Exhibit 10.3
 

 
NEITHER THE ISSUANCE AND SALE OF THIS WARRANT REPRESENTED BY THIS CERTIFICATE
NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
NOR QUALIFIED UNDER ANY APPLICABLE STATE SECURITIES LAWS, AND THEY MAY NOT BE
SOLD, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (A) A REGISTRATION STATEMENT
UNDER THE SECURITIES ACT WITH RESPECT TO THE SECURITIES  IS EFFECTIVE AND ANY
APPLICABLE STATE SECURITIES LAW REQUIREMENTS HAVE BEEN MET, OR (B) GULFSTREAM
INTERNATIONAL GROUP, INC. RECEIVES AN OPINION OF COUNSEL, REASONABLY ACCEPTABLE
TO IT, THAT THE REQUIREMENTS FOR EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS
UNDER THE SECURITIES ACT AND FROM THE REGISTRATION OR QUALIFICATION PROVISIONS
OF ANY APPLICABLE STATE SECURITIES LAWS HAVE BEEN MET.

WARRANT TO PURCHASE

SHARES OF COMMON STOCK

OF

GULFSTREAM INTERNATIONAL GROUP, INC.

Expires February 28, 2015
 
No.: ______ 
Number of Shares: _________

 
Date of Issuance: February 26, 2010

FOR VALUE RECEIVED, the undersigned, GULFSTREAM INTERNATIONAL GROUP, INC., a
Delaware corporation (together with its successors and assigns, the “Issuer”),
hereby certifies that GULFSTREAM FUNDING III, LLC (the “Initial Holder”) or his
or its registered assigns is entitled to subscribe for and purchase, during the
Term (as hereinafter defined), that number of shares of Warrant Stock of the
Issuer as shall be determined by dividing (i) fifty percent (50%) of the
principal amount of the Note purchased by the Initial Holder, by (ii) the
Warrant Price of the Warrants; provided, however, that if the Note purchased by
the Purchaser shall not have been prepaid in full by June 30, 2010, then and in
such event the Warrant Share Number issuable upon exercise of this Warrant shall
be determined by dividing (i) one hundred percent (100%) of the principal amount
of the Note purchased by such Initial Holder, by (ii) the Warrant Price of the
Warrants.  Such Warrant Price and the Warrant Share Number shall be subject to
certain adjustments as provided in Section 3 hereof.. Capitalized terms used in
this Warrant and not otherwise defined herein shall have the respective meanings
specified in Section 7 hereof.

1.           Term. The term of this Warrant shall commence on the Date of
Issuance hereof and shall expire at 5:00 p.m., Eastern Standard Time, on
February 28, 2015 (such period being the “Term”).

2.           Method of Exercise; Payment; Issuance of New Warrant; Transfer and
Exchange.
 
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(a)           Time of Exercise. The purchase rights represented by this Warrant
may be exercised in whole or in part during the Term.
 
(b)           Method of Exercise. The Holder hereof may exercise this Warrant,
in whole or in part, by the surrender of this Warrant (with the exercise form
attached hereto duly executed) at the principal office of the Issuer, and by the
payment to the Issuer of an amount of consideration therefor equal to the
Warrant Price as in effect on the date of such exercise multiplied by the number
of shares of Warrant Stock with respect to which this Warrant is then being
exercised, payable at such Holder's election by certified or official bank check
or by wire transfer to an account designated by the Issuer.
 
(c)           Issuance of Stock Certificates. In the event of any exercise of
this Warrant in accordance with and subject to the terms and conditions hereof,
certificates for the shares of Warrant Stock so purchased shall be dated the
date of such exercise and delivered to the Holder’s Prime Broker as specified in
the Holder’s exercise form within a reasonable time, not exceeding five (5)
Trading Days after such exercise (the “Delivery Date”) or, at the request of the
Holder (provided that a registration statement under the Securities Act
providing for the resale of the Warrant Stock is then in effect or that the
shares of Warrant Stock are otherwise exempt from registration), issued and
delivered to the Depository Trust Company (“DTC”) account on the Holder’s behalf
via the Deposit Withdrawal Agent Commission System (“DWAC”)  when available,
within a reasonable time, not exceeding five (5) Trading Days after such
exercise, and the Holder hereof shall be deemed for all purposes to be the
holder of the shares of Warrant Stock so purchased as of the date of such
exercise. Notwithstanding the foregoing to the contrary, the Issuer or its
transfer agent shall only be obligated to issue and deliver the shares to the
DTC on a holder’s behalf via DWAC if such exercise is in connection with a sale
or other exemption from registration by which the shares may be issued without a
restrictive legend and the Issuer and its transfer agent are participating in
DTC through the DWAC system. The Holder shall deliver this original Warrant, or
an indemnification reasonably acceptable to the Issuer undertaking with respect
to such Warrant in the case of its loss, theft or destruction, at such time that
this Warrant is fully exercised. With respect to partial exercises of this
Warrant, the Issuer shall keep written records for the Holder of the number of
shares of Warrant Stock exercised as of each date of exercise.
 
(d)           Transferability of Warrant. Subject to Section 2(f) hereof, this
Warrant may be transferred by a Holder, in whole or in part, without the consent
of the Issuer. If transferred pursuant to this paragraph, this Warrant may be
transferred on the books of the Issuer by the Holder hereof in person or by duly
authorized attorney, upon surrender of this Warrant at the principal office of
the Issuer, properly endorsed (by the Holder executing an assignment in the form
attached hereto) and upon payment of any necessary transfer tax or other
governmental charge imposed upon such transfer. This Warrant is exchangeable at
the principal office of the Issuer for Warrants to purchase the same aggregate
number of shares of Warrant Stock, each new Warrant to represent the right to
purchase such number of shares of Warrant Stock as the Holder hereof shall
designate at the time of such exchange. All Warrants issued on transfers or
exchanges shall be dated the Original Issue Date and shall be identical with
this Warrant except as to the number of shares of Warrant Stock issuable
pursuant thereto.
 
(e)           Continuing Rights of Holder. The Issuer will, at the time of or at
any time after each exercise of this Warrant, upon the request of the Holder
hereof, acknowledge in writing the extent, if any, of its continuing obligation
to afford to such Holder all rights to which such Holder shall continue to be
entitled after such exercise in accordance with the terms of this Warrant,
provided that if any such Holder shall fail to make any such request, the
failure shall not affect the continuing obligation of the Issuer to afford such
rights to such Holder.
 
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(f)           Compliance with Securities Laws.
 
(i)           The Holder of this Warrant, by acceptance hereof, acknowledges
that this Warrant and the shares of Warrant Stock to be issued upon exercise
hereof are being acquired solely for the Holder's own account and not as a
nominee for any other party, and for investment, and that the Holder will not
offer, sell or otherwise dispose of this Warrant or any shares of Warrant Stock
to be issued upon exercise hereof except pursuant to an effective registration
statement, or an exemption from registration, under the Securities Act and any
applicable state securities laws.
 
(ii)           Except as provided in paragraph (iii) below, this Warrant and all
certificates representing shares of Warrant Stock issued upon exercise hereof
shall be stamped or imprinted with a legend in substantially the following form:
 
NEITHER THE ISSUANCE AND SALE OF THIS WARRANT REPRESENTED BY THIS CERTIFICATE
NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
NOR QUALIFIED UNDER ANY APPLICABLE STATE SECURITIES LAWS, AND THEY MAY NOT BE
SOLD, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (A) A REGISTRATION STATEMENT
UNDER THE SECURITIES ACT WITH RESPECT TO THE SECURITIES  IS EFFECTIVE AND ANY
APPLICABLE STATE SECURITIES LAW REQUIREMENTS HAVE BEEN MET, OR (B) GULFSTREAM
INTERNATIONAL GROUP, INC. RECEIVES AN OPINION OF COUNSEL, REASONABLY ACCEPTABLE
TO IT, THAT THE REQUIREMENTS FOR EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS
UNDER THE SECURITIES ACT AND FROM THE REGISTRATION OR QUALIFICATION PROVISIONS
OF ANY APPLICABLE STATE SECURITIES LAWS HAVE BEEN MET.
 
(iii)           The Issuer agrees to reissue this Warrant or certificates
representing any of the Warrant Stock, without the legend set forth above, if at
such time, prior to making any transfer of any such securities, the Holder shall
give written notice to the Issuer describing the manner and terms of such
transfer and demonstrating that the following conditions are satisfied. Such
proposed transfer will not be effected until: (a) either (i) the Issuer has
received an opinion of counsel reasonably satisfactory to the Issuer, to the
effect that the registration of such securities under the Securities Act is not
required in connection with such proposed transfer, or (ii) a registration
statement under the Securities Act covering such proposed disposition has been
filed by the Issuer with the Securities and Exchange Commission and has become
and remains effective under the Securities Act, or (b) either (i) the Issuer has
received an opinion of counsel, reasonably satisfactory to the Issuer, to the
effect that registration or qualification under the securities or “blue sky”
laws of any state is not required in connection with such proposed disposition,
or (ii) compliance with applicable state securities or “blue sky” laws has been
effected or a valid exemption exists with respect thereto. The Issuer will
respond to any such notice from a holder within three (3) Trading Days. In the
case of any proposed transfer under this Section 2(f), the Issuer will use
reasonable efforts to comply with any such applicable state securities or “blue
sky” laws, but shall in no event be required, (x) to qualify to do business in
any state where it is not then qualified, (y) to take any action that would
subject it to tax or to the general service of process in any state where it is
not then subject, or (z) to comply with state securities or “blue sky” laws of
any state for which registration by coordination is unavailable to the Issuer.
The restrictions on transfer contained in this Section 2(f) shall be in addition
to, and not by way of limitation of, any other restrictions on transfer
contained in any other section of this Warrant. Whenever a certificate
representing the Warrant Stock is required to be issued to the Holder without a
legend, in lieu of delivering physical certificates representing the Warrant
Stock, the Issuer shall cause its transfer agent to electronically transmit the
Warrant Stock to the Holder by crediting the account of the Holder or Holder's
Prime Broker with DTC through its DWAC system (to the extent not inconsistent
with any provisions of this Warrant or the Purchase Agreement).
 
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(g)           Accredited Investor Status. At the time of the exercise of this
Warrant, the Holder (1) shall be an “accredited investor” as defined in
Regulation D under the Securities Act, or (2) shall exercise this Warrant by
means of a cashless exercise as provided for in Section 2(c).

3.          Adjustment of Warrant. The Warrant shall be subject to adjustment
from time to time as set forth in this Section 3. The Issuer shall give the
Holder notice of any event described below which requires an adjustment pursuant
to this Section 3 in accordance with the notice provisions set forth in Section
13.
 
(a)           Adjustments for Stock Splits, Combinations, Certain Dividends and
Distributions.  If the Issuer shall, at any time or from time to time after the
Original Issue Date, effect a split of the outstanding Common Stock (or any
other subdivision of its shares of Common Stock into a larger number of shares
of Common Stock), combine the outstanding shares of Common Stock into a smaller
number of shares of Common Stock, or make or issue or set a record date for the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in shares of Common Stock, then, in each event (i) the
number of shares of Common Stock for which this Warrant shall be exercisable
immediately after the occurrence of any such event shall be adjusted to equal
the number of shares of Common Stock that a record holder of the same number of
shares of Common Stock for which this Warrant is exercisable immediately prior
to the occurrence of such event would own or be entitled to receive after the
happening of such event, and (ii) the Warrant Price then in effect shall be
adjusted to equal (A) the Warrant Price then in effect multiplied by the
applicable numbers of shares of Common Stock at each price for which this
Warrant is exercisable immediately prior to the adjustment divided by (B) the
applicable numbers of shares of Common Stock at each price for which this
Warrant is exercisable immediately after such adjustment.
 
(b)           Adjustment for Other Dividends and Distributions. If the Issuer
shall, at any time or from time to time after the Original Issue Date, make or
issue or set a record date for the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable in (i) cash, (ii)
any evidences of indebtedness, or any other securities of the Company or any
property of any nature whatsoever, other than, in each case, shares of Common
Stock; or (iii) any warrants or other rights to subscribe for or purchase any
evidences of indebtedness, or any other securities of the Company or any
property of any nature whatsoever, other than, in each case, shares of Common
Stock, then, and in each event, (A) the number of shares of Common Stock for
which this Warrant shall be exercisable shall be adjusted to equal the product
of the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such adjustment multiplied by a fraction (1) the numerator
of which shall be the Per Share Market Value of Common Stock at the date of
taking such record and (2) the denominator of which shall be such Per Share
Market Value minus the amount allocable to one share of Common Stock of any such
cash so distributable and of the fair value (as determined in good faith by the
Board and supported by an opinion from an investment banking firm mutually
agreed upon by the Issuer and the Holder) of any and all such evidences of
indebtedness, shares of stock, other securities or property or warrants or other
subscription or purchase rights so distributable, and (B) the Warrant Price then
in effect shall be adjusted to equal (1) the Warrant Price then in effect
multiplied by the applicable numbers of shares of Common Stock for which this
Warrant is exercisable at each price immediately prior to the adjustment divided
by (2) the applicable numbers of shares of Common Stock for which this Warrant
is exercisable at each price immediately after such adjustment. A
reclassification of the Common Stock (other than a change in par value, or from
par value to no par value or from no par value to par value) into shares of
Common Stock and shares of any other class of stock shall be deemed a
distribution by the Issuer to the holders of its Common Stock of such shares of
such other class of stock within the meaning of this Section 3(b) and, if the
outstanding shares of Common Stock shall be changed into a larger or smaller
number of shares of Common Stock as a part of such reclassification, such change
shall be deemed a subdivision or combination, as the case may be, of the
outstanding shares of Common Stock within the meaning of Section 3(a).
 
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(c)           Adjustments for Reclassification, Exchange or Substitution. If the
Common Stock for which this Warrant is exercisable at any time or from time to
time after the Original Issue Date shall be changed to the same or different
number of shares of any class or classes of stock, whether by reclassification,
exchange, substitution or otherwise (other than by way of a stock split or
combination of shares or stock dividends provided for in Section 3(a), Section
3(b), or a reorganization, merger, consolidation, or sale of assets provided for
in Section 3(d)), then, and in each event, an appropriate revision to the
Warrant Price shall be made and provisions shall be made (by adjustments of the
Warrant Price or otherwise) so that, upon any subsequent exercise of this
Warrant, the Holder shall have the right to receive, in lieu of Warrant Stock,
the kind and amount of shares of stock and other securities receivable upon
reclassification, exchange, substitution or other change, by holders of the
number of shares of Common Stock for which this Warrant was exercisable
immediately prior to such reclassification, exchange, substitution or other
change.
 
 
(d)           Adjustments for Reorganization, Merger, Consolidation or Sales of
Assets. If at any time or from time to time after the Original Issue Date there
shall be a capital reorganization of the Issuer (other than by way of a stock
split or combination of shares or stock dividends or distributions provided for
in Section 3(a), and Section 3(b), or a reclassification, exchange or
substitution of shares provided for in Section 3(c)), or a merger or
consolidation of the Issuer with or into another corporation where the holders
of the Issuer’s outstanding voting securities prior to such merger or
consolidation do not own over 50% of the outstanding voting securities of the
merged or consolidated entity, immediately after such merger or consolidation,
or the sale of all or substantially all of the Issuer's properties or assets to
any other person (an “Organic Change”), then as a part of such Organic Change an
appropriate revision to the Warrant Price shall be made if necessary and
provision shall be made if necessary (by adjustments of the Warrant Price or
otherwise) so that, upon any subsequent exercise of this Warrant, the Holder
shall have the right to receive, in lieu of Warrant Stock, the kind and amount
of shares of stock and other securities or property of the Issuer or any
successor corporation resulting from the Organic Change. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 3(d) with respect to the rights of the Holder after the Organic
Change to the end that the provisions of this Section 3(d) (including any
adjustment in the Warrant Price then in effect and the number of shares of stock
or other securities deliverable upon exercise of this Warrant) shall be applied
after that event in as nearly an equivalent manner as may be practicable.  In
any such case, the resulting or surviving corporation (if not the Issuer) shall
expressly assume the obligations to deliver, upon the exercise of this Warrant,
such securities or property as the Holder shall be entitled to receive pursuant
to the provisions hereof, and to make provisions for the protection of the
rights of the Holder as provided above.
 
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(e)           Adjustments for Issuance of Additional Shares of Common Stock.  In
the event that the Company shall issue or sell any additional shares of Common
Stock (otherwise than as provided in the foregoing subsections (a) through (d)
of this Section 3 or pursuant to (X) Common Stock Equivalents (as hereafter
defined) or (Y) subsection (f) below) (“Additional Shares of Common Stock”) at a
price per share less than the then-applicable Warrant Price or without
consideration, then the Warrant Price upon each such issuance shall be reduced
to that price (rounded to the nearest cent) determined by multiplying the
Warrant Price by a fraction: (1) the numerator of which shall be equal to the
sum of (A) the number of shares of outstanding Common Stock immediately prior to
the issuance of such Additional Shares of Common Stock plus (B) the number of
shares of Common Stock (rounded to the nearest whole share) which the aggregate
consideration for the total number of such Additional Shares of Common Stock so
issued would purchase at a price per share equal to the outstanding Warrant
Price in effect immediately prior to such issuance; and (2) the denominator of
which shall be equal to the number of shares of outstanding Common Stock
immediately after the issuance of such Additional Shares of Common Stock. No
adjustment of the Warrant Price shall be made upon the issuance of any
Additional Shares of Common Stock which are issued pursuant to the exercise of
any warrants or other subscription or purchase rights or pursuant to the
exercise of any conversion or exchange rights in any Common Stock Equivalents,
if any such adjustment shall previously have been made upon the issuance of such
warrants or other rights or upon the issuance of such Common Stock Equivalents
(or upon the issuance of any warrant or other rights therefore).
 
(f)           Issuance of Common Stock Equivalents. The provisions of this
Section 3(f) shall apply if the Company shall (a) issue any securities
convertible into or exchangeable for, directly or indirectly, Common Stock
(“Convertible Securities”), or (b) issue or sell any rights or warrants or
options to purchase any such Common Stock or Convertible Securities
(collectively, the “Common Stock Equivalents”).  If the price per share for
which Additional Shares of Common Stock may be issuable pursuant to any such
Convertible Securities or Common Stock Equivalent shall be less than the
applicable Warrant Price then in effect, or if, after any such issuance of
Common Stock Equivalents, the price per share for which Additional Shares of
Common Stock may be issuable thereafter is amended or adjusted, and such price
as so amended shall be less than the applicable Warrant Price in effect at the
time of such amendment or adjustment, then the applicable Warrant Price upon
each such issuance or amendment shall be adjusted as provided in Section 3(e).
No adjustment shall be made to the Warrant Price upon the issuance of any Common
Stock pursuant to the exercise, conversion or exchange of any Convertible
Security or Common Stock Equivalent where an adjustment to the Warrant Price was
made as a result of the issuance or purchase of such Convertible Security or
Common Stock Equivalent.
 
(g)           Superseding Adjustment. If, at any time after any adjustment of
the Warrant Price then in effect shall have been made pursuant to Section 3(e)
or Section 3(f) as the result of any issuance of Common Stock Equivalents, and
such Common Stock Equivalents, or the right of conversion or exchange in such
Common Stock Equivalents, shall expire, and all of such or the right of
conversion or exchange with respect to all of such Common Stock Equivalents
shall not have been converted or exercised, then such previous adjustment shall
be rescinded and annulled and the Warrant Price then in effect shall be adjusted
to the Warrant Price in effect immediately prior to the issuance of such Common
Stock Equivalents, subject to any further adjustments pursuant to this Section
3.
 
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(h)           Consideration for Stock. In case any shares of Common Stock or
Convertible Securities, or any rights or warrants or options to purchase any
such Common Stock or Convertible Securities, shall be issued or sold:
 
(i)           in connection with any merger or consolidation in which the
Company is the surviving corporation (other than any consolidation or merger in
which the previously outstanding shares of Common Stock of the Company shall be
changed to or exchanged for the stock or other securities of another
corporation), the amount of consideration therefore shall be deemed to be the
fair value, as determined reasonably and in good faith by the Board, of such
portion of the assets and business of the non-surviving corporation as the Board
may determine to be attributable to such shares of Common Stock, Convertible
Securities, rights or warrants or options, as the case may be; or
 
(ii)           in the event of any consolidation or merger of the Company in
which the Company is not the surviving corporation or in which the previously
outstanding shares of Common Stock of the Company shall be changed into or
exchanged for the stock or other securities of another corporation, or in the
event of any sale of all or substantially all of the assets of the Company for
stock or other securities of any corporation, the Company shall be deemed to
have issued a number of shares of its Common Stock for stock or securities or
other property of the other corporation computed on the basis of the actual
exchange ratio on which the transaction was predicated, and for a consideration
equal to the fair market value on the date of such transaction of all such stock
or securities or other property of the other corporation. If any such
calculation results in adjustment of the applicable Warrant Price, or the number
of shares of Common Stock for which this Warrant is exercisable, the
determination of the applicable Warrant Price or the number of shares of Common
Stock for which this Warrant is exercisable immediately prior to such merger,
consolidation or sale, shall be made after giving effect to such adjustment of
the number of shares of Common Stock for which this Warrant is exercisable. In
the event any consideration received by the Company for any securities consists
of property other than cash, the fair market value thereof at the time of
issuance or as otherwise applicable shall be as determined in good faith by the
Board. In the event Common Stock is issued with other shares or securities or
other assets of the Company for consideration which covers both, the
consideration computed as provided in this Section 3(h) shall be allocated among
such securities and assets as determined in good faith by the Board.
 
(i)           Record Date. In case the Company shall take record of the holders
of its Common Stock or any other preferred stock for the purpose of entitling
them to subscribe for or purchase Common Stock or Convertible Securities, then
the date of the issue or sale of the shares of Common Stock shall be deemed to
be such record date.
 
(j)           Certain Issues Excepted. Anything herein to the contrary
notwithstanding, the Company shall not be required to make any adjustment to the
Warrant Price upon or in connection with the issuance of any shares of Common
Stock or other securities issued pursuant to Common Stock Equivalents that are:
(i) issued pursuant to a bona fide acquisition of another business entity or
business segment of any such entity by the Company pursuant to a merger,
purchase of substantially all the assets or any type of reorganization (each an
“Acquisition”) provided that (A) the Company will own more than twenty-five
percent (25%) of the voting power of such business entity or business segment of
such entity and (B) such Acquisition is approved by the Board; (ii) issued in
connection with bona fide strategic license agreements or other partnering
arrangements so long as such issuances are not solely for the purpose of raising
capital; (iii) issued under grants of options to purchase Common Stock pursuant
to equity incentive plans that are adopted by the Board; and (iv) issued to any
underwriter, placement agent and their respective designees for the transactions
contemplated by a private placement or public offering of securities of the
Company; (vi issued to advisors or consultants (including, without limitation,
financial advisors and investor relations firms) in connection with any
engagement letter or consulting agreement, provided that any such issuance is
approved by the Board; (vi) issued to financial institutions or lessors in
connection with reasonable commercial credit arrangements, equipment financings
or similar transactions, provided that any such issue is approved by the Board
of Directors; (vii) issued to vendors or customers or to other persons in
similar commercial situations as the Company, provided that any such issue is
approved by the Board of Directors; and (viii) issued in connection with any
recapitalization.
 
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(k)           No Impairment. The Issuer shall not, by amendment of its Articles
of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder, but will at all times in good
faith assist in the carrying out of all the provisions of this Section 3 and in
the taking of all such action as may be necessary or appropriate in order to
protect against impairment the right of the Holder to exercise this Warrant. In
the event the Holder shall elect to exercise this Warrant, in whole or in part,
as provided herein, the Issuer cannot refuse exercise based on any claim that
the Holder or anyone associated or affiliated with such holder has been engaged
in any violation of law, unless (i) the Issuer receives an order from the
Securities and Exchange Commission prohibiting such exercise or (ii) an
injunction from a court, on notice, restraining and/or adjoining exercise of
this Warrant.
 
(l)           Certificates as to Adjustments. Upon occurrence of each adjustment
or readjustment of the Warrant Price or number of shares of Common Stock for
which this Warrant is exercisable pursuant to this Section 3, the Issuer at its
expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and furnish to the Holder a certificate setting forth such
adjustment and readjustment, showing in detail the facts upon which such
adjustment or readjustment is based. The Issuer shall, upon written request of
the Holder, at any time, furnish or cause to be furnished to the Holder a like
certificate setting forth such adjustments and readjustments, the Warrant Price
in effect at the time, and 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
the exercise of this Warrant. Notwithstanding the foregoing, the Issuer shall
not be obligated to deliver a certificate unless such certificate would reflect
an increase or decrease of at least one percent of such adjusted amount; if the
Issuer so postpones delivering a certificate, such prior adjustment shall be
carried forward and made as soon as such adjustment, together with other
adjustments required by this Section 3 and not previously made, would result in
an adjustment of one percent or more.
 
(m)           Issue Taxes. The Issuer shall pay any and all issue and other
taxes, excluding federal, state or local income taxes, that may be payable in
respect of any issue or delivery of shares of Common Stock on exercise of this
Warrant; provided, however, that the Issuer shall not be obligated to pay any
transfer taxes resulting from any transfer requested by any holder in connection
with any such conversion.
 
(n)           Fractional Shares. No fractional shares of Common Stock shall be
issued upon exercise of this Warrant. In lieu of any fractional shares to which
the Holder would otherwise be entitled, the Holder shall round the number of
shares to be issued upon exercise up to the nearest whole number of shares.
 
(o)           Reservation of Common Stock. The Issuer shall, during the period
within which this Warrant may be exercised, reserve and keep available out of
its authorized and unissued Common Stock, solely for the purpose of effecting
the exercise of this Warrant, such number of shares of Common Stock equal to at
least one hundred ten percent (120%) of the aggregate number of shares of Common
Stock as shall from time to time be sufficient to effect the exercise of this
Warrant.
 
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(p)           Retirement of this Warrant. Exercise of this Warrant shall be
deemed to have been effected on the date of exercise hereof. Upon exercise of
this Warrant only in part, the Issuer shall issue and deliver to the Holder, at
the expense of the Issuer, a new Warrant covering the unexercised balance of the
Warrant Shares.
 
(q)           Regulatory Compliance. If any shares of Common Stock to be
reserved for the purpose of exercise of this Warrant require registration or
listing with or approval of any governmental authority, stock exchange or other
regulatory body under any federal or state law or regulation or otherwise before
such shares may be validly issued or delivered upon conversion, the Issuer
shall, at its sole cost and expense, in good faith and as expeditiously as
possible, endeavor to secure such registration, listing or approval, as the case
may be.
 
4.           No Preemptive Rights. The Holder shall not be entitled to rights to
subscribe for, purchase or receive any part of any new or additional shares of
any class, whether now or hereinafter authorized, or of bonds or debentures, or
other evidences of indebtedness convertible into or exchangeable for shares of
any class, but all such new or additional shares of any class, or any bond,
debentures or other evidences of indebtedness convertible into or exchangeable
for shares, may be issued and disposed of by the Board on such terms and for
such consideration (to the extent permitted by law), and to such person or
persons as the Board in its absolute discretion may deem advisable.
 
5.           Exercise Restriction. Notwithstanding anything to the contrary set
forth in this Warrant, at no time may the Holder exercise this Warrant, in whole
or in part, if the number of shares of Common Stock to be issued pursuant to
such exercise would cause the number of shares of Common Stock beneficially
owned by the Holder and its affiliates at such time, when aggregated with all
other shares of Common Stock beneficially owned by the Holder and its affiliates
at such time, result in the Holder beneficially owning (as determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and the rules thereunder) in excess of 9.99% of the then issued and
outstanding shares of Common Stock outstanding at such time; provided, however,
that upon the Holder providing the Issuer with sixty-one (61) days notice
(pursuant to Section 13 hereof) (the "Waiver Notice") that the Holder would like
to waive Section 5 of this Warrant with regard to any or all shares of Common
Stock for which this Warrant is exercisable, this Section 5 shall be of no force
or effect with regard to those shares referenced in the Waiver Notice.

6.           Registration Rights.The Holder of this Warrant is entitled to the
benefit of certain registration rights with respect to the shares of Warrant
Stock issuable upon the exercise of this Warrant, pursuant to that certain
Registration Rights Agreement, of even date herewith, by and among the Issuer
and Persons listed on Schedule I thereto (the “Registration Rights Agreement”)
and the registration rights with respect to the shares of Warrant Stock issuable
upon the exercise of this Warrant by any subsequent Holder may only be assigned
in accordance with the terms and provisions of the Registrations Rights
Agreement.
 
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7.           Net Exercise.  In lieu of exercising this Warrant for cash, and
unless the Warrant Shares are registered pursuant to an effective registration
statement within twelve (12) months from the Final Closing Date, the Holder may
elect to exchange this Warrant for shares of Common Stock equal to the value of
the Warrant by surrender of the Warrant, together with notice of such election,
at the principal office of the Issuer, in which event the Issuer shall issue to
the holder a number of shares of Common Stock determined by the following
formula:

X = Y(A-B)
            A
Where
X = the number of shares of Common Stock to be issued to the Holder
Y = the number of shares purchasable under this Warrant a the relevant Warrant
Price
A = value per share of one share of Common Stock determined in accordance with
this Warrant.
B = the relevant Warrant Price (as adjusted).

8.           Definitions. For the purposes of this Warrant, the following terms
have the following meanings:

“Articles of Incorporation” means the Amended and Restated Articles of
Incorporation of the Issuer as in effect on the Original Issue Date, and as
hereafter from time to time amended, modified, supplemented or restated in
accordance with the terms hereof and thereof and pursuant to applicable law.

“Board” means the Board of Directors of the Issuer.

“Capital Stock” means and includes (i) any and all shares, interests,
participations or other equivalents of or interests in (however designated)
corporate stock, including, without limitation, shares of preferred or
preference stock, (ii) all partnership interests (whether general or limited) in
any Person which is a partnership, (iii) all membership interests or limited
liability company interests in any limited liability company, and (iv) all
equity or ownership interests in any Person of any other type.

 “Common Stock” means the Common Stock, $0.001 par value per share, of the
Issuer and any other Capital Stock into which such stock may hereafter be
changed.

“Convertible Securities” means any evidences of indebtedness, shares or other
securities directly or indirectly convertible or exchangeable for Common Stock,
but excluding Options.

 “Governmental Authority” means any governmental, regulatory or self-regulatory
entity, department, body, official, authority, commission, board, agency or
instrumentality, whether federal, state or local, and whether domestic or
foreign.

“Holders” means the Persons who shall from time to time own any Warrant. The
term “Holder” means one of the Holders.

“Option” means any right, option or warrant to subscribe for, purchase or
otherwise acquire Common Stock or Convertible Securities.

“Original Issue Date” means the Issuance Date of this Warrant.

“AMEX” means the NYSE Amex Stock Exchange

“Other Common” means any other Capital Stock of the Issuer of any class which
shall be authorized at any time after the date of this Warrant (other than
Common Stock) and which shall have the right to participate in the distribution
of earnings and assets of the Issuer without limitation as to amount.
 
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“Outstanding Common Stock” means, at any given time, the aggregate amount of
outstanding shares of Common Stock, assuming full exercise, conversion or
exchange (as applicable) of all Common Stock Equivalents that are outstanding at
such time.

“Person” means an individual, corporation, limited liability company,
partnership, joint stock company, trust, unincorporated organization, joint
venture, Governmental Authority or other entity of whatever nature.

“Per Share Market Value” means on any particular date (a) the last closing bid
price per share of the Common Stock on such date on the AMEX or another
registered national stock exchange on which the Common Stock is then listed, or
if there is no such price on such date, then the closing bid price on such
exchange or quotation system on the date nearest preceding such date, or (b) if
the Common Stock is not listed then on the AMEX or any registered national stock
exchange, the last closing bid price for a share of Common Stock in the market,
as reported by the National Quotation Bureau Incorporated or similar
organization or agency succeeding to its functions of reporting prices) at the
close of business on such date, or (c) if the Common Stock is not then reported
by the National Quotation Bureau Incorporated (or similar organization or agency
succeeding to its functions of reporting prices), then the average of the "Pink
Sheet" quotes for the five (5) Trading Days preceding such date of
determination, or (d) if the Common Stock is not then publicly traded the fair
market value of a share of Common Stock as determined by the Board.

“Purchase Agreement” means the Purchase Agreement for Senior Subordinated
Debentures and Warrants dated as of February 26, 2010, among the Issuer and the
Purchasers.

“Purchasers” means the Initial Holder and the other purchasers of the Common
Stock and the Warrants issued by the Issuer pursuant to the Purchase Agreement.

“Securities” means any debt or equity securities of the Issuer, whether now or
hereafter authorized, any instrument convertible into or exchangeable for
Securities or a Security, and any option, warrant or other right to purchase or
acquire any Security. "Security" means one of the Securities.

“Securities Act” means the Securities Act of 1933, as amended.

“Subsidiary” means any corporation at least 50% of whose outstanding Voting
Stock shall at the time be owned directly or indirectly by the Issuer or by one
or more of its Subsidiaries, or by the Issuer and one or more of its
Subsidiaries.

“Term” has the meaning specified in Section 1 hereof.
 
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“Trading Day” means (a) a day on which the Common Stock is traded on the NYSE:
American Stock Exchange, or (b) if the Common Stock is not traded on the NYSE:
American Stock Exchange a day on which the Common Stock is quoted in the
over-the-counter market as reported by National Quotation Bureau Incorporated
(or any similar organization or agency succeeding its functions of reporting
prices); provided, however, that in the event that the Common Stock is not
listed or quoted as set forth in (a) or (b) hereof, then Trading Day shall mean
any day except Saturday, Sunday and any day which shall be a legal holiday or a
day on which banking institutions in the State of New York are authorized or
required by law or other government action to close.

“Voting Stock” means, as applied to the Capital Stock of any corporation,
Capital Stock of any class or classes (however designated) having ordinary
voting power for the election of a majority of the members of the Board of
Directors (or other governing body) of such corporation, other than Capital
Stock having such power only by reason of the happening of a contingency.

“Warrants” means the Warrants issued and sold pursuant to the Purchase
Agreement, including, without limitation, this Warrant (as defined in the
Purchase Agreement), and any other warrants of like tenor issued in substitution
or exchange for any thereof pursuant to the provisions of Section 2(d) or  2(e)
hereof or of any of such other Warrants.

“Warrant Price” initially means $1.22 per share, representing 100% of the
closing price of the Company’s Common Stock on the trading day immediately prior
to but not including the Closing Date.

“Warrant Share Number” means at any time the aggregate number of shares of
Warrant Stock which may at such time be purchased upon exercise of a Warrant,
after giving effect to all prior adjustments and increases to such number made
or required to be made under the terms hereof.

“Warrant Stock” means Common Stock issuable upon exercise of any Warrant or
Warrants or otherwise issuable pursuant to any Warrant or Warrants.

10.          Other Notices. In case at any time:
 
(i) the Issuer shall make any distributions to the holders of Common Stock; or
 
(ii) the Issuer shall authorize the granting to all holders of its Common Stock
of rights to subscribe for or purchase any shares of Capital Stock of any class
or other rights; or
 
(iii) there shall be any reclassification of the Capital Stock of the Issuer; or
 
(iv) there shall be any capital reorganization by the Issuer; or
 
(v) there shall be any (i) consolidation or merger involving the Issuer or (ii)
sale, transfer or other disposition of all or substantially all of the Issuer's
property, assets or business (except a merger or other reorganization in which
the Issuer shall be the surviving corporation and its shares of Capital Stock
shall continue to be outstanding and unchanged and except a consolidation,
merger, sale, transfer or other disposition involving a wholly-owned
Subsidiary); or
 
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(vi) there shall be a voluntary or involuntary dissolution, liquidation or
winding-up of the Issuer or any partial liquidation of the Issuer or
distribution to holders of Common Stock;

then, in each of such cases, the Issuer shall give written notice to the Holder
of the date on which (i) the books of the Issuer shall close or a record shall
be taken for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their certificates for Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be. Such notice shall be given at least twenty
(20) days prior to the action in question and not less than ten (10) days prior
to the record date or the date on which the Issuer's transfer books are closed
in respect thereto. This Warrant entitles the Holder to receive copies of all
financial and other information distributed or required to be distributed to the
holders of the Common Stock.

9.           Amendment and Waiver. Any term, covenant, agreement or condition in
this Warrant may be amended, or compliance therewith may be waived (either
generally or in a particular instance and either retroactively or
prospectively), by a written instrument or written instruments executed by (a)
the Issuer, (b) the Initial Holder (assuming the Initial Holder still owns all
or part of this Warrant), and (c) the Holders of twenty-five percent (25%) of
the Warrants, the calculation of which shall include the Initial Holder’s
percentage of ownership of the Warrants; provided, however, that no such
amendment or waiver shall reduce the Warrant Share Number, increase the Warrant
Price, shorten the period during which this Warrant may be exercised or modify
any provision of this Section 11 without the consent of the Holder of this
Warrant. No consideration shall be offered or paid to any person to amend or
consent to a waiver or modification of any provision of this Warrant unless the
same consideration is also offered to all holders of the Warrants.

10.           Governing Law; Jurisdiction. This Warrant shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to any of the conflicts of law principles which would result in
the application of the substantive law of another jurisdiction. This Warrant
shall not be interpreted or construed with any presumption against the party
causing this Warrant to be drafted. The Issuer and the Holder agree that venue
for any dispute arising under this Warrant will lie exclusively in the state or
federal courts located in New York County, New York, and the parties irrevocably
waive any right to raise forum non conveniens or any other argument that New
York is not the proper venue. The Issuer and the Holder irrevocably consent to
personal jurisdiction in the state and federal courts of the state of New York.
The Issuer and the Holder consent to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address in
effect for notices to it under this Warrant and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing in
this Section 12 shall affect or limit any right to serve process in any other
manner permitted by law. The Issuer and the Holder hereby agree that the
prevailing party in any suit, action or proceeding arising out of or relating to
this Warrant or the Purchase Agreement, shall be entitled to reimbursement for
reasonable legal fees from the non-prevailing party. The parties hereby waive
all rights to a trial by jury.
 
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11.           Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by facsimile or
three (3) business days following being mailed by certified or registered mail,
postage prepaid, return-receipt requested, addressed to the holder of record at
its address appearing on the books of the Issuer. The Issuer will give written
notice to the Holder at least twenty (20) calendar days prior to the date on
which the Issuer closes its books or takes a record (a) with respect to any
dividend or distribution upon the Common Stock, (b) with respect to any pro rata
subscription offer to holders of Common Stock or (c) for determining rights to
vote with respect to any Organic Change, dissolution, liquidation or winding-up
and in no event shall such notice be provided to such holder prior to such
information being made known to the public. The Issuer will also give written
notice to the Holder at least twenty (20) days prior to the date on which any
Organic Change, dissolution, liquidation or winding-up will take place and in no
event shall such notice be provided to such holder prior to such information
being made known to the public. The addresses for such communications shall be
as is set forth in the Purchase Agreement. Any party hereto may from time to
time change its address for notices by giving written notice of such changed
address to the other party hereto.
 
12.           Warrant Agent. The Issuer may, by written notice to each Holder of
this Warrant, appoint an agent having an office in New York, New York for the
purpose of issuing shares of Warrant Stock on the exercise of this Warrant
pursuant to subsection (b) of Section 2 hereof, exchanging this Warrant pursuant
to subsection (d) of Section 2 hereof or replacing this Warrant pursuant to
Section 13 hereof, or any of the foregoing, and thereafter any such issuance,
exchange or replacement, as the case may be, shall be made at such office by
such agent.
 
13.           Flight Benefits.                                 The Holder of
this Warrant and members of the immediate family (parents, children and spouse)
of the Holder of this Warrant shall be entitled to receive the same
complimentary flight benefits on flights operated by the Borrower or any
Subsidiary of the Borrower as are conferred upon employees of the Borrower or
any airline Subsidiary of the Borrower.

14.           Lost or Stolen Warrant. Upon receipt by the Company of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant, and, in the case of loss, theft or destruction, of any
indemnification undertaking by the Holder to the Company and, in the case of
mutilation, upon surrender and cancellation of this Warrant, the Company shall
execute and deliver new Warrant of like tenor and date; provided, however, that
the Company shall not be obligated to re-issue warrant(s) if the Holder
contemporaneously exercise this Warrant to purchase shares of Common Stock.

15.           Remedies, Characterizations, Other Obligations, Breaches and
Injunctive Relief. The remedies provided in this Warrant shall be cumulative and
in addition to all other remedies available under this Warrant, at law or in
equity (including a decree of specific performance and/or other injunctive
relief), no remedy contained herein shall be deemed a waiver of compliance with
the provisions giving rise to such remedy and nothing herein shall limit a
Holder's right to pursue actual damages for any failure by the Company to comply
with the terms of this Warrant. Amounts set forth or provided for herein with
respect to payments, conversion and the like (and the computation thereof) shall
be the amounts to be received by the Holder thereof and shall not, except as
expressly provided herein, be subject to any other obligation of the Company (or
the performance thereof). The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach or threatened breach, the Holder
shall be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
 
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16.           Specific Shall Not Limit General; Construction. No specific
provision contained in this Warrant shall limit or modify any more general
provision contained herein. This Warrant shall be deemed to be jointly drafted
by the Company and all initial purchasers of the Warrant and shall not be
construed against any person as the drafter hereof.

17.           Successors and Assigns. This Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors and
assigns of the Issuer, the Holder hereof and (to the extent provided herein) the
Holders of Warrant Stock issued pursuant hereto, and shall be enforceable by any
such Holder or Holder of Warrant Stock.

18.           Modification and Severability. If, in any action before any court
or agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency. If any such provision is not enforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained herein.

19.           Headings. The headings of the Sections of this Warrant are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
 
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
 
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IN WITNESS WHEREOF, the Issuer has executed this Warrant as of the day and year
first above written.

 
GULFSTREAM INTERNATIONAL GROUP, INC
         
 
By:
        Name: David Hackett       Title:    Preside          

 
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EXERCISE FORM
 
WARRANT
 
GULFSTREAM INTERNATIONAL GROUP, INC.

The undersigned _______________, pursuant to the provisions of the accompanying
Warrant, hereby elects to purchase _____ shares of Common Stock of GULFSTREAM
INTERNATIONAL GROUP, INC. covered by the accompanying Warrant.
 
Dated:
_________________                                                               
Signature                   ___________________________
 
Address                     ___________________________
 
        ___________________________

 
Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the Holder on the date of Exercise: _________________________

The undersigned is an “accredited investor” as defined in Regulation D under the
Securities Act of 1933, as amended.o Yeso No
 
The Holder shall pay the sum of $________ by certified or official bank check
(or via wire transfer) to the Issuer in accordance with the terms of the
Warrant.
 
 
 
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ASSIGNMENT

FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the accompanying Series C Warrant and all rights evidenced
thereby and does irrevocably constitute and appoint _____________, attorney, to
transfer said Series C Warrant on the books of the corporation named therein.

Dated:
_________________                                                               
Signature                  ___________________________
 
Address                    ___________________________
 
        ___________________________

 
 
 
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PARTIAL ASSIGNMENT

FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the accompanying Series C Warrant together with all rights therein,
and does irrevocably constitute and appoint ___________________, attorney, to
transfer that part of said Series C Warrant on the books of the corporation
named therein.

Dated:
_________________                                                               
Signature                  ___________________________
 
Address                    ___________________________
 
        ___________________________

FOR USE BY THE ISSUER ONLY:

This Warrant No. ________ canceled (or transferred or exchanged) this _____ day
of ___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. ________ issued for ____ shares of Common Stock in
the name of _______________.
 
 
 
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