gia_ex102.htm


    EXHIBIT
10.2

     

    CERTIFICATE
OF DESIGNATION,

    PREFERENCES
AND RIGHTS

    of

    SERIES
A CONVERTIBLE PREFERRED STOCK

    of

    GULFSTREAM
INTERNATIONAL GROUP, INC.

    (Pursuant
to Section 151 of the

    Delaware
General Corporation Law)

    


    GULFSTREAM INTERNATIONAL GROUP,
INC., a corporation organized and existing under the laws of the State of
Delaware (the "Corporation"), the
certificate of incorporation of which was filed in the office of the Secretary
of State of Delaware on December 20, 2005, as amended on June 12, 2007 and as
further amended on October 26, 2009, hereby certifies that the Board of
Directors of the Corporation (the "Board of Directors"
or the "Board"), pursuant to
authority of the Board of Directors as required by Section 151 of the Delaware
General Corporation Law, and in accordance with the provisions of its
Certificate of Incorporation and Bylaws, each as amended and restated through
the date hereof, has and hereby authorizes a series of the Corporation's
previously authorized 5,000,000 shares of preferred stock, par value $0.01 per
share (the "Preferred
Stock"), and hereby states the designation and number of shares, and
fixes the relative rights, preferences, privileges, powers and restrictions
thereof, as follows:

    


    I.
DESIGNATION AND AMOUNT

    


    The
designation of this series, which consists of up to Two Hundred Fifty Thousand
(250,000) shares of Preferred Stock, is the Series A Preferred Stock (the "Series A Preferred
Stock") and the stated value amount shall be Ten Dollars ($10.00) per
share (the "Stated
Value ").

    


    II.
CERTAIN DEFINITIONS

    


    Unless otherwise defined in this
Certificate of Designations, all capitalized terms, when used herein, shall have
the same meaning as is defined in the Subscription Agreement.  For
purposes of this Certificate of Designation, in addition to the other terms
defined herein, the following terms shall have the following
meanings:

    


    A           “Affiliates” of any
particular Person means any other Person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by or under common
control with such Person.  For purposes of this definition, “ control ” (including
the terms “ controlling,” “controlled by” and
“under common control
with”) means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or
otherwise.

    


    B.           “Bloomberg” shall mean
Bloomberg, L.P. (or any successor to its function of reporting stock
prices).

     

    C.           "Business Day" means
any day, other than a Saturday or Sunday, or a day on which banking institutions
in the State of New York are authorized or obligated by law, regulation or
executive order to close.

    


    D.           “Common Stock” means
the common stock of the Corporation, par value $0.001 per share, together with
any securities into which the common stock may be reclassified.

     

    E.           “Common Stock Deemed
Outstanding” shall mean the number of shares of Common Stock actually
outstanding (not including shares of Common Stock held in the treasury of the
Corporation), plus (x) the maximum total number of shares of Common Stock
issuable upon the exercise of the Options, as of the date of such issuance or
grant of such Options, if any, and (y) the maximum total number of shares of
Common Stock issuable upon conversion or exchange of Convertible Securities, as
of the date of issuance of such Convertible Securities, if any.

     

    
      
         


      

      
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    F.           "Conversion Date"
means, for any Conversion, the date specified in the notice of conversion in the
form attached hereto (the "Notice of
Conversion"), so long as a copy of the Notice of Conversion is faxed,
emailed or delivered by other means resulting in notice to the Corporation
before 11:59 p.m., New York City time, on the Conversion Date indicated in the
Notice of Conversion; provided, however, that if
the Notice of Conversion is not so faxed, emailed or otherwise delivered before
such time, then the Conversion Date shall be the date the Holder faxes or
otherwise delivers the Notice of Conversion to the Corporation.

    


    G.           “Convertible
Securities” shall have the meaning as defined in Article VIII, Section
F(ii) of this Certificate of Designations.

    


    H.           “Conversion Shares”
means such number of shares of Common Stock as shall be determined by dividing
(i) the ten dollar ($10.00) Stated Value per share of Series A Preferred Stock,
by (ii) the Series A Conversion Price per share, then in effect.

     

    I.           “Dilutive Issuance”
shall have the meaning as defined in Article VIII, Section E of this Certificate
of Designations.

     

    J.            “Holder” shall mean
the collective reference to the Investor, its Affiliates or any one or more
holder(s) of shares of Series A Preferred Stock.

     

    K.           “Indebtedness” shall
mean the collective reference to (i) all loans, advances, debts, liabilities,
obligations, covenants and duties owing by the Corporation or any Subsidiary of
any kind or nature, present or future, whether or not for the payment of money,
whether arising by reason of an extension of credit, loan, guaranty,
indemnification or in any other manner, whether direct or indirect (including,
without limitation, those acquired by assignment, purchase, discount or
otherwise), whether absolute or contingent, due or to become due, and however
acquired, including all interest, charges, expenses, commitment, facility or
other fees, attorneys’ fees, and any other sum properly chargeable to the
Corporation under any of the foregoing, (ii) any and all other indebtedness
secured by the assets of the Corporation or any Subsidiary, (iii) any and all
other obligations designated as “senior indebtedness” or “secured indebtedness”
by the terms thereof, (iv) any and all leases which, under generally accepted
accounting principles would be capitalized on the balance sheet of the
Corporation or any Subsidiary, and (vv) any and all other indebtedness incurred
in connection with the amendment, restatement, refinancing or replacement of any
of the foregoing.

    


    L.            “Investor” shall mean
any Person who purchases from the Corporation, for the Original Issue Price, any
shares of Series A Preferred Stock being issued pursuant to the Subscription
Agreement.

    


    M.           “Issuance Date" means
one (1) Business Day following the filing of this Series A Certificate of
Designation with the Secretary of State of the State of Delaware.

    


    N.           "Majority Holders"
means the Holders of a majority of the then outstanding shares of Series A
Preferred Stock.

     

    
      
         


      

      
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    O.           “Market Price” means,
as of any Trading Day, (i) the last reported sale prices for the shares of
Common Stock on a national securities exchange which is the principal trading
market for the Common Stock as reported by Bloomberg or (ii) if no national
securities exchange is the principal trading market for the shares of Common
Stock, the average of the last reported sale prices on the principal trading
market for the Common Stock as reported by Bloomberg, or (iii) if market value
cannot be calculated as of such date on any of the foregoing bases, the Market
Price shall be the fair market value as reasonably determined in good faith by
(A) the Board of Directors of the Corporation, or (B) at the option of a
majority-in-interest of the holders of the outstanding Series A Preferred Stocks
by an independent investment bank of nationally recognized standing in the
valuation of businesses similar to the business of the
Corporation.  The manner of determining the Market Price of the Common
Stock set forth in the foregoing definition shall apply with respect to any
other security in respect of which a determination as to market value must be
made hereunder.

    


    P.           “National Securities
Exchange” means any one of the New York Stock Exchange, the NYSE Amex
Exchange, the NASDAQ Capital Market, the OTC Bulletin Board or any other
national securities exchange in the United States where the Corporation’s Common
Stock may trade.

    


    Q.           “Original Issue Price”
means the sum of $10.00, representing the aggregate purchase price for each
share of Series A Preferred Stock at the Stated Value.

    


    R.           "Redemption Date"
means the date specified in the notice of redemption by the Corporation in the
form attached hereto (the "Notice of Redemption
") of its intention to redeem and repurchase the Series A Preferred
Stock; provided,
that such Redemption Date shall be a date that is not later than thirty (30)
calendar days following the date the Notice of Redemption is provided to Holders
of Series A Preferred Stock in the manner specified in Paragraph B of Article X
of this Certificate of Designations.

     

    S.           “Redemption Payment
Date” shall mean a date which shall be the Business Day immediately
following the Redemption Date.

    


    T.           “Series A Conversion
Price” means One Dollar ($1.00), or such other dollar amount (or fraction
thereof) into which such Series A Conversion Price may be adjusted pursuant to
Article VIII of this Certificate.

    


    U.           “Stated Value” means
Ten Dollars ($10.00) per share of Series A Preferred Stock.

    


    V.           “Subscription
Agreement” shall mean the individual and collective reference to the
Series A preferred stock purchase agreements, each dated as of March 31, 2010,
between the Corporation and the Holder(s) of the Series A Preferred Stock,
pursuant to which on the Issuance Date, the Corporation issued, and the
Investors purchased, an aggregate of up to 250,000 shares of Series A Preferred
Stock for $2,500,000, all upon the terms and conditions stated
therein.

     

    W.          “Subsidiary” shall
mean any Person means another Person, an amount of the voting securities, other
voting ownership or voting partnership interests of which is sufficient to elect
at least a majority of its Board of Directors or other governing body (or, if
there are no such voting interests, 50% or more of the equity interests of
which) is owned directly or indirectly by such first Person.

    


    X.           “Trading Day” shall
mean any day on which the Common Stock is traded for any period on the principal
securities exchange or other securities market on which the Common Stock is then
being traded.

     

    
      
         


      

      
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    III.
DIVIDENDS

     

    A           The
Series A Preferred Stock shall pay an annual dividend at the rate of twelve
percent (12%) per annum, payable quarterly, on the last Business Day of each
December, March, June and September (each a “Dividend Payment
Date”), based on a 360 day calendar year.  Such quarterly
dividend shall be payable on each Dividend Payment Date as follows:

     

    (i)           sixty
percent (60%) of each quarterly dividend (based on an annual rate of seven
percent (7%) per annum) shall be payable in cash; and

     

    (ii)           forty
percent (40%) of each quarterly dividend (based on an annual rate of five
percent (5%) per annum) shall be payable either in cash, or at the sole option
of the Corporation, in additional shares of Common Stock, calculated for such
purposes by dividing the amount of the quarterly dividend then payable by 100%
of the Market Price of the Common Stock on such Dividend Payment
Date.

     

    B.           In
the event the Holder of Series A Preferred Stock shall elect to convert all or
any portion of his or its Series A Preferred Stock into Common Stock, all
accrued and unpaid dividends on the amount so converted shall be payable as of
the Conversion Date, pro-rated for any period of less than 90 days, in the
manner provided in Paragraph A of this Article III.

     

    C.           No
cash dividends or distributions shall be declared or paid or set apart for
payment on the Common Stock or any other Junior Securities unless such cash
dividend or distribution is likewise declared, paid or set apart for payment on
the Series A Preferred Stock.

     

    D.           No
dividends or distributions shall be declared or paid or set apart for payment on
the Series A Preferred Stock unless full and (if applicable) cumulative
dividends have been or are contemporaneously declared, paid or set apart for
payment on all Senior Securities (as hereinafter defined) in accordance with the
respective terms of the Certificates of Designations for such Senior
Securities.

     

    IV.
RESERVATION OF SHARES OF COMMON STOCK

    


    A.           Reserved
Amount.   Immediately following the Corporation’s filing
of an Amendment to its Certificate of Incorporation authorizing an increase to
its authorized Common Stock,  the Corporation shall reserve not less
than 1,100,000 shares of its authorized but unissued shares of Common Stock for
issuance upon conversion of the Series A Preferred Stock (including any shares
that may be issuable in connection with the adjustment provisions of this
Certificate of Designations), and, thereafter, the number of authorized but
unissued shares of Common Stock so reserved (the "Reserved Amount")
shall at all times be sufficient to provide for the full conversion of all of
the Series A Preferred Stock (including any shares that may be issuable in
connection with the adjustment provisions of this Certificate of Designations)
outstanding or issuable upon conversion of the Class A Warrant Shares, at the
current Series A Series A Conversion Price thereof, and any anticipated
adjustments to such Series A Series A Conversion Price.

    


    B.           Increases to Reserved
Amount. During the period that the Corporation’s Common Stock is not
listed on any National Securities Exchange or on the OTC Bulletin Board, the
Corporation shall, twice annually, review the Reserved Amount for any stock
splits, or adjustments on the Series A Preferred Stock, or similar situations to
determine whether the Reserved Amount needs to be increased.

     

    
      
         


      

      
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    V.
RANK

    


    All
shares of the Series A Preferred Stock shall rank (i) senior to
the Corporation's Common Stock and any other class of securities which is
specifically designated as junior to the Series A Preferred Stock (collectively,
with the Common Stock, the "Junior Securities");
(ii) pari
passu with
any other class or series of Preferred Stock of the Corporation hereafter
created specifically ranking, by its terms, on parity with the Series A
Preferred Stock (the "Pari Passu
Securities"); and (iii) junior to
any (A) Indebtedness, or (B) other class or series of Preferred Stock or other
capital stock of the Corporation hereafter created (with the written consent of
the Majority Holders obtained in accordance with Article IX hereof) specifically
ranking, by its terms, senior to the Series A Preferred Stock (collectively, the
"Senior
Securities"), in each case as to distribution of assets upon liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary.

    


    VI.
LIQUIDATION PREFERENCE

    


    A.           In
the event of any liquidation, dissolution or winding up of the Corporation,
either voluntary or involuntary, distributions to the stockholders of the
Corporation shall be made in the following manner:

    


    (i)           After
payment or provision for payment of any distribution on any Senior Securities,
the Holders of the Series A Preferred Stock shall be entitled to receive, on a
pari passu basis with the holders of the Pari Passu Securities, and
prior and in preference to any distribution of any of the assets or surplus
funds of the Corporation to the holders of the Common Stock by reason of their
ownership of such stock, an amount equal to the sum of (x) Ten Dollars ($10.00)
for each share of Series A Preferred Stock then held by them (the "Initial Series A Liquidation
Preference Price"), and (y) an amount equal to all unpaid dividends on
the Series A Preferred Stock, if any.  If upon the occurrence of a
liquidation, dissolution or winding up of the Corporation the assets and funds
thus distributed among the holders of the Series A Preferred Stock and the Pari Passu Securities
shall be insufficient to permit the payment to such holders of the full
liquidation preference amount based on the Initial Series A Liquidation
Preference Price, then the entire assets and funds of the Corporation legally
available for distribution shall be distributed ratably among the holders of the
Series A Preferred Stock and the Pari Passu Securities in
proportion to the preferential amount each such holder is otherwise entitled to
receive.

    


    (ii)           After
setting apart or paying in full the preferential amounts due pursuant to Section VI (A)(i)
above, the remaining assets of the Corporation available for distribution to
stockholders, if any, shall be distributed to the holders of the Series A
Preferred Stock, the Series A Preferred Stock and  the Common Stock on
a pro rata basis, based on the number of shares of Common Stock then held by
each Holder, as though all shares of Series A Preferred Stock and Series A
Preferred Stock had been converted into Common Stock immediately prior to the
date of such distribution.

    


    VII.
CONVERSION

    


    A.            Optional and Automatic
Conversion

    


    (i)           Optional
Conversion. Holders of Series A Preferred Stock may at their option
convert all or any portion of their shares of Series A Preferred Stock into
Common Stock of the Corporation at any time or from time to time (an “Optional
Conversion”).

    


    (ii)           Automatic
Conversion. Unless previously converted into Common Stock, all
shares of Series A Preferred Stock that are outstanding on a date which shall be
the earlier
to occur of:

     

    
      
         


      

      
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      (A)   the date
on which the average of the Market Prices of the Common Stock of the Corporation
for any twenty (20) consecutive Trading Days shall be Two Dollars ($2.00) or
higher, or

       

      (B)           five
(5) years from the Issuance Date,

    

    


    shall,
without any further action on the part of the Holder or the Corporation, be
automatically converted into shares of Common Stock of the Corporation (a “Automatic
Conversion”).

    


    (iii)           In
the event of any one or more Optional Conversions or any Automatic Conversion
pursuant to this Article VII(A) (each a "Conversion") each
share of Series A Preferred Stock shall be convertible into a number of fully
paid and non-assessable shares of Common Stock determined in accordance with the
following formula:

    


    The Original Issue
Price

    Series A
Conversion Price then in effect

    


    B.           Mechanics of
Conversion. In order to effect an Conversion, a Holder of shares of
Series A Preferred Stock shall: (i) fax (or otherwise deliver) a copy of the
fully executed Notice of Conversion to the Corporation (Attention: Secretary)
and (ii) surrender or cause to be surrendered the original certificates
representing the Series A Preferred Stock being converted (the "Series A Preferred Stock
Certificates"), duly endorsed, along with a copy of the Notice of
Conversion as soon as practicable thereafter to the Corporation.  Upon
receipt by the Corporation of a facsimile copy of a Notice of Conversion from a
Holder, the Corporation shall promptly send, via facsimile, a confirmation to
such Holder stating that the Notice of Conversion has been received, the date
upon which the Corporation expects to deliver the Common Stock issuable upon
such conversion and the name and telephone number of a contact person at the
Corporation regarding the conversion.  The Corporation shall not be
obligated to issue shares of Common Stock upon a conversion unless either the
Series A Preferred Stock Certificates are delivered to the Corporation as
provided above, or the Holder notifies the Corporation that such Series A
Preferred Stock Certificates have been lost, stolen or destroyed and delivers
the documentation to the Corporation required by Article XII. B
hereof.

    


    (i)           Delivery of Common Stock
Upon Conversion. Upon the surrender of Series A Preferred Stock
Certificates accompanied by a Notice of Conversion, the Corporation (itself, or
through its transfer agent, as appropriate) shall, no later than the later of
(a) the fifth (5th) Business Day following the Conversion Date and (b) the
Business Day immediately following the date of such surrender (or, in the case
of lost, stolen or destroyed certificates, after provision of indemnity pursuant
to Article XI B) (the "Delivery Period"),
issue and deliver (i.e., deposit with a nationally recognized overnight courier
service portage prepaid) to the Holder or its nominee (x) that number of shares
of Common Stock issuable upon conversion of such shares of Series A Preferred
Stock being converted and (y) a certificate representing the number of shares of
Series A Preferred Stock not being converted, if any.  Notwithstanding
the foregoing, the Holder of Series A Preferred Stock shall, for all purposes,
be deemed to be a record owner of that number of shares of Common Stock issuable
upon conversion of those shares of Series A Preferred Stock set forth in the
Conversion Notice as at the date of such Conversion Notice.  In
addition, if the Corporation's transfer agent is participating in the Depository
Trust Corporation ("DTC") Fast Automated
Securities Transfer program, and so long as the certificates therefore do not
bear a legend (pursuant to the terms of the Securities Subscription Agreement)
and the Holder thereof is not then required to return such certificate for the
placement of a legend thereon (pursuant to the terms of the Securities
Subscription Agreement), the Corporation shall cause its transfer agent to
promptly electronically transmit the Common Stock issuable upon conversion to
the Holder by crediting the account of the Holder or its nominee with DTC
through its Deposit Withdrawal Agent Commission system ("DTC
Transfer").  If the aforementioned conditions to a DTC Transfer
are not satisfied, the Corporation shall deliver as provided above to the Holder
physical certificates representing the Common Stock issuable upon conversion.
Further, a Holder may instruct the Corporation to deliver to the Holder physical
certificates representing the Common Stock issuable upon conversion in lieu of
delivering such shares by way of DTC Transfer.

     

    
      
         


      

      
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    (ii)            Taxes.  The
Corporation shall pay any and all taxes that may be imposed upon it respect to
the issuance and delivery of the shares of Common Stock upon the conversion of
the Series A Preferred Stock.

    


    (iii)           No Fractional
Shares.  If any conversion of Series A Preferred Stock would
result in the issuance of a fractional share of Common Stock (aggregating all
shares of Series A Preferred Stock being converted pursuant to a given Notice of
Conversion), such fractional share shall be payable in cash based upon the
Series A Series A Conversion Price per share, and the number of shares of Common
Stock issuable upon conversion of the Series A Preferred Stock shall be the next
lower whole number of shares.  If the Corporation elects not to, or is
unable to, make such a cash payment, the Holder shall be entitled to receive, in
lieu of the final fraction of a share, one whole share of Common
Stock.

    


    (iv)           Conversion
Disputes.   In the case of any dispute with respect to a
conversion, the Corporation shall promptly issue such number of shares of Common
Stock in accordance with subparagraph (i) above as are not disputed. If such
dispute involves the calculation of the Series A Conversion Price, and such
dispute is not promptly resolved by discussion between the relevant Holder and
the Corporation, the Corporation and the Holder shall submit their disputed
calculations to an independent outside accountant via facsimile within three
Business Days of receipt of the Notice of Conversion. The accountant, at the
Corporation's sole expense, shall promptly audit the calculations and notify the
Corporation and the Holder of the results no later than three Business Days from
the date it receives the disputed calculations. The accountant's calculation
shall be deemed conclusive, absent manifest error. The Corporation shall then
issue the appropriate number of shares of Common Stock in accordance with
subparagraph (i) above.

    


    (v)   Payment of Accrued
Amounts.  Upon conversion of any shares of Series A Preferred
Stock, all amounts then accrued or payable on such shares under this Certificate
of Designation (including, without limitation, all Dividends, if any) through
and including the Conversion Date shall be paid by the Corporation in cash. In
the event that the Corporation elects to effect a payment-in-kind, the number of
fully paid and non-assessable shares of Common Stock due shall be determined in
accordance with the following formula:

    


    All Amounts Accrued or
Payable

     Series
A Conversion Price

    


    VIII.
ADJUSTMENTS

     

    The
Series A Conversion Price and the number of Conversion Shares shall be subject
to adjustment as follows:

    


    
      
         


      

      
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    A.           Subdivision or Combination
of Common Stock.  If the Corporation at any time subdivides (by
any stock split, stock dividend, recapitalization, reorganization,
reclassification or otherwise) the shares of Common Stock acquirable hereunder
into a greater number of shares, then, after the date of record for effecting
such subdivision, the Conversion Shares issuable upon conversion of the Series A
Preferred Stock will be proportionately increased and the Series A Conversion
Price in effect immediately prior to such subdivision will be proportionately
reduced.  If the Corporation at any time combines (by any reverse
stock split, recapitalization, reorganization, reclassification or otherwise)
the shares of Common Stock acquirable hereunder into a smaller number of shares,
then, after the date of record for effecting such combination,  the
Conversion Shares issuable upon conversion of the Series A Preferred Stock will
be proportionately reduced and the Series A Conversion Price in effect
immediately prior to such combination will be proportionately
increased.

     

    B.           [Intentionally
Omitted].

     

    C.           Consolidation, Merger or
Sale.  In case of any consolidation of the Corporation with, or
merger of the Corporation into any other corporation, or in case of any sale or
conveyance of all or substantially all of the assets of the Corporation other
than in connection with a plan of complete liquidation of the Corporation, then
as a condition of such consolidation, merger or sale or conveyance, adequate
provision will be made whereby the Holder of the Series A Preferred Stock will
have the right to acquire and receive upon conversion of the Series A Preferred
Stock in lieu of the shares of Common Stock immediately theretofore acquirable
upon the conversion of the Series A Preferred Stock, such shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for the number of shares of Common Stock immediately theretofore acquirable and
receivable upon conversion of the Series A Preferred Stock had such
consolidation, merger or sale or conveyance not taken place.  In any
such case, the Corporation will make appropriate provision to insure that the
provisions of this Article VIII Section C hereof will thereafter be applicable
as nearly as may be in relation to any shares of stock or securities thereafter
deliverable upon the conversion of the Series A Preferred Stock.  The
Corporation will not effect any consolidation, merger or sale or conveyance
unless prior to the consummation thereof, the successor corporation (if other
than the Corporation) assumes by written instrument the obligations under this
Article VIII Section C and the obligations to deliver to the Holder of the
Series A Preferred Stock such shares of stock, securities or assets as, in
accordance with the foregoing provisions, the Holder may be entitled to
acquire.

     

    D.           Distribution of
Assets.  In case the Corporation shall declare or make any
distribution of its assets (including cash) to holders of Common Stock as a
partial liquidating dividend, by way of return of capital or otherwise, then,
after the date of record for determining shareholders entitled to such
distribution (on an “as converted” basis, as though all Series A Preferred Stock
had been converted into Common Stock immediately prior to the dividend
declaration date), the Holder of the Series A Preferred Stock shall be entitled
upon conversion of the Series A Preferred Stock for the purchase of any or all
of the shares of Common Stock subject hereto, to receive the amount of such
assets which would have been payable to the Holder had the Holder been the
holder of such shares of Common Stock on the record date for the determination
of shareholders entitled to such distribution.

     

    
      
         


      

      
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    E.           Adjustment Due to Dilutive
Issuance.  If, at any time when any shares of Series A
Preferred Stock are issued and outstanding, the Corporation issues or sells, or
in accordance with this Article VIII 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 Series A
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 Series A Conversion Price will
be reduced to the price determined by multiplying the Series A Conversion Price
in effect immediately prior to the Dilutive Issuance by a fraction, (i) the
numerator of which is an amount equal to the sum of (x) the number of shares of
Common Stock Deemed Outstanding immediately prior to the Dilutive Issuance, plus
(y) the quotient of the aggregate consideration, calculated as set forth in
Article VIII, received by the Corporation upon such Dilutive Issuance divided by
the Series A Conversion Price in effect immediately prior to the Dilutive
Issuance, and (ii) the denominator of which is the Common Stock Deemed
Outstanding immediately after the Dilutive Issuance; provided that only one
adjustment will be made for each Dilutive Issuance.  No adjustment to
the Series A Conversion Price shall have the effect of increasing the Series A
Conversion Price above the Series A Conversion Price in effect immediately prior
to such adjustment.

     

    
      F.           Effect on Series A
Conversion Price of Certain Events.  For purposes of
determining the adjusted Series A Conversion Price, the following will be
applicable:

       

      (i)           
Issuance of Rights or
Options.  If the Corporation in any manner issues or grants any
warrants, rights or options, whether or not immediately exercisable, to
subscribe for or to purchase Common Stock or Convertible Securities (such
warrants, rights and options to purchase Common Stock or Convertible Securities
are hereinafter collectively referred to in this Article VIII as “Options”) and the
price per share for which Common Stock is issuable upon the exercise of such
Options is less than the Series A Conversion Price on the date of issuance or
grant of such Options, then the maximum total number of shares of Common Stock
issuable upon the exercise of all such Options will, as of the date of the
issuance or grant of such Options, be deemed to be outstanding and to have been
issued and sold by the Corporation for 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 Corporation as consideration
for the issuance or granting of all such Options, plus the minimum aggregate
amount of additional consideration, if any, payable to the Corporation upon the
exercise of all such Options, plus, in the case of Convertible Securities (as
hereinafter defined) 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 or exchange of Convertible Securities, if applicable).  No
further adjustment to the Series A 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.

    

     

    
      
         


      

      
        9

        
          

        

      

      
         


      

    

     

    (ii)           
Issuance of
Convertible Securities.  If the Corporation in any manner
issues or sells any other series or classes of Preferred Stock (other than the
Series A Preferred Stock) or any notes, debentures, evidences of Indebtedness or
other securities that are convertible into or exchangeable for Common Stock
(“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
Series A Conversion Price on the date of issuance, then the maximum total number
of shares of Common Stock issuable upon the conversion or exchange of all such
Convertible Securities will, as of the date of the issuance of such Convertible
Securities, be deemed to be outstanding and to have been issued and sold by the
Corporation for 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 Corporation 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 Corporation 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 Series A Conversion Price
will be made upon the actual issuance of such Common Stock upon conversion or
exchange of such Convertible Securities.

     

    (iii)           Change in Option Price or
Conversion Rate.  If there is a change at any time in (i) the
amount of additional consideration payable to the Corporation upon the exercise
of any Options; (ii) the amount of additional consideration, if any, payable to
the Corporation upon the conversion or exchange of any Convertible Securities;
or (iii) the rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock (other than under or by reason of provisions
designed to protect against dilution), the Series A Conversion Price in effect
at the time of such change will be readjusted to the Series A Conversion Price
which would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed additional consideration
or changed conversion rate, as the case may be, at the time initially granted,
issued or sold.

     

    (iv)           Treatment of Expired Options
and Unexercised Convertible Securities.  If, in any case, the
total number of shares of Common Stock issuable upon exercise of any Option or
upon conversion or exchange of any Convertible Securities is not, in fact,
issued and the rights to exercise such Option or to convert or exchange such
Convertible Securities shall have expired or terminated, the Series A Conversion
Price then in effect will be readjusted to the Series A Conversion Price which
would have been in effect at the time of such expiration or termination had such
Option or Convertible Securities, to the extent outstanding immediately prior to
such expiration or termination (other than in respect of the actual number of
shares of Common Stock issued upon exercise or conversion thereof), never been
issued.

     

    
      
         


      

      
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    (v)           Calculation of Consideration
Received.  If any Common Stock, Options or Convertible
Securities are issued, granted or sold for cash, the consideration received
therefor for purposes hereof will be the amount received by the Corporation
therefor, before deduction of reasonable commissions, underwriting discounts or
allowances or other reasonable expenses paid or incurred by the Corporation in
connection with such issuance, grant or sale.  In case any Common
Stock, Options or Convertible Securities are issued or sold for a consideration
part or all of which shall be other than cash, the amount of the consideration
other than cash received by the Corporation will be the fair value of such
consideration, except where such consideration consists of securities, in which
case the amount of consideration received by the Corporation will be the Market
Price thereof as of the date of receipt.  In case any Common Stock,
Options or Convertible Securities are issued in connection with any acquisition,
merger or consolidation in which the Corporation is the surviving corporation,
the amount of consideration therefor will be deemed to be the fair value of such
portion of the net assets and business of the non-surviving corporation as is
attributable to such Common Stock, Options or Convertible Securities, as the
case may be.  The fair value of any consideration other than cash or
securities will be determined in good faith by the Board of Directors of the
Corporation.

     

    (G)           Exceptions to
Adjustments.  Notwithstanding anything contained to the
contrary in this Article VIII, no adjustment to the Series A Conversion Price or
Conversion Shares pursuant to Section (E) of this Article VIII will be
made:

     

    (i)           
upon the issuance of shares of Common Stock or Options or Convertible Securities
to eligible Persons pursuant to any stock or option plan duly adopted by the
Board of Directors of the Corporation, subject to compliance with the terms of
the Stock Option Plan referred to in the Subscription Agreement, including the
limitations on Options issued or issuable to the “Key Employees” as defined in
the Subscription Agreement; or

     

    (ii)           
upon the issuance of shares of Common Stock issuable upon the exercise of
Options or conversion of any Convertible Securities that are outstanding as of
the date of filing of this Certificate of Designations, including, without
limitation, the Series A Preferred Stock or any other securities issued pursuant
to the Subscription Agreement; or

     

    (iii)           the
issuance of shares of Series A Preferred Stock as pay-in-kind dividends with
respect to the Series A Preferred Stock;

     

    (iv)           the
issuance (not for capital raising purposes) of shares of Common Stock,
Convertible Securities or Options to financial institutions, lessors or vendors
in connection with commercial credit or service arrangements, equipment
financings or similar transactions, all approved by the Board of Directors of
the Corporation; or

     

    (v)           
the issuance of shares of Common
Stock, Convertible Securities or Options to provide financing to consummate any
acquisition of the assets, securities or business of any other
Person.  

    


    
      
         


      

      
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    (H)           Notice of
Adjustment.  Upon the occurrence of any event which requires
any adjustment of the Series A Conversion Price, then, and in each such case,
the Corporation shall give notice thereof to the Holder of the Series A
Preferred Stock, which notice shall state the Series A Conversion Price
resulting from such adjustment and the increase or decrease in the number of
Conversion Shares purchasable at such price upon exercise, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.  Such calculation shall be certified by the
Chief Financial Officer of the Corporation.

     

    (I)           
Minimum Adjustment of
Series A Conversion Price.  No adjustment of the Series A
Conversion Price shall be made in an amount of less than 1% of the Series A
Conversion Price in effect at the time such adjustment is otherwise required to
be made, but any such lesser adjustment shall be carried forward and shall be
made at the time and together with the next subsequent adjustment which,
together with any adjustments so carried forward, shall amount to not less than
1% of such Series A Conversion Price.

     

    (J)           
No Fractional
Shares.  No fractional shares of Common Stock are to be issued
upon the conversion of the Series A Preferred Stock, but the Corporation shall
pay a cash adjustment in respect of any fractional share which would otherwise
be issuable in an amount equal to the same fraction of the average Market Price
per share of the Common Stock for the five (5) Trading Days immediately prior to
the date of such exercise.

     

    (K)           Other
Notices.  In case at any time:

     

    (i)           the
Corporation shall declare any dividend upon the Common Stock payable in shares
of stock of any class or make any other distribution (including dividends or
distributions payable in cash out of retained earnings) to the holders of the
Common Stock;

     

    (ii)          the
Corporation shall offer for subscription pro rata to the holders of the Common
Stock any additional shares of stock of any class or other rights;

     

    (iii)         there
shall be any capital reorganization of the Corporation, or reclassification of
the Common Stock, or consolidation or merger of the Corporation with or into, or
sale of all or substantially all its assets to, another corporation or
entity;

    


    (iv)         there
shall be a voluntary or involuntary dissolution, liquidation or winding up of
the Corporation;

    


    then, in
each such case, the Corporation shall give to the Holder of the Series A
Preferred Stock (a) notice of the date on which the books of the Corporation
shall close or a record shall be taken for determining the holders of Common
Stock entitled to receive any such dividend, distribution, or subscription
rights or for determining the holders of Common Stock entitled to vote in
respect of any such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding-up and (b) in the case of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up of the Corporation, notice of the date (or, if not
then known, a reasonable approximation thereof by the Corporation) when the same
shall take place.  Such notice shall also specify the date on which
the holders of Common Stock shall be entitled to receive such dividend,
distribution, or subscription rights or to exchange their Common Stock for stock
or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be.  Such notice shall be given at least
thirty (30) days prior to the record date or the date on which the Corporation’s
books are closed in respect thereto.  Failure to give any such notice
or any defect therein shall not affect the validity of the proceedings referred
to in clauses (i), (ii), (iii) and (iv) above.

     

    
      
         


      

      
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    IX.
VOTING RIGHTS

    


    A.          Class Voting
Rights.   Holders of the Series A Preferred Stock shall
vote together as a separate class on all matters which impact the rights, value
or conversion terms, or ranking of the Series A Preferred Stock, as provided
herein.

    


    B.           No Other Voting
Rights.   Except as otherwise required
by law or as set forth herein, Series A Preferred Stock shall have no other
voting rights and the Holder of each share of Series A Preferred Stock shall not
be entitled to cast, at any regular or special meeting of stockholders of the
Corporation or in connection with the solicitation of any written consent of
stockholders of the Corporation, any votes.

    


    X.
PROTECTION PROVISIONS

    


    The
Corporation shall not, without first obtaining the affirmative vote or written
consent of the Majority Holders of the Series A Preferred Stock, voting or
consenting as a separate class, given in person or by proxy:

     

    A.          make
any amendment or modification of the Corporation’s Certificate of Incorporation
or by-laws in any manner which has or could reasonably be expected to have, an
adverse effect on the rights, privileges and designations of the Series A
Preferred Stock;

     

    B.          issue
any additional shares of Series A Preferred Stock; or

     

    C.          amend
or modify in any manner this Series A Certificate of Designation;.

    


    XI.
MISCELLANEOUS

    


    A.          Cancellation of Series A
Preferred Stock If any shares of Series A Preferred Stock are converted
pursuant to this Series A Certificate of Designations, the shares so converted
or redeemed shall be canceled, shall return to the status of authorized, but
unissued Series A Preferred Stock of no designated series, and shall not be
issuable by the Corporation as Series A Preferred Stock.

    


    B.           Lost or Stolen
Certificates. Upon receipt by the Corporation of (i) evidence of the
lost, theft, destruction or mutilation of any Series A Preferred Stock
Certificate(s) and (ii) (y) in the case of loss, theft or destruction, indemnity
(without any bond or other security) reasonably satisfactory to the Corporation,
or (z) in the case of mutilation, the Series A Preferred Stock Certificate(s)
(surrendered for cancellation), the Corporation shall execute and deliver new
Series A Preferred Stock Certificate(s) of like tenor and
date.  However, the Corporation shall not be obligated to reissue such
lost, stolen, destroyed or mutilated Series A Preferred Stock Certificate(s) if
the Holder contemporaneously requests the Corporation to convert such Series A
Preferred Stock.

    


    C           Waiver
Notwithstanding any provision in this Certificate of Designation to the
contrary, any provision contained herein and any right of the Holders of Series
A Preferred Stock granted hereunder may be waived as to all shares of Series A
Preferred Stock (and the Holders thereof) upon the written consent of the
Majority Holders, unless a higher percentage is required by applicable law, in
which case the written consent of the Holders of not less than such higher
percentage of shares of Series A Preferred Stock shall be required.

     

    
      
         


      

      
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    D.          Information Rights So
long as shares of Series A Preferred Stock are outstanding, the Corporation will
deliver to each Holder of Series A Preferred Stock (i) audited annual financial
statements to the Holders of Series A Preferred Stock within 90 days after the
end of each fiscal year; (ii) and unaudited quarterly financial statements
within 45 days of the end of each fiscal quarter.  To the extent that
such information is electronically available on the Corporation's Form 10-K
Annual Reports, Form 10-Q Quarterly Reports, Form 8-K Periodic Reports and
Annual Reports to Shareholders, the Corporation need not separately furnish such
documents to Holders of the Series A Preferred Stock.

     

    E            Notices. Any notices
required or permitted to be given under the terms hereof shall be sent by
certified or registered mail (return receipt requested) or delivered personally,
by nationally recognized overnight carries or by confirmed facsimile
transmission, and shall be effective five days after being placed in the mail,
if mailed, or upon receipt or refusal of receipt, if delivered personally or by
nationally recognized overnight carrier or confirmed facsimile transmission, in
each case addressed to a party. The addresses for such communications are (i) if
to the Corporation to Gulfstream International Group, Inc., 3201 Griffin Road,
Ft. Lauderdale, Florida, attn: Chief Executive Officer; and (ii) if to any
Holder to the address set forth in the Subscription Agreement, or such other
address as may be designated in writing hereafter, in the same manner, by such
person.

     

    


     

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    IN WITNESS WHEREOF, the
undersigned declares under penalty of perjury under the laws of the State of
Delaware that he has read the foregoing Certificate of Designation and knows the
contents thereof, and that he is duly authorized to execute the same on behalf
of the Corporation, this 31st day
of March, 2010.

     

    
      
        	 	GULFSTREAM INTERNATIONAL GROUP,
      INC.	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ David F.
      Hackett	 
	 	 	

                David
      F. Hackett

              	 
	 	 	

                Chief
      Executive Officer

              	 
	 	 	 	 


      

    

     

     

     

    
 

     

    
      
         


      

      
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    NOTICE
OF CONVERSION

     

    (To be
Executed by the Registered Holder

    in order
to Convert the Series A Preferred Stock)

    


    The
undersigned hereby irrevocably elects to convert __________ shares of Series A
Convertible Preferred Stock (the "Conversion"), represented by Stock Certificate
No(s). ______________ (the "Series A Preferred Stock Certificates"), into shares
of common stock ("Common Stock") of National Holdings Corporation (the
"Corporation") according to the conditions of the Certificate of Designation,
Preferences and Rights of Series A Preferred Stock (the "Certificate of
Designation"), as of the date written below.   If securities are
to be issued in the name of a person other than the undersigned, the undersigned
will pay all transfer taxes payable with respect thereto.  No fee will
be charged to the Holder for any conversion, except for transfer taxes, if any
Each Series A Preferred Stock Certificate is attached hereto (or evidence of
loss, theft or destruction thereof).

    


    Except as
may be provided below, the Corporation shall electronically transmit the Common
Stock issuable pursuant to this Notice of Conversion to the account of the
undersigned or its nominee (which is) with DTC through its Deposit Withdrawal Agent Commission System
("DTC Transfer").

    


    In the
event of partial exercise, please reissue a new stock certificate for the number
of shares of Series A Preferred Stock which shall not have been
converted.

    


    The
undersigned acknowledges and agrees that all offers and sales by the undersigned
of the securities issuable to the undersigned upon conversion of Series A
Preferred Stock have been or will be made only pursuant to an effective
registration of the transfer of the Common Stock under the Securities Act of
1933, as amended (the "Act"), or pursuant to an exemption from registration
under the Act.

    


    In lieu
of receiving the shares of Common Stock issuable pursuant to this Notice of
Conversion by way of DTC Transfer, the undersigned hereby requests that the
Corporation issue and deliver to the undersigned physical certificates
representing such shares of Common Stock.

     

     

    Date of
Conversion:

    
      Applicable
Series A Conversion Price:  $________

    

    


    


     

    
      	 	Signature:
      ________________
	 	

              Name:
      ___________________

            
	 	 
	 	 
	 	

              Address:

            


    

     

    


    
      
         


      

      
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