities laws and the rules and regulations
promulgated thereunder. The Subscriber has obtained copies of the Company's Form
10-K Annual Report for the most recent year ended December 31, 2008 and Form
10-Q for the most recent fiscal quarter ended September 30, 2009, copies of all
Form 8-K Reports from the beginning of the Company's past fiscal year to the
date of execution of the within Agreement.

         5.6 NO DIRECTED SELLING EFFORTS IN REGARD TO THIS TRANSACTION. The
Company has not, and, to the best of the Company's knowledge, neither the
Subscriber nor any distributor, if any, participating in the offering of the
Securities nor any person acting for the Company or any such distributor has
conducted any "directed selling efforts" as that term is defined under the Act.
Such activity includes, without limitation, the making of printed material
available to investors, the holding of promotional seminars, the placement of
advertisements with radio or television stations which discuss the offering of
the Securities.

         5.7 NO CONFLICTS. The execution and delivery of this Agreement and the
consummation of the issuance of the Securities and the transactions contemplated
by this Agreement do not and will not conflict with or result in a breach by the
Company of any of the terms or provisions of, or constitute a default under, the
Certificate of Incorporation or bylaws of the Company, or any indenture,
mortgage, deed of trust or other agreement or instrument to which the Company or
any of its subsidiaries is a party or by which it or any of its subsidiaries or
any of its or any of its subsidiaries' properties or assets are bound, or any
existing applicable decree, judgment or order of any court, Federal or State
regulatory body, administrative agency or other governmental body having
jurisdiction over the Company or any of its subsidiaries or any of its or any of
its subsidiaries' properties or assets.

                                      -7-
<PAGE>

         5.8 ISSUANCE OF SECURITIES. The Company will issue one or more
certificates representing the Convertible Debentures in the name of the
Subscriber in such denominations to be specified by the Subscriber prior to
closing. Upon conversion of the Convertible Debentures in accordance with their
terms, the Company will issue one or more certificates representing Shares in
the name of the Subscriber and in such denominations to be specified by the
Subscriber prior to conversion. The Shares to be issued upon conversion of the
Convertible Debentures shall bear restrictive legends unless subject to an
effective registration or exemption under the Act. Nothing in this section shall
affect in any way the Subscriber's obligations and agreement to comply with all
applicable securities laws upon resale of the Securities.

         5.9 NO ACTION. The Company has not taken and will not take any action
that will affect in any way the Subscriber's ability to resell the Securities in
accordance with applicable securities laws.

         5.10 COMPLIANCE WITH LAWS. As of the date hereof, the conduct of the
business of the Company and its subsidiaries complies (and has complied) in all
material respects with all material statutes, laws, regulations, ordinances,
rules, judgments, orders or decrees applicable thereto. The Company and its
subsidiaries have not received notice of any alleged violation of any statute,
law, regulations, ordinance, rule, judgment, order or decree from any
governmental authority. The Company shall comply with all applicable securities
laws with respect to the sale of the Securities, including, but not limited to,
the filing of all reports required to be filed in connection therewith with the
Commission or any other regulatory authority. Further, assuming the accuracy of
the representations of the Subscriber, the offer and sale by the Company of the
Securities (including, without limitation, the Shares issuable upon conversion
of the Convertible Debentures) are exempt from registration under the Securities
Act.

         5.11 LITIGATION. There is no action, suit or proceeding before or by
any court or governmental agency or body, domestic or foreign, now pending or,
to the knowledge of the Company, threatened, against or affecting the Company
and its subsidiaries, or any of the Company or its subsidiaries assets or
properties, which could reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.

                                      -8-
<PAGE>

         5.12 DISCLOSURES. There is no fact known to the Company (other than
general economic conditions known to the public generally) that has not been
disclosed in writing to the Subscriber that (a) could reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect or (b) could
reasonably be expected, individually or in the aggregate, to materially and
adversely affect the ability of the Company to perform its obligations pursuant
the Transaction Documents and the issuance of the Convertible Debentures
hereunder.

         5.13 CAPITALIZATION. The Company, as of the date of the Closing, will
have authorized the number of shares of Common Stock set forth on EXHIBIT B and
outstanding the number of shares of Common Stock and Convertible Debentures set
forth on EXHIBIT B. All of the issued and outstanding shares of capital stock of
the Company and each of its subsidiaries have been duly authorized and are
validly issued, fully paid and non-assessable. No personal liability attaches to
the registered holders of the Common Stock by reason of their being registered
holders thereof.

                  Except as set forth on EXHIBIT B, (i) no subscription,
warrant, option, convertible security or other right (contingent or otherwise)
to purchase or acquire any shares of capital stock of the Company or any of its
subsidiaries is authorized or outstanding, (ii) neither the Company nor any of
its subsidiaries has any obligation (contingent or otherwise) to issue any
subscription, warrant, option, convertible security or other such right or to
issue or distribute to holders of any shares of its capital stock or other
equity securities any evidences of indebtedness or assets of the Company or such
subsidiary, (iii) neither the Company nor any of its subsidiaries has any
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any shares of its capital stock (or other equity securities) or any interest
therein or to pay any dividend or make any other distribution in respect
thereof, and (iv) there are no outstanding or authorized stock appreciation,
phantom stock or similar rights with respect to the Company or any of its
subsidiaries.

                  All of the issued and outstanding shares of the Company's and
its subsidiaries' capital stock (or other equity securities) have been offered,
issued and sold by the Company and such subsidiaries in compliance with
applicable federal and state securities Laws.

                                      -9-
<PAGE>

         5.14. MATERIAL CHANGES. Except as disclosed in the SEC Reports: (i) the
Company and its subsidiaries have not incurred any material liabilities or
obligations, indirect, or contingent, or entered into any material oral or
written agreement or other transaction which is not in the ordinary course of
business or which could reasonably be expected to result in a material reduction
in the future earnings or prospects of the Company and its subsidiaries; (ii)
each of the Company and its subsidiaries have not sustained any material loss or
interference with its businesses or properties from fire, flood, windstorm,
accident or other calamity not covered by insurance; (iii) except as described
in the SEC Reports, the Company and its subsidiaries have not paid or declared
any dividends or other distributions with respect to its capital stock and
neither the Company nor any of its subsidiaries is in default in the payment of
principal or interest on any outstanding debt obligations; (iv) there has not
been any change in the capital stock of the Company or any of its subsidiaries
other than the sale of the Securities hereunder, shares or options issued
pursuant to stock option plans or purchase plans approved by the Company's Board
of Directors and repurchases of shares or options pursuant to repurchase plans
already approved by the Company's Board of Directors, or indebtedness material
to the Company or any of its subsidiaries (other than in the ordinary course of
business); and (v) there has not been any other event or change that would have,
individually or in the aggregate, a Material Adverse Effect.

         5.15 FINANCIAL STATEMENTS. The consolidated financial statements of the
Company and the related notes contained in the SEC Reports present fairly, in
accordance with generally accepted accounting principles, the consolidated
financial position of the Company and its subsidiaries as of the dates
indicated, and the results of their operations, cash flows and the changes in
shareholders' equity for the periods therein specified, subject, in the case of
unaudited financial statements for interim periods, to normal year-end audit
adjustments. Such consolidated financial statements (including the related
notes) have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods therein
specified, except that unaudited financial statements may not contain all
footnotes required by generally accepted accounting principles. The Company and
each of its subsidiaries have fully complied with the Sarbanes-Oxley Act of
2002; however auditor attestation of the Company's compliance is not currently
required.

         5.16 STABILIZATION. Neither the Company nor any of its subsidiaries has
taken, directly or indirectly, any action which was designed to or which has
constituted or which might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities, the Convertible Debentures and
the Shares issuable upon exercise of the Convertible Debentures.

                                      -10-
<PAGE>

         5.17 BROKERS. The Company has taken no action which would give rise to
any claim by any person for brokerage commissions, finders' fees or similar
payments by the Subscriber relating to this Subscription Agreement or the
transactions contemplated hereby.

         5.18 CONSENTS. Except as to filings which may be required under
applicable state securities regulations, no consent, authorization, approval,
order, license, certificate, or permit of or from, or declaration or filing
with, any federal, state, local, or other governmental authority or of any court
or other tribunal is required by the Company or any of its subsidiaries in
connection with the transactions contemplated hereby. No consent of any party to
any contract, agreement, instrument, lease, license, arrangement, or
understanding to which the Company or any of its subsidiaries is a party, or by
which any of its properties or assets is bound, is required for the execution,
delivery, or performance by the Company of the transactions contemplated by the
Transaction Documents.

         5.19 INTELLECTUAL PROPERTY. To the Company's knowledge, the Company or
its subsidiaries own, or have the right to use, all patents, trademarks, service
marks, trade names, copyrights, licenses, trade secrets or other proprietary
rights necessary to their business as now conducted without conflicting with or
infringing upon the right or claimed right of any person under or with respect
to any of the foregoing. Except for hardware and software licenses entered into
in the ordinary course of business, the Company and its subsidiaries are not
bound by or a party to any options, licenses or agreements of any kind with
respect to patents, trademarks, service marks, trade names, copyrights,
licenses, trade secrets or other proprietary rights of any other person or
entity. The Company and its subsidiaries have not received any communications
alleging that the Company or any of its subsidiaries have violated the patents,
trademarks, service marks, trade names, copyrights or trade secrets or other
proprietary rights of any other person or entity. The Company and its
subsidiaries are not aware of any violation by a third party of any of the
Company's or its subsidiaries patents, trade marks, service marks, trade names,
copyrights, trade secrets or other proprietary rights.

         5.20 FOREIGN CORRUPT PRACTICES ACT. Neither the Company or any of its
subsidiaries nor any director, officer, agent, or other person acting on behalf
of the Company or any of its subsidiaries has, in the course of his or its
actions for or on behalf of the Company or any of its subsidiaries violated any
provision of the United States Foreign Corrupt Practices Act of 1977, as
amended, or the regulations there under.

                                      -11-
<PAGE>

         5.21 OTHER SUBSCRIPTION AGREEMENTS. The Company may simultaneously,
with the execution of this Subscription Agreement, enter into one or more
subscription agreements with other purchasers of Securities (the "OTHER
PURCHASERS") with substantially the same terms and conditions as this
Subscription Agreement; and no Other Purchaser is subscribing for any securities
of the Company on the Closing with terms and conditions different from the terms
and conditions of this Subscription Agreement.

         5.22 DILUTIVE EFFECT. The Company understands and acknowledges that the
number of Shares issuable upon conversion of the Convertible Debentures will
increase in certain circumstances. Except as provided in the Convertible
Debentures, the Company further acknowledges that its obligation to issue Shares
upon conversion of the Convertible Debentures in accordance with this Agreement
and the Convertible Debentures is not conditioned on the dilutive effect that
such issuance may have on the ownership interests of other shareholders of the
Company.

6.       ADDITIONAL COVENANTS OF COMPANY

         6.1 CORPORATE EXISTENCE AND TAXES. For as long as any Convertible
Debentures remain outstanding, the Company and its subsidiaries shall, maintain
their corporate existence in good standing, and shall pay all taxes when due
except for taxes which the Company or its subsidiaries dispute in good faith and
for which adequate reserves are established on the Company's or its subsidiaries
books and records.

         6.2      RESERVED  SHARES AND LISTINGS;  EXCHANGE ACT. For so long as
any Convertible Debentures remain outstanding:

                  (a) the Company will reserve adequate shares of Common Stock,
par value $0.001 per share ("COMMON STOCK"), to permit the conversion in full of
the outstanding principal and interest amount of Convertible Debentures (unless
the appropriate Standstill Agreements are in place); and

                  (b) the Company will maintain the listing of its Shares on the
Over the Counter Bulletin Board or other exchange or automated quotation system;
and

                  (c) the Company shall timely file all reports required to be
filed with the Commission pursuant to the Exchange Act and the Company shall not
terminate its status as an issuer required to file reports under the Exchange
Act even if the Exchange Act or the rules and regulations thereunder would
permit such termination.

         6.3 USE OF PROCEEDS. The Company and/or its subsidiaries shall use all
of the net proceeds from the sale of all Securities for general corporate
purposes and to repay existing short term debt.

                                      -12-
<PAGE>

         6.4 ESCROW ACCOUNT. The Company shall not take any action to cause the
release of any monies from the escrow account until the Company has received net
proceeds into the escrow account established with Baratta, Baratta & Aidala (the
"ESCROW AGENT") pursuant to the terms of the Escrow Agreement (the "ESCROW
AGREEMENT"), among the Company, the Subscriber and Baratta, Baratta & Aidala of
a minimum of an aggregate of $2,000,000.

         6.5 FURTHER FINANCINGS. If within twelve (12) months from the date of
Closing, the Company enters into or closes another financing or other
transaction (which for securities law purposes would be integrable with the
offer and sale of the Securities) on terms and conditions more favorable to
another purchaser than this Subscription Agreement, and the Convertible
Debentures (in each case, such determination to be made by the Subscriber), then
the terms and conditions of this Offering shall be adjusted to reflect the more
favorable terms to such purchaser (including, at the Subscriber's option, the
issuance of additional Securities or other securities of the Company). The
foregoing shall apply to successive financings or successive other transactions
within twelve (12) months of the date of the Closing.

         6.6 PUBLICITY. Except as may be required by applicable law or
regulation, the Company shall not use, directly or indirectly, the Subscriber's
name or the name of any of its affiliates in any advertisement, announcement,
press release or other similar communication unless it has received the prior
written consent of the Subscriber for the specific use contemplated or as
otherwise required by applicable law or regulation.

7.       CONDITIONS TO CLOSING; DELIVERIES AT CLOSING

         7.1      CONDITIONS TO  SUBSCRIBER'S  OBLIGATIONS TO CLOSE.  The
obligations of the Subscriber to purchase the Convertible Debentures offered
hereunder are conditioned on the fulfillment or waiver of the following:

                  (a) the execution and delivery of the Transaction Documents by
the Company and the execution and delivery of such other documents, opinions,
certificates and instruments that the Subscriber may reasonably request;

                  (b) all the representations and warranties of the Company in
this Agreement as of the date hereof shall be true and correct at the Closing as
if made on such date, and the Company shall have performed all actions required
hereunder;

                  (c) the Company and its subsidiaries shall have performed in
all material respects all agreements which the Transaction Documents provide
shall be performed on or before the date of the Closing;

                  (d) no event shall have occurred and be continuing or would
result from the consummation of the transactions contemplated by the Transaction
Documents which would, individually or in the aggregate, constitute a Material
Adverse Effect;

                  (e) no order, judgment or decree of any court, arbitrator or
governmental authority shall enjoin or restrain the Subscriber from purchasing
the Securities or consummating the transactions contemplated by the Transaction
Documents and there shall not be existing, or, to the knowledge of the Company,
threatened, any action, suit, proceeding, governmental investigation or
arbitration against or affecting the Company or any of its subsidiaries which
would reasonably be expected to result in such an order, judgment or decree; and

                                      -13-
<PAGE>

                  (f) the Company shall not have defaulted on any long-term debt
(including, but not limited to, any other series of convertible debentures or
the Convertible Debentures).

         7.2 CONDITIONS TO THE COMPANY'S OBLIGATIONS TO CLOSE. The obligations
of the Company to issue the Convertible Debentures offered hereunder are
conditioned on the fulfillment or waiver of the following:

                  (a) the execution and delivery of this Agreement and the
Escrow Agreement by the Subscriber;

                  (b) all representations and warranties of the Subscriber made
in this Agreement as of the date hereof shall be true and correct at the Closing
as if made on such date, and the Subscriber shall have performed all actions
required hereunder; and

8.       GOVERNING LAW

         This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, applicable to agreements made in and wholly
to be performed in that jurisdiction without regard to the choice of law rules
of such state, except for matters arising under the Act or the Exchange Act
which matters shall be construed and interpreted in accordance with such laws.
Any action brought to enforce, or otherwise arising out of, this Agreement shall
be heard and determined in either a Federal or state court sitting in the County
of New York, State of New York, and the parties consent to jurisdiction in the
State of New York.

9.        ENTIRE AGREEMENT; AMENDMENT

         This Agreement, the Transaction Documents and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties hereto with regard to the subject matter hereof
and thereof, and no party hereto shall be able or bound to any other party
hereto in any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party hereto against
whom enforcement of any such amendment, waiver, discharge or termination is
sought.

                                      -14-
<PAGE>

10.      NOTICES, ETC.

         Any notice, demand or request required or permitted to be given by
 either the Company or the Subscriber pursuant to the terms of this Agreement
 shall be in writing and shall be deemed given when delivered personally or by
 facsimile, with a hard copy to follow by two day courier addressed to the
 intended recipient thereof at the addresses of the parties hereto set forth at
 the end of this Agreement or such other address as a party hereto may request
 by notifying the other in writing.

11.      INDEMNIFICATION

         11. 1 COMPANY INDEMNIFICATION. In consideration of the Subscriber's
execution and delivery of the Transaction Documents to which it is a party and
acquiring the Securities hereunder and thereunder and in addition to all of the
Company's other obligations under the Transaction Documents to which it is a
party, the Company shall defend, protect, indemnify and hold harmless the
Subscriber and each other holder of the Securities and all of their
shareholders, trustees, partners, members, officers, directors, employees and
direct or indirect investors and any of the foregoing persons' agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"SUBSCRIBER INDEMNITEES") from and against any and all actions, causes of
action, suits, claims, losses, costs, penalties, fees, liabilities and damages
(other than consequential damages), and expenses in connection therewith
(irrespective of whether any such Subscriber Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements (the "SUBSCRIBER INDEMNIFIED LIABILITIES"),
incurred by any Subscriber Indemnitee as a result of, or arising out of, or
relating to (a) any misrepresentation or breach of any representation or
warranty made by the Company in the Transaction Documents, (b) any breach of any
covenant, agreement or obligation of the Company contained in the Transaction
Documents, or (c) any cause of action, suit or claim brought or made against
such Subscriber Indemnitee by a third party (including for these purposes a
derivative action brought on behalf of the Company) and arising out of or
resulting from (i) other than those arising from or resulting from a
misrepresentation or breach of any representation or warranty made by such
Subscriber Indemnitee contained in the Transaction Documents to which it is a
party, the execution, delivery, performance or enforcement of the Transaction
Documents, (ii) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Securities, or
(iii) the status of the Subscriber or holder of the Securities as an investor in
the Company.

                  11.2 CONTRIBUTION; MECHANICS AND PROCEDURES. To the extent
that the foregoing undertaking by the Company may be unenforceable for any
reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law.

                                      -15-
<PAGE>

12.      NO STRICT CONSTRUCTION

         The language used in this Agreement will be deemed to be the language
chosen by the parties hereto to express their mutual intent, and no rules of
strict construction will be applied against any party hereto.

13.      NO THIRD PARTY BENEFICIARIES

         This Agreement is intended for the benefit of the parties hereto and
their respective permitted successors and assigns, and is not for the benefit
of, nor may any provision hereof be enforced by, any other person or entity.

14.      SURVIVAL

         All covenants, agreements, representations and warranties made by the
Company and the Subscriber herein and in the Transaction Documents shall survive
the execution of this Subscription Agreement, the delivery to the Subscriber of
the Convertible Debentures being purchased and the payment therefor.

15.      SUCCESSORS AND ASSIGNS

         This Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and assigns, including any purchasers of
the Convertible Debentures. The Company shall not assign this Agreement or any
rights or obligations hereunder without the prior written consent of the
Subscriber, including by merger or consolidation, except in accordance with the
applicable provisions of the Convertible Debentures with respect to which the
Company is in compliance. The Subscriber may assign, without the consent of the
Company, some or all of its rights hereunder to any person to whom the
Subscriber assigns or transfers Securities, or the right to acquire Securities,
in accordance herewith; PROVIDED, that such transferee agrees in writing to be
bound with respect to the transferred Securities to the provisions hereof that
apply to the transferring Subscriber, in which event such assignee shall be
deemed to be a Subscriber hereunder with respect to such assigned rights.

16.      COUNTERPARTS

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

                                      -16-
<PAGE>

17.      HEADINGS

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

18.      SEVERABILITY

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

19.      AMOUNT

         The  undersigned  Subscriber  hereby  subscribes  for a Convertible
Debenture in the principal  amount of $-------------.

         The undersigned Subscriber acknowledges that this subscription shall
not be effective unless accepted by the Company as indicated below.

This Subscription Is Accepted by the Company on the [ ] day of March, 2010.

                                   Environmental Solutions Worldwide, Inc.

                                   By: ______________________________
                                   Print Name: _______________________
                                   Title: _____________________________

                                   Subscriber:

                                   --------------------

                                   ----------------------------------
                                   Name:
                                   Title:

                                    Address for Notice:

                                      -17-

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