Document:

gia_ex103.htm

    
      EXHIBIT
10.3

       

    

    Exhibit
D

    

    REGISTRATION
RIGHTS AGREEMENT

    

    This
Registration Rights Agreement (this "Agreement") is made
and entered into as of January 29, 2010, by and among Gulfstream International
Group, Inc. (the “Company”), and the purchaser set forth on the signature page
annexed hereto (the "Purchaser").

    

    Introduction

    

    This
Agreement is being entered into pursuant to a unit purchase agreement, dated as
of January 29, 2010, among the Company and the Purchaser signatory hereto as
well as other purchasers of Units of securities of the Company (individually and
collectively, the "Purchase
Agreement").

    

    The
Company and the Purchaser do hereby agree as follows:

    

    1.           Definitions.

    

    Capitalized
terms used and not otherwise defined herein shall have the meanings given such
terms in the Purchase Agreement.  As used in this Agreement, the
following terms shall have the following meanings:

    

    "Advice" shall have
meaning set forth in Section 3(m).

    

    "Affiliate" means,
with respect to any Person, any other Person that directly or indirectly
controls or is controlled by or under common control with such
Person.  For the purposes of this definition, "control," when used
with respect to any Person, means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms of "affiliated," "controlling" and
"controlled"
have meanings correlative to the foregoing.

    

    "Board" shall have
meaning set forth in Section 3(n).

    

    "Business Day" means
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 generally are
authorized or required by law or other government actions to close.

    

    "Closing Date" means
the date of the closing of the purchase and sale of the Units pursuant to the
Purchase Agreement by the above-referenced Purchaser who has executed this
Agreement.

    

    "Commission" means the
Securities and Exchange Commission.

    

    
      
        
        

      

      
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    "Common Stock" means
the Company's common stock, par value $0.01 per share.

    

    "Effectiveness Date"
means with respect to the Registration Statement under Section 2(a), the earlier
of (A) the one hundred fiftieth  (150th) day
following the Filing Date (or in the event the Registration Statement receives a
“full review” by the Commission, the one hundred and eightieth (180th) day
following the Filing Date) or (B) the date which is within three (3) Business
Days after the date on which the Commission informs the Company (i) that the
Commission will not review the Registration Statement or (ii) that the Company may
request the acceleration of the effectiveness of the Registration Statement;
provided, however,that, if the
Effectiveness Date falls on a Saturday, Sunday or any other day which shall be a
legal holiday or a day on which the Commission is authorized or required by law
or other government actions to close, the Effectiveness Date shall be the
following Business Day.

    

    "Effectiveness Period"
shall have the meaning set forth in Section 2(a).

    

    "Event" shall have the
meaning set forth in Section 7(e).

    

    "Event Date" shall
have the meaning set forth in Section 7(e).

    

    "Exchange Act" means
the Securities Exchange Act of 1934, as amended.

    

    "Filing Date" means
with respect to a Registration Statement under Section 2(a), the date that is on
or before April 1, 2010, but in no event later than April 15, 2010 if the
Company files an extension to file its Annual Report on Form 10-K for the year
ended December 31, 2009; provided, however that if the
Filing Date falls on a Saturday, Sunday or any other day which shall be a legal
holiday or a day on which the Commission is authorized or required by law or
other government actions to close, the Filing Date shall be the following
Business Day.

    

    "Holder" or "Holders" means the
collective reference to the Purchaser and any subsequent record holder or
holders, from time to time, of Registrable Securities.

    

    "Indemnified Party"
shall have the meaning set forth in Section 6(c).

    

    "Indemnifying Party"
shall have the meaning set forth in Section 6(c).

    

    "Losses" shall have
the meaning set forth in Section 6(a).

    

    "Person" means an
individual or a corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or political subdivision thereof) or other entity of
any kind.

    

    

    "Proceeding" means an
action, claim, suit, investigation or proceeding (including, without limitation,
an investigation or partial proceeding, such as a deposition), whether commenced
or threatened.

    

    
      
        
        

      

      
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    "Prospectus" means the
prospectus included in the Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by the Registration Statement, and
all other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference in such
Prospectus.

    

    “Public Offering”
shall mean an offering of the Company’s capital stock for which a registration
statement has been filed with the Commission and underwritten by a licensed
FINRA (NASD) member firm

    

    "Registrable
Securities” means the collective reference to (i) those specific shares
of Common Stock included in the Units sold pursuant to the Purchase Agreement;
(ii) the Warrant included in the Units sold pursuant to the Purchase Agreement,
(iii) the Warrant Shares; and (iv) any securities issued or issuable upon any
stock split, dividend or other distribution, recapitalization or similar event
with respect to the foregoing.

    

    "Registration
Statement" means the registration statements and any additional
registration statements contemplated by Section 2, including (in each case) the
Prospectus, amendments and supplements to such registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits thereto,
and all material incorporated by reference in such registration
statement.

    

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

    

    "Rule 158" means Rule
158 promulgated by the Commission pursuant to the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such
Rule.

    

    "Rule 415" means Rule
415 promulgated by the Commission pursuant to the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such
Rule.

    

    “Rule 416” means Rule
416 promulgated by the Commission pursuant to the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such
Rule.

    

    "Rule 424" means Rule
424 promulgated by the Commission pursuant to the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such
Rule.

    

    "Securities Act" means
the Securities Act of 1933, as amended.

    

    
      
        
        

      

      
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    “Shares” means the
collective reference to those specific shares of Common Stock included in the
Units sold pursuant to the Purchase Agreement and the Warrant
Shares.

    

    "Warrant" means the
warrant to purchase shares of Common Stock issued to the Purchasers pursuant to
the Purchase Agreement.

    

    “Warrant Shares” means
the shares of Common Stock of the Company that are issuable upon exercise of the
Warrant.

    

    “Units” means the
units of securities of the Company to purchase Common Stock and Warrants of the
Company that are described in, and have been sold pursuant to, the Purchase
Agreement.

    

    2.           Resale
Registration.

     

               
(a)           Resale
Registration. Subject at all times to the provisions of Section 3(b) of this
Agreement, on or prior to the Filing Date, the Company shall prepare and file
with the Commission a "resale" Registration Statement providing for the resale
of all Registrable Securities by means of an offering to be made on a continuous
basis pursuant to Rule 415.  The Registration Statement shall be on
Form S-3 (except if the Company is not then eligible to register for resale the
Registrable Securities on Form S-3, in which case such registration shall be on
another appropriate form in accordance herewith and the Securities Act and the
rules promulgated thereunder).  The Company shall use its best efforts
to cause the Registration Statement to be declared effective under the
Securities Act as promptly as possible after the filing thereof, but in any
event on or prior to the Effectiveness Date, and to keep such Registration
Statement continuously effective under the Securities Act until such date as is
the earlier of (x) the date when all Registrable Securities covered by such
Registration Statement have been sold or (y) the date on which the Registrable
Securities may be sold without any restriction pursuant to Rule 144 as
determined by the counsel to the Company pursuant to a written opinion letter,
addressed to the Company's transfer agent to such effect (the "Effectiveness
Period").  The Company shall request that the effective time of
the Registration Statement be 4:00 p.m. Eastern Time on the Effectiveness
Date.  If at any time and for any reason, an additional Registration
Statement is required to be filed because at such time the actual number of
Registrable Securities exceeds the number of Registrable Securities remaining
under the Registration Statement, the Company shall have twenty (20) Business
Days to file such additional Registration Statement, and the Company shall use
its best efforts to cause such additional Registration Statement to be declared
effective by the Commission as soon as possible, but in no event later than
sixty (60) days after such filing.

     

               
(b)           Notwithstanding
anything to the contrary set forth in this Section 2, in the event the
Commission does not permit the Company to register all of the Registrable
Securities in the Registration Statement because of the Commission’s application
of Rule 415, the number of Registrable Securities to be registered on such
Registration Statement will be reduced in the following order (i) the
Registrable Securities represented by the total number of shares of Common Stock
included in the Units that were sold under the Purchase Agreement, applied on a
pro-rata basis, as among the Holders thereof, and (ii) the Registrable
Securities represented by the total number of Warrant Shares owned by the
Holders, applied on a pro rata basis.  The Company shall use its best
efforts to file subsequent Registration Statements to register the Registrable
Securities that were not registered in the initial Registration Statement as
promptly as possible and in a manner permitted by the Commission.  For
purposes of this Section 2(b), “Filing Date” means
with respect to each subsequent Registration Statement filed pursuant hereto,
the later of (i) sixty (60) days following the sale of substantially all of the
Registrable Securities included in the initial Registration Statement or any
subsequent Registration Statement and (ii) six (6) months following the
effective date of the initial Registration Statement or any subsequent
Registration Statement, as applicable, or such earlier date as permitted by the
Commission.

    

    
      
        
        

      

      
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(c)           For
purposes of this Section 2, “Effectiveness Date”
means with respect to each subsequent Registration Statement filed pursuant
hereto, the earlier of (A) the one hundred and fiftieth (150th) day
following the filing date of such Registration Statement (or in the event such
Registration Statement receives a “full review” by the Commission, the one
hundred eightieth (180th) day
following such filing date) or (B) the date which is within five (5) Business
Days after the date on which the Commission informs the Company (i) that the
Commission will not review such Registration Statement or (ii) that the Company may
request the acceleration of the effectiveness of such Registration Statement;
providedthat, if the
Effectiveness Date falls on a Saturday, Sunday or any other day which shall be a
legal holiday or a day on which the Commission is authorized or required by law
or other government actions to close, the Effectiveness Date shall be the
following Business Day.

    

    

    3.           Piggyback
Registration.

     

               
(a)           Notwithstanding
the provisions of Section 2 above, in
the event that, prior to the Filing Date, the Company elects to files a
Registration Statement for a Public Offering (the “Public Offering Registration
Statement”), in lieu of the requirements of filing a resale Registration
Statement pursuant to Section 2, the
Company shall include all of the Registrable Securities then owned by the Holder
in the Public Offering Registration Statement; provided, that, following the
effectiveness of such Public Offering Registration Statement, the Common Stock
and Warrant Shares included in the Registrable Securities may be resold in a
public distribution only as follows:

     

    (i)            the
entire Warrant may be resold by the Purchaser at any time from after the
effective date of the Public Offering Registration Statement;

     

    (ii)           fifty
percent (50%) of the Registrable Securities, consisting of the shares of Common
Stock included in the Units and the Warrant Shares, may be resold by the
Purchaser at any time commencing on a date ninety (90) days after the effective
date of such Public Offering Registration Statement; and

     

    (iii)           the
remaining fifty percent (50%) of the Registrable Securities constituting shares
of Common Stock included in the Units and the Warrant Shares may be resold at
any time commencing on a date which shall be one hundred and eighty (180) days
after the effective date of the Public Offering Registration
Statement.

     

    
      
        
        

      

      
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(b)           The
obligation of the Company to file a resale Registration Statement pursuant to
Section 2
above, shall be suspended for a period not to exceed June 30, 2010, so long as
the Company has in effect prior to such date a Public Offering Registration that
complies with the provisions of this Section 3.  In addition, the
Company shall not be required to register any Registrable Securities pursuant to
this Section 3 that are then eligible for sale pursuant to Rule 144 under the
Securities Act.

     

               
(c)           The Public
Offering Registration Statement, to the extent allowable under the 1933 Act and
the rules and regulations promulgated thereunder shall state that such Public
Offering Registration Statement also covers such indeterminate number of
additional shares of Common Stock as may become issuable upon exercise of or
otherwise pursuant to the Warrants to prevent dilution resulting from stock
splits, stock dividends or similar transactions.

     

               
(d)           The Company
acknowledges that the number of shares of Common Stock initially included in
such Registration Statement represents a good faith estimate of the maximum
number of Warrant Shares and shall be amended, or another registration statement
filed, if not sufficient.

     

               
(e)           In
connection with any underwritten Public Offering for the account of the Company,
if the managing underwriter(s) thereof shall impose a limitation on the number
of shares of Common Stock or number of Warrant Shares which may be included in
the Public Offering Registration Statement because, in such underwriter(s)'
judgment, marketing or other factors dictate such limitation is necessary to
facilitate public distribution, then the Company shall be obligated pursuant to
this Section 3 to include in such Registration Statement only such limited
portion of the Registrable Securities as to which the underwriter(s) shall
permit.

     

               
(f)           Any
exclusion of Registrable Securities under Section 3(e) shall be made pro rata
with holders of other Registrable Securities, if any,  having the
contractual right to include such securities in the Registration Statement. No
right to piggyback registration of Registrable Securities under this
Section 3 shall be construed to limit any demand resale registration
required under Section 2 hereof.

     

    4.           Registration
Procedures.

    

                    In
connection with the Company's registration obligations hereunder, the Company
shall:

     

               
(a)           Prepare and
file with the Commission, on or prior to the Filing Date, a Registration
Statement on Form S-3 (or if the Company is not then eligible to register for
resale the Registrable Securities on Form S-3 such registration shall be on
another appropriate form in accordance herewith and the Securities Act and the
rules promulgated thereunder) in accordance with the plan of distribution as set
forth on Exhibit
A hereto and in accordance with applicable law, and cause the
Registration Statement to become effective and remain effective as provided
herein; provided, however, that not
less than five (5) Business Days prior to the filing of the Registration
Statement or any related Prospectus or any amendment or supplement thereto, the
Company shall (i) furnish to the Holders copies of all such documents proposed
to be filed, which documents will be subject to the review of such Holders, and
(ii) cause its officers and directors, counsel and independent certified public
accountants to respond to such inquiries as shall be necessary to conduct a
reasonable review of such documents.  The Company shall not file the
Registration Statement or any such Prospectus or any amendments or supplements
thereto to which the Purchasers shall reasonably object in writing within three
(3) Business Days of their receipt thereof.

     

    
      
        
        

      

      
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(b)           (i) Prepare
and file with the Commission such amendments, including post-effective
amendments, to the Registration Statement as may be necessary to keep the
Registration Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with the Commission
such additional Registration Statements as necessary in order to register for
resale under the Securities Act all of the Registrable Securities; (ii) cause
the related Prospectus to be amended or supplemented by any required Prospectus
supplement, and as so supplemented or amended to be filed pursuant to Rule 424
(or any similar provisions then in force) promulgated under the Securities Act;
(iii) respond as promptly as possible, but in no event later than twenty (20)
Business Days, to any comments received from the Commission with respect to the
Registration Statement or any amendment thereto and as promptly as possible
provide the Holders true and complete copies of all correspondence from and to
the Commission relating to the Registration Statement; (iv) file the final
prospectus pursuant to Rule 424 of the Securities Act no later than two (2)
Business Days following the date the Registration Statement is declared
effective by the Commission; and (v) comply in all material respects with the
provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by the Registration Statement
during the Effectiveness Period in accordance with the intended methods of
disposition by the Holders thereof set forth in the Registration Statement as so
amended or in such Prospectus as so supplemented.

    

     

               
(c)           Notify the
Holders of Registrable Securities as promptly as possible (and, in the case of
(i)(A) below, not less than three (3) Business Days prior to such filing, and in
the case of (iii) below, on the same day of receipt by the Company of such
notice from the Commission) and (if requested by any such Person) confirm such
notice in writing no later than one (1) Business Day following the
day:  (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to the Registration Statement is filed; (B) when the
Commission notifies the Company whether there will be a "review" of such
Registration Statement and whenever the Commission comments in writing on such
Registration Statement and (C) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental authority
for amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities or the initiation or threatening of any
Proceedings for that purpose; (iv) if at any time any of the representations and
warranties of the Company contained in any agreement contemplated hereby ceases
to be true and correct in all material respects; (v) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (vi) of the occurrence of any event that makes any statement made
in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.

     

    
      
        
        

      

      
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(d)           Use its
best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of,
as promptly as possible, (i) any order suspending the effectiveness of the
Registration Statement or (ii) any suspension of the qualification (or exemption
from qualification) of any of the Registrable Securities for sale in
any jurisdiction.

       

                 
(e)           If
requested by the Holders of a majority in interest of the Registrable
Securities, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment to the Registration Statement such information as the
Company reasonably agrees should be included therein and (ii) make all required
filings of such Prospectus supplement or such post-effective amendment as soon
as practicable after the Company has received notification of the matters to be
incorporated in such Prospectus supplement or post-effective
amendment.

       

                  (f)   If
requested by any Holder, furnish to such Holder, without charge, at least one
conformed copy of each Registration Statement and each amendment thereto,
including financial statements and schedules, all documents incorporated or
deemed to be incorporated therein by reference, and all exhibits to the extent
requested by such Person (including those previously furnished or incorporated
by reference) promptly after the filing of such documents with the
Commission.

       

                  (g)   Promptly
deliver to the Holder, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request; and subject to the
provisions of Sections 4(m) and 4(n), the Company hereby consents to the use of
such Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto.

       

                  (h)   Prior to
any public offering of Registrable Securities, use its best efforts to register
or qualify or cooperate with the selling Holders in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any Holder requests in writing, to keep each such registration or qualification
(or exemption therefrom) effective during the Effectiveness Period and to do any
and all other acts or things necessary or advisable to enable the disposition in
such jurisdictions of the Registrable Securities covered by a Registration
Statement; provided, however, that the
Company shall not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action that would
subject it to general service of process in any such jurisdiction where it is
not then so subject or subject the Company to any material tax in any such
jurisdiction where it is not then so subject.

    

     

    
      
        
        

      

      
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(i)           Cooperate
with the Holders to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold pursuant to a
Registration Statement, which certificates, to the extent permitted by the
Purchase Agreement and applicable federal and state securities laws, shall be
free of all restrictive legends, and to enable such Registrable Securities to be
in such denominations and registered in such names as any Holder may request in
connection with any sale of Registrable Securities.

       

                 
(j)           Upon the
occurrence of any event contemplated by Section 4(c)(vi), as promptly as
possible, prepare a supplement or amendment, including a post-effective
amendment, to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference, and file any other required document so that, as thereafter
delivered, neither the Registration Statement nor such Prospectus will contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not
misleading.

    

     

               
(k)           Use its
best efforts to cause all Registrable Securities relating to the Registration
Statement, to continued to be quoted or listed on a  securities
exchange, quotation system or market, if any, on which similar securities issued
by the Company are then listed or traded as and when required pursuant to the
Purchase Agreement.

     

               
(l)           Comply in
all material respects with all applicable rules and regulations of the
Commission and make generally available to its security holders all documents
filed or required to be filed with the Commission, including, but not limited,
to, earning statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 not later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period is a
fiscal year) commencing on the first day of the first fiscal quarter of the
Company after the effective date of the Registration Statement, which statement
shall conform to the requirements of Rule 158.

     

               
(m)           The Company
may require each selling Holder to furnish to the Company information regarding
such Holder and the distribution of such Registrable Securities as is required
by law to be disclosed in the Registration Statement, Prospectus, or any
amendment or supplement thereto, and the Company may exclude from such
registration the Registrable Securities of any such Holder who unreasonably
fails to furnish such information within a reasonable time after receiving such
request.

     

               
(n)           If the
Registration Statement refers to any Holder by name or otherwise as the holder
of any securities of the Company, then such Holder shall have the right to
require (if such reference to such Holder by name or otherwise is not required
by the Securities Act or any similar federal statute then in force) the deletion
of the reference to such Holder in any amendment or supplement to the
Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.

    

    
      
        
        

      

      
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(o)           The Holder
covenants and agrees that it will not sell any Registrable Securities under the
Registration Statement until the Company has electronically filed the Prospectus
as then amended or supplemented as contemplated in Section 3(g) and notice from
the Company that the Registration Statement and any post-effective amendments
thereto have become effective as contemplated by Section
3(c).

    

     

                (p)    The Holder
agrees by its acquisition of such Registrable Securities that, upon receipt of a
notice from the Company of the occurrence of any event of the kind described in
Section 4(c)(ii), 4(c)(iii), 4(c)(iv), 4(c)(v), 4(c)(vi) or 4(n), such Holder
will forthwith discontinue disposition of such Registrable Securities under the
Registration Statement until such Holder's receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement contemplated by
Section 4(j), or until it is advised in writing (the "Advice") by the
Company that the use of the applicable Prospectus may be resumed, and, in either
case, has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement.

     

               
(q)           If (i)
there is material non-public information regarding the Company which the
Company's Board of Directors (the "Board") determines
not to be in the Company's best interest to disclose and which the Company is
not otherwise required to disclose, (ii) there is a significant business
opportunity (including, but not limited to, the acquisition or disposition of
assets (other than in the ordinary course of business) or any merger,
consolidation, tender offer or other similar transaction) available to the
Company which the Board determines not to be in the Company's best interest to
disclose, or (iii) the Company is required to file a post-effective amendment to
the Registration Statement to incorporate the Company’s quarterly and annual
reports and audited financial statements on Forms 10-Q and 10-K, , then the
Company may (x) postpone or suspend filing of a registration statement for a
period not to exceed forty-five (45) consecutive days or (y) postpone or suspend
effectiveness of a registration statement for a period not to exceed forty-five
(45) consecutive days; provided that the Company may not postpone or suspend
effectiveness of a registration statement under this Section 3(n) for more than
ninety (90) days in the aggregate during any three hundred sixty (360) day
period; provided, however, that no such
postponement or suspension shall be permitted for consecutive twenty (20) day
periods arising out of the same set of facts, circumstances or
transactions.

    

    5.           Registration
Expenses.

     

    All fees
and expenses incident to the performance of or compliance with this Agreement by
the Company, except as and to the extent specified in this Section 4, shall be
borne by the Company whether or not the Registration Statement is filed or
becomes effective and whether or not any Registrable Securities are sold
pursuant to the Registration Statement.  The fees and expenses
referred to in the foregoing sentence shall include, without limitation, (i) all
registration and filing fees (including, without limitation, fees and expenses
(A) with respect to filings required to be made with any  securities
exchange or market on which Registrable Securities are required hereunder to be
listed, if any (B) with respect to filing fees required to be paid to the
Financial Industry Regulatory Authority, Inc. (including, without limitation,
pursuant to FINRA Rule 5110) and (C) in compliance with state securities or Blue
Sky laws (including, without limitation, fees and disbursements of counsel for
the Holders in connection with Blue Sky qualifications of the Registrable
Securities and determination of the eligibility of the Registrable Securities
for investment under the laws of such jurisdictions as the Holders of a majority
of Registrable Securities may designate)), (ii)
printing expenses (including, without limitation, expenses of printing
certificates for Registrable Securities and of printing prospectuses if the
printing of prospectuses is requested by the holders of a majority of the
Registrable Securities included in the Registration Statement), (iii) messenger,
telephone and delivery expenses, (iv) Securities Act liability insurance, if the
Company so desires such insurance, and (v) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement, including, without limitation, the
Company's independent public accountants (including the expenses of any comfort
letters or costs associated with the delivery by independent public accountants
of a comfort letter or comfort letters).  In addition, the Company
shall be responsible for all of its internal expenses incurred in connection
with the consummation of the transactions contemplated by this Agreement
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit, the fees and expenses incurred in connection with the listing of the
Registrable Securities on any securities exchange if required
hereunder.  The Company shall not be responsible for any discounts,
commissions, transfer taxes or other similar fees incurred by the Holders in
connection with the sale of the Registrable Securities.

    
       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

    

    6.           Indemnification.

    

    (a)           Indemnification by the
Company.  The Company shall, notwithstanding any termination of
this Agreement, indemnify and hold harmless the Holder, the officers, directors,
managers, partners, members, shareholders, agents, brokers, investment advisors
and employees of each of them, each Person who controls any such Holder (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) and the officers, directors, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against any
and all losses, claims, damages, liabilities, costs (including, without
limitation, costs of preparation and attorneys' fees) and expenses
(collectively, "Losses"), as
incurred, arising out of or relating to any violation of securities laws or
untrue statement of a material fact contained in the Registration Statement,
any
Prospectus or any form of prospectus or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or relating to any omission
of a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, except to the extent, but only to the extent, that such
untrue statements or omissions are based solely upon information regarding such
Holder or such other Indemnified Party furnished in writing to the Company by
such Holder for use therein.  The Company shall notify the Holders
promptly of the institution, threat or assertion of any Proceeding of which the
Company is aware in connection with the transactions contemplated by this
Agreement.

    

    (b)           Indemnification by
Holders.  The Holder shall, severally and not jointly,
indemnify and hold harmless the Company, its directors, officers, agents and
employees, each Person who controls the Company (within the meaning of Section
15 of the Securities Act and Section 20 of the Exchange Act), and the directors,
officers, agents and employees of such controlling Persons, to the fullest
extent permitted by applicable law, from and against all Losses, as incurred,
arising solely out of or based solely upon any untrue statement of a material
fact contained in the Registration Statement, any Prospectus, or any form of
prospectus, or in any amendment or supplement thereto, or arising solely out of
or based solely upon any omission of a material fact required to be stated
therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading, to the extent, but
only to the extent, that such untrue statement or omission is contained in any
information so furnished in writing by such Holder or other Indemnifying Party
to the Company specifically for inclusion in the Registration Statement or such
Prospectus.  Notwithstanding anything to the contrary contained
herein, the Holder shall be liable under this Section 6(b) only for the lesser
of (a) the actual damages incurred or (b) that amount as does not exceed the
gross proceeds to such Holder as a result of the sale of his/her/its Registrable
Securities pursuant to such Registration Statement.

    

    (c)           Conduct of Indemnification
Proceedings.  If any Proceeding shall be brought or asserted
against any Person entitled to indemnity hereunder (an "Indemnified Party"),
such Indemnified Party promptly shall promptly notify the Person from whom
indemnity is sought (the "Indemnifying Party”)
in writing, and the Indemnifying Party shall be entitled to assume the defense
thereof, including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided that the failure of any Indemnified
Party to give such notice shall not relieve the Indemnifying Party of its
obligations or liabilities pursuant to this Agreement, except (and only) to the
extent that it shall be finally determined by a court of competent jurisdiction
(which determination is not subject to appeal or further review) that such
failure shall have proximately and materially adversely prejudiced the
Indemnifying Party.

    

    An
Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (1) the Indemnifying Party has agreed in writing to pay such fees and
expenses; or (2) the Indemnifying Party shall have failed promptly to assume the
defense of such Proceeding and to employ counsel reasonably satisfactory to such
Indemnified Party in any such Proceeding; or (3) the named parties to any such
Proceeding (including any impleaded parties) include both such Indemnified Party
and the Indemnifying Party, and such parties shall have been advised by counsel
that a conflict of interest is likely to exist if the same counsel were to
represent such Indemnified Party and the Indemnifying Party (in which case, if
such Indemnified Party notifies the Indemnifying Party in writing that it elects
to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
such counsel shall be at the expense of the Indemnifying Party).  The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld or delayed.  No Indemnifying Party shall, without the prior
written consent of the Indemnified Party, effect any settlement of any pending
or threatened Proceeding in respect of which any Indemnified Party is a party
and indemnity has been sought hereunder, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.

    

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

       

                  All
indemnifiable fees and expenses of the Indemnified Party (including reasonable
fees and expenses incurred in connection with investigating or preparing to
defend such Proceeding in a manner not inconsistent with this Section) shall be
paid to the Indemnified Party, as incurred, within ten (10) Business Days of
written notice thereof to the Indemnifying Party (regardless of whether it is
ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the
Indemnified Party shall reimburse all such fees and expenses to the extent it is
finally judicially determined that such Indemnified Party is not entitled to
indemnification hereunder).

    

    

    (d)           Contribution. If a
claim for indemnification under Section 6(a) or 6(b) is due but unavailable to
an Indemnified Party because of a failure or refusal of a governmental authority
to enforce such indemnification in accordance with its terms (by reason of
public policy or otherwise), then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Losses, in such proportion
as is appropriate to reflect the relative benefits received by the Indemnifying
Party on the one hand and the Indemnified Party on the other from the offering
of the Common Stock and Warrants.  If, but only if, the allocation
provided by the foregoing sentence is not permitted by applicable law, the
allocation of contribution shall be made in such proportion as is appropriate to
reflect not only the relative benefits referred to in the foregoing sentence but
also the relative fault, as applicable, of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable
considerations.  The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue statement of a material
fact or omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and
the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such action, statement or omission.  The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 6(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.  In no event shall any
selling Holder be required to contribute an amount under this Section 6(d) in
excess of the gross proceeds received by such Holder upon sale of such Holder’s
Registrable Securities pursuant to the Registration Statement giving rise to
such contribution obligation.

    

                
The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 6(d) were determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph.  No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.

    

                
The indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties pursuant to the law.

    

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    7.          Rule
144.

     

               As long as any Holder
owns Warrants or other Registrable Securities, the Company covenants to timely
file (or obtain extensions in respect thereof and file within the applicable
grace period) all reports required to be filed by the Company after the date
hereof pursuant to Section 13(a) or 15(d) of the Exchange Act.  As
long as any Holder owns Common Stock, Warrant Shares or a Warrant, if the
Company is not required to file reports pursuant to Section 13(a) or 15(d) of
the Exchange Act, it will prepare and furnish to the Holders and make publicly
available in accordance with Rule 144(c) promulgated under the Securities Act
annual and quarterly financial statements, together with a discussion and
analysis of such financial statements in form and substance substantially
similar to those that would otherwise be required to be included in reports
required by Section 13(a) or 15(d) of the Exchange Act, as well as any other
information required thereby, in the time period that such filings would have
been required to have been made under the Exchange Act.  The Company
further covenants that it will take such further action as any Holder may
reasonably request, all to the extent reasonably required from time to time to
enable such Person to sell Conversion Shares and Warrant Shares without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 promulgated under the Securities Act, including providing
any legal opinions relating to such sale pursuant to Rule 144.  Upon
the request of any Holder, the Company shall deliver to such Holder a written
certification of a duly authorized officer as to whether it has complied with
such requirements.

    

    8.           Miscellaneous.

    

    (a)           Remedies.  In
the event of a breach by the Company or by a Holder, of any of their obligations
under this Agreement, such Holder or the Company, as the case may be, in
addition to being entitled to exercise all rights granted by law and under this
Agreement, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement.  The
Company and the Holder agree that monetary damages would not provide adequate compensation
for any losses incurred by reason of a breach by it of any of the provisions of
this Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.

    

    (b)           No Inconsistent
Agreements.  The Company has not entered into and shall not
enter into on or after the date of this Agreement, any agreement with respect to
its securities that is inconsistent with the rights granted to the Holders in
this Agreement or otherwise conflicts with the provisions hereof.

    

    (c)           Amendments and
Waivers.  The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the same shall be in writing and signed by the Company and the Holder of
the Registrable Securities.

     

    (d)           Notices.  Any
notice, demand, request, waiver or other communication required or permitted to
be given hereunder shall be in writing and shall be effective (a) upon hand
delivery, telecopy or facsimile at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur.  The
addresses for such communications shall be as set forth in the Purchase
Agreement.  Any party hereto may from time to time change its address
for notices by giving at least ten (10) days written notice of such changed
address to the other party hereto.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    (e)           Successors and
Assigns.  This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted assigns and shall
inure to the benefit of the Holder and his, her or its successors and
assigns.  The Company may not assign this Agreement or any of its
rights or obligations hereunder without the prior written consent of the
Holder.  Each Purchaser may assign its rights hereunder in the manner
and to the Persons as permitted under the Purchase Agreement.

    

    (f)           Assignment of Registration
Rights.  The rights of the Holder hereunder, including the
right to have the Company register for resale Registrable Securities in
accordance with the terms of this Agreement, shall be automatically assignable
by the Holder to any Person who acquires all or a portion of the Common Stock, the
Warrant Shares, or the Warrant if: (i) the Holder agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment, (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such registration rights
are being transferred or assigned, (iii) following such transfer or assignment
the further disposition of such securities by the transferee or assignees is
restricted under the Securities Act and applicable state securities laws unless
such securities are registered in a Registration Statement under this Agreement
(in which case the Company shall be obligated to amend such Registration
Statement to reflect such transfer or assignment) or are otherwise exempt from
registration, (iv) at or before the time the Company receives the written notice
contemplated by clause (ii) of this Section, the transferee or assignee agrees
in writing with the Company to be bound by all of the provisions of this
Agreement, and (v) such transfer shall have been made in accordance with the
applicable requirements of the Purchase Agreement.  The rights to
assignment shall apply to the Holders (and to subsequent) successors and
assigns.

    

    (g)           Counterparts.  This
Agreement may be executed in any number of counterparts, each of which when so
executed shall be deemed to be an original and, all of which taken together
shall constitute one and the same Agreement and shall become effective when
counterparts have been signed by each party and delivered to the other parties
hereto, it being understood that all parties need not sign the same
counterpart.  In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid binding obligation
of the party executing (or on whose behalf such signature is executed) the same
with the same force and effect as if such facsimile signature were the original
thereof.

     

    (h)           Governing Law;
Jurisdiction.  This Agreement 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.  

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    This
Agreement shall not be interpreted or construed with any presumption against the
party causing this Agreement to be drafted.  The Company and the
Holders agree that venue for any dispute arising under this Agreement 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 Company and
the Holders irrevocably consent to personal jurisdiction in the state and
federal courts of the state of New York.  The Company 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 Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof.  Nothing in this
Section 7(k) shall affect or limit any right to serve process in any other
manner permitted by law.  The Company and the Holder hereby agree that
the prevailing party in any suit, action or proceeding arising out of or
relating to this Agreement 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.

     

    (i)           Cumulative
Remedies.  The remedies provided herein are cumulative and not
exclusive of any remedies provided by law.

    

    (j)           Severability. If any
term, provision, covenant or restriction of this Agreement is held to be
invalid, illegal, void or unenforceable in any respect, the remainder of the
terms, provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction.  It is
hereby stipulated and declared to be the intention of
the parties that they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such that may be hereafter
declared invalid, illegal, void or unenforceable.

    

    (k)           Headings.  The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.

    

    (l)           Independent Nature of
Purchasers.  The Company acknowledges that the obligations of
each Purchaser under the Transaction Documents are several and not joint with
the obligations of any other Purchaser, and no Purchaser shall be responsible in
any way for the performance of the obligations of any other Purchaser under the
Transaction Documents.  The Company acknowledges that the decision of
each Purchaser to purchase Securities pursuant to the Purchase Agreement has
been made by such Purchaser independently of any other Purchaser and
independently of any information, materials, statements or opinions as to the
business, affairs, operations, assets, properties, liabilities, results of
operations, condition (financial or otherwise) or prospects of the Company or of
its Subsidiaries which may have been made or given by any other Purchaser or by
any agent or employee of any other Purchaser, and no Purchaser or any of its
agents or employees shall have any liability to any Purchaser (or any other
person) relating to or arising from any such information, materials, statements
or opinions.  The Company acknowledges that nothing contained herein,
or in any Transaction Document, and no action taken by any Purchaser pursuant
hereto or thereto (including, but not limited to, the (i) inclusion of a
Purchaser in the Registration Statement and (ii) review by, and consent to, such
Registration Statement by a Purchaser) shall be deemed to constitute the
Purchasers as a partnership, an association, a joint venture or any other kind
of entity, or create a presumption that the Purchasers are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Documents.  The Company acknowledges
that each Purchaser shall be entitled to independently protect and enforce its
rights, including without limitation, the rights arising out of this Agreement
or out of the other Transaction Documents, and it shall not be necessary for any
other Purchaser to be joined as an additional party in any proceeding for such
purpose.  

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    The
Company acknowledges that it has elected to provide all Purchasers with the same
terms and Transaction Documents for the convenience of the Company and not
because it was required or requested to do so by the Purchasers.  The
Company acknowledges that such procedure with respect to the Transaction
Documents in no way creates a presumption that the Purchasers are in any way
acting in concert or as a group with respect to the Transaction Documents or the
transactions contemplated hereby or thereby.

    

     

     

     

     

     

     

    [this
page intentionally left blank – signature page follows]

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be duly executed by their respective authorized persons as of the
date first indicated above.

    

    
      
        	 	GULFSTREAM
      INTERNATIONAL GROUP, INC.	 
	 	 	 	 
	
                Date

              	
                By:
      

              	 	 
	 	 	Name:
      David
      Hackett	 
	 	 	Title: President	 
	 	 	
                 

              	 
	 	 	 	 
	 	PURCHASER:	 
	 	 	 	 
	 	 	 	 
	 	By:	 	 
	 	 	Name:	 
	 	 	Title:	 
	 	 	
                Address:
      ____________________________________

                Tel
      No:    _____________________________________

                Fax
      No:    _____________________________________

                Email:     
       _____________________________________

              	 

      

    

     

     

    
 

    [Signature
Page to Registration Rights Agreement]

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Exhibit
A

    Plan of
Distribution

    

     

    The
selling security holders and any of their pledgees, donees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock being offered under this prospectus on any stock exchange,
market or trading facility on which shares of our common stock are traded or in
private transactions.  These sales may be at fixed or negotiated
prices.  The selling security holders may use any one or more of the
following methods when disposing of shares:

    
    

     

    
      	●  	ordinary
      brokerage transactions and transactions in which the broker-dealer
      solicits purchasers;
	●  	block
      trades in which the broker-dealer will attempt to sell the shares as agent
      but may position and resell a portion of the block as principal to
      facilitate the transaction;
	●  	purchases
      by a broker-dealer as principal and resales by the broker-dealer for its
      account;
	●  	an
      exchange distribution in accordance with the rules of the applicable
      exchange;
	●  	
              privately
      negotiated transactions;

            
	●  	
              to
      cover short sales made after the date that the registration statement of
      which this prospectus is a part is declared effective by the
      Commission;

            
	●  	broker-dealers
      may agree with the selling security holders to sell a specified number of
      such shares at a stipulated price per share;
	  ●  	a
      combination of any of these methods of sale; and
	    ●  	any
      other method permitted pursuant to applicable
  law.

    

     

    The
shares may also be sold under Rule 144 under the Securities Act of 1933, as
amended (“Securities Act”), if available, rather than under this
prospectus.  The selling security holders have the sole and absolute
discretion not to accept any purchase offer or make any sale of shares if they
deem the purchase price to be unsatisfactory at any particular
time.

     

    The
selling security holders may pledge their shares to their brokers under the
margin provisions of customer agreements.  If a selling security
holder defaults on a margin loan, the broker may, from time to time, offer and
sell the pledged shares.

     

    Broker-dealers
engaged by the selling security holders may arrange for other broker-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the selling security holders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated, which
commissions as to a particular broker or dealer may be in excess of customary
commissions to the extent permitted by applicable law.

     

    
      
        
        

      

      
         

        
          

        

      

      
        
        

      

    

     

    If sales
of shares offered under this prospectus are made to broker-dealers as
principals, we would be required to file a post-effective amendment to the
registration statement of which this prospectus is a part.  In the
post-effective amendment, we would be required to disclose the names of any
participating broker-dealers and the compensation arrangements relating to such
sales.

     

    The
selling security holders and any broker-dealers or agents that are involved in
selling the shares offered under this prospectus may be deemed to be
“underwriters” within the meaning of the Securities Act in connection with these
sales.  Commissions received by these broker-dealers or agents and any
profit on the resale of the shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.  Any
broker-dealers or agents that are deemed to be underwriters may not sell shares
offered under this prospectus unless and until we set forth the names of the
underwriters and the material details of their underwriting arrangements in a
supplement to this prospectus or, if required, in a replacement prospectus
included in a post-effective amendment to the registration statement of which
this prospectus is a part.

     

    The
selling security holders and any other persons participating in the sale or
distribution of the shares offered under this prospectus will be subject to
applicable provisions of the Exchange Act, and the rules and regulations under
that act, including Regulation M.  These provisions may restrict
activities of, and limit the timing of purchases and sales of any of the shares
by, the selling security holders or any other person.  Furthermore,
under Regulation M, persons engaged in a distribution of securities are
prohibited from simultaneously engaging in market making and other activities
with respect to those securities for a specified period of time prior to the
commencement of such distributions, subject to specified exceptions or
exemptions.  All of these limitations may affect the marketability of
the shares.

     

    If any of
the shares of common stock offered for sale pursuant to this prospectus are
transferred other than pursuant to a sale under this prospectus, then subsequent
holders could not use this prospectus until a post-effective amendment or
prospectus supplement is filed, naming such holders.  We offer no
assurance as to whether any of the selling security holders will sell all or any
portion of the shares offered under this prospectus.

     

    We have
agreed to pay all fees and expenses we incur incident to the registration of the
shares being offered under this prospectus.  However, each selling
security holder and purchaser is responsible for paying any discounts,
commissions and similar selling expenses they incur.

     

    We and
the selling security holders have agreed to indemnify one another against
certain losses, damages and liabilities arising in connection with this
prospectus, including liabilities under the Securities Act.ex-10_1.htm

Lake Shore Bancorp, Inc. 8-K

Exhibit 10.1

 

One-Year Change of Control Agreement

 

This Amended and Restated Change of Control Agreement (the “Agreement”) is made and entered into as of _________________ (the “Effective Date”) by and among Lake
Shore Savings Bank, a federally-chartered savings bank having an office at 128 East 4th Street, Dunkirk, New York 14048 (the “Bank”), Lake Shore Bancorp, Inc., a federally-chartered corporation having an office at 128 East 4th Street, Dunkirk, New York 14048
(the “Company”) and ____________________ (the “Officer”).

 

Introductory Statement

 

The Board of Directors of the Bank has concluded that it is in the best interests of the Bank, the Company and their prospective shareholders to establish a working environment for the Officer which minimizes the personal distractions that might result from possible business combinations in which the Company or the Bank might be involved.  To
this end, the Bank has decided to provide the Officer with assurance that his/her compensation will be continued for a minimum period of one (1) year following termination of employment, as defined in Treasury Regulation Section 1.409A-1(h)(ii) (the “Assurance Period”) if his/her employment terminates under specified circumstances related to a business combination.  The Board of Directors of the Bank has decided to formalize this assurance by entering into this Agreement with the Officer.  The
Board of Directors of the Company has authorized the Company to guarantee the Bank’s obligations under this Agreement.

 

The terms and conditions which the Bank, the Company and the Officer have agreed to are as follows.

 

Agreement

 

Section 1.     Effective Date; Term; Change of Control and Pending Change of Control Defined.

 

(a)           This Agreement shall take effect on the Effective Date and shall be in effect during the period (the “Term”) beginning on the Effective Date and ending on the first anniversary of the date
on which the Bank notifies the Officer of its intent to discontinue the Agreement (the “Initial Expiration Date”) or, if later, the first anniversary of the latest Change of Control or Pending Change of Control, as defined below, that occurs after the Effective Date and before the Initial Expiration Date.

 

(b)           For all purposes of this Agreement, a “Change of Control” shall be deemed to have occurred upon the happening of any of the following events:

 

(i)           the consummation of a reorganization, merger or consolidation of the Company with one (1) or more other persons, other than a transaction following which:

 

(A)           at least 51% of the equity ownership interests of the entity resulting from such transaction are beneficially owned (within the meaning of Rule
13d-3 promulgated under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) in substantially the same relative proportions by persons who, immediately prior to such transaction, beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51% of the outstanding equity ownership interests in the Company; and

 

  

  

  

 

(B)           at least 51% of the securities entitled to vote generally in the election of directors of the entity resulting from such transaction are beneficially owned (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) in substantially the same relative proportions by persons who, immediately prior to such transaction, beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51% of the securities entitled to vote generally in the election of directors of the Company;

 

(ii)           the acquisition of all or substantially all of the assets of the Company or beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of the outstanding
securities of the Company entitled to vote generally in the election of directors by any person or by any persons acting in concert;

 

(iii)           a complete liquidation or dissolution of the Company;

 

(iv)           the occurrence of any event if, immediately following such event, at least 50% of the members of the Board of Directors of the Company do not belong to any of the following groups:

 

(A)           individuals who were members of the Board of Directors of the Company on the date of this Agreement; or

 

(B)           individuals who first became members of the Board of Directors of the Company after the date of this Agreement either:

 

(1)           upon election to serve as a member of the Board of Directors of the Company by affirmative vote of three-quarters of the members of such board, or of a nominating committee thereof, in office at the
time of such first election; or

 

(2)           upon election by the shareholders of the Board of Directors of the Company to serve as a member of such board, but only if nominated for election by affirmative vote of three-quarters of the members
of the Board of Directors of the Company, or of a nominating committee thereof, in office at the time of such first nomination;

 

provided, however, that such individual’s election or nomination did not result from an actual or threatened election contest or other actual or threatened solicitation of proxies or consents other than by or on behalf of the Board of Directors of the Company; provided,
however, that this section 1(b)(iv) shall only apply if the Company is not majority owned by Lake Shore, MHC; or

 

  

  

  

 

 

(v)           any event which would be described in section 1(b)(i), (ii), (iii) or (iv) if the term “Bank” were substituted for the term “Company” therein.

 

In no event, however, shall a Change of Control be deemed to have occurred as a result of (i) any acquisition of securities or assets of the Company, the Bank, or a subsidiary of either of them, by the Company, the Bank, or any subsidiary of either of them, or by any employee benefit plan maintained by any of them or (ii) the conversion
of Lake Shore, MHC to a stock form company and the issuance of additional shares of the Company in connection therewith.  For purposes of this section 1(b), the term “person” shall have the meaning assigned to it under Sections 13(d)(3) or 14(d)(2) of the Exchange Act.

 

(C)           For purposes of this Agreement, a “Pending Change of Control” shall mean: (i) the signing of a definitive agreement for a transaction which, if consummated, would result in a Change of Control;
(ii) the commencement of a tender offer which, if successful, would result in a Change of Control; or (iii) the circulation of a proxy statement seeking proxies in opposition to management in an election contest which, if successful, would result in a Change of Control; provided, however, that the Change of Control contemplated does, in fact, occur.

 

Section 2.     Discharge Prior to a Pending Change of Control.

 

The Bank may discharge the Officer at any time prior to the occurrence of a Pending Change of Control for any reason or for no reason.  In such event:

 

(a)           The Bank shall pay to the Officer (or, in the event of his/her death, his/her estate) his/her earned but unpaid compensation (including, without limitation, salary and all other items which constitute
wages under applicable law) as of the date of his/her termination of employment.  This payment shall be made at the time and in the manner prescribed by law applicable to the payment of wages but in no event later than thirty (30) days after the date of the Officer’s termination of employment.

 

(b)           The Bank shall provide the benefits, if any, due to the Officer (or, in the event of his/her death, his/her estate, surviving dependents or his/her designated beneficiaries) under the employee benefit
plans and programs and compensation plans and programs maintained for the benefit of the officers and employees of the Bank.  The time and manner of payment or other delivery of these benefits and the recipients of such benefits shall be determined according to the terms and conditions of the applicable plans and programs.

 

The payments and benefits described in sections 2(a) and (b) shall be referred to in this Agreement as the “Standard Termination Entitlements.”

 

The Officer, the Company and the Bank agree that the termination benefits described in this section 2 are intended to be exempt from Section 409A (“Section 409A”) of the Internal Revenue Code of 1986, as amended (the “Code”) pursuant to Treasury Regulation Section 1.409A-1(b)(4) as
short-term deferrals or pursuant to Treasury Regulation Section 1.409A-1(b)(1) as non-taxable benefits.

 

  

  

  

 

 

Section 3.     Termination of Employment Due to Death.

 

The Officer’s employment with the Bank shall terminate, automatically and without any further action on the part of any party to this Agreement, on the date of the Officer’s death.  In such event, the Bank shall pay and deliver to his/her estate and surviving dependents and beneficiaries, as applicable, the Standard
Termination Entitlements within the timeframes contained in section 2.

 

The Officer, the Company and the Bank agree that the termination benefits described in this section 3 are intended to be exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(4) as short-term deferrals or pursuant to Treasury Regulation Section 1.409A-1(b)(1) as non-taxable benefits.

 

Section 4.     Termination Due to Disability after Change of Control or Pending Change of Control.

 

The Bank may terminate the Officer’s employment during the Term and after the occurrence of a Change of Control or a Pending Change of Control upon a determination, by a majority vote of the members of the Board of Directors of the Bank, acting in reliance on the written advice of a medical professional acceptable to it, that the
Officer is suffering from a physical or mental impairment which, at the date of the determination, has prevented the Officer from performing his/her assigned duties on a substantially full-time basis for a period of at least one hundred and eighty (180) days during the period of one (1) year ending with the date of the determination or is likely to result in death or prevent the Officer from performing his/her assigned duties on a substantially full-time basis for a period of at least one hundred and eighty (180)
days during the period of one (1) year beginning with the date of the determination.  In such event:

 

(a)           The Bank shall pay and deliver to the Officer (or in the event of his/her death before payment, to his/her estate and surviving dependents and beneficiaries, as applicable) the Standard Termination Entitlements
within the timeframes contained in section 2.

 

(b)           In addition to the Standard Termination Entitlements, the Bank shall continue to pay the Officer his/her base salary, at the annual rate in effect for him immediately prior to the termination of his/her
employment, during a period ending on the earliest of: (i) the expiration of one hundred and eighty (180) days after the date of termination of his/her employment; (ii) the date on which long-term disability insurance benefits are first payable to him under any long-term disability insurance plan covering employees of the Bank (the “LTD Eligibility Date”); (iii) the date of his/her death; and (iv) the expiration of the Assurance Period (the “Initial Continuation Period”).  If
the end of the Initial Continuation Period is neither the LTD Eligibility Date nor the date of his/her death, the Bank shall continue to pay the Officer his/her base salary, at an annual rate equal to sixty percent (60%) of the annual rate in effect for him immediately prior to the termination of his/her employment, during an additional period ending on the earliest of the LTD Eligibility Date, the date of his/her death and the expiration of the Assurance Period.

 

  

  

  

 

 

A termination of employment due to disability under this section 4 shall be effected by a notice of termination given to the Officer by the Bank and shall take effect on the later of the effective date of termination specified in such notice or the date on which the notice of termination is deemed given to the Officer.

 

The Officer, the Company and the Bank agree that the termination benefits described in this section 4 are intended to be exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(4) as short-term deferrals or pursuant to Treasury Regulation Section 1.409A-1(b)(1) as non-taxable benefits.

 

Section 5.     Discharge with Cause after Change of Control or Pending Change of Control.

 

(a)           The Bank may terminate the Officer’s employment with “Cause” during the Term and after the occurrence of a Change of Control or Pending Change of Control, but a termination shall be deemed
to have occurred with “Cause” only if:

 

(i)           the Board of Directors of the Bank and the Board of Directors of the Company, by separate majority votes of their entire membership, determine that the Officer should be discharged because of personal
dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease and desist order, or any material breach of this Agreement; and

 

(ii)           at least forty-five (45) days prior to the vote contemplated by section 5(a)(i), the Bank has provided the Officer with notice of its intent to discharge the Officer for Cause, detailing with particularity
the facts and circumstances which are alleged to constitute Cause (the “Notice of Intent to Discharge”); and

 

(iii)           after the giving of the Notice of Intent to Discharge and before the taking of the vote contemplated by section 5(a)(i), the Officer (together with his/her legal counsel, if he/she so desires) is afforded
a reasonable opportunity to make both written and oral presentations before the Board of Directors of the Bank for the purpose of refuting the alleged grounds for Cause for his/her discharge; and

 

(iv)           after the vote contemplated by section 5(a)(i), the Bank has furnished to the Officer a notice of termination which shall specify the effective date of his/her termination of employment (which shall
in no event be earlier than the date on which such notice is deemed given) and include a copy of a resolution or resolutions adopted by the Board of Directors of the Bank, certified by its corporate secretary and signed by each member of the Board of Directors voting in favor of adoption of the resolution(s), authorizing the termination of the Officer’s employment with Cause and stating with particularity the facts and circumstances found to constitute Cause for his/her discharge (the “Final Discharge
Notice”).

 

(b)           If the Officer is discharged with Cause during the Term and after a Change of Control or Pending Change of Control, the Bank shall pay and provide to him (or, in the event of his/her death, to his/her
estate, his/her surviving beneficiaries and his/her dependents) the Standard Termination Entitlements only, within the timeframes contained in section 2.  Following the giving of a Notice of Intent to Discharge, the Bank shall temporarily suspend the Officer’s duties and authority and, in such event, shall also suspend the payment of salary and other cash compensation, but not the Officer’s participation in retirement, insurance and other employee benefit plans.  If, after the
giving of a Notice of Intent to Discharge, the Officer is not discharged, or is discharged without Cause, payments of salary and cash compensation shall resume in accordance with this Agreement, and all payments withheld during the period of suspension shall be promptly restored.  If the Officer is discharged with Cause in accordance with this Section 5, all payments withheld during the period of suspension shall be deemed forfeited and shall not be included in the Standard Termination Entitlements.  If
the Bank does not give a Final Discharge Notice to the Officer within ninety (90) days after giving a Notice of Intent to Discharge, the Notice of Intent to Discharge shall be deemed withdrawn and any future action to discharge the Officer with Cause shall require the giving of a new Notice of Intent to Discharge.

 

  

  

  

 

 

Section 6.     Discharge without Cause after Change of Control or Pending Change of Control.

 

The Bank may discharge the Officer without Cause at any time after the occurrence of a Change of Control or Pending Change of Control, and in such event:

 

(a)           The Bank shall pay and deliver to the Officer (or in the event of his/her death before payment, to his/her estate and surviving dependents and beneficiaries, as applicable) the Standard Termination Entitlements
within the timeframes contained in section 2.

 

(b)           In addition to the Standard Termination Entitlements:

 

(i)           During the Assurance Period, the Bank shall provide for the Officer and his/her dependents continued group life, health (including hospitalization, medical and major medical), dental, accident and long-term
disability insurance benefits on substantially the same terms and conditions (including any required premium-sharing arrangements, co-payments and deductibles) in effect for them immediately prior to the Officer’s resignation.  The coverage provided under this section 6(b)(i) may, at the election of the Bank, be secondary to the coverage provided as part of the Standard Termination Entitlements and to any employer-paid coverage provided by a subsequent employer or through Medicare, with the result
that benefits under the other coverages will offset the coverage required by this section 6(b)(i).

 

(ii)           The Bank shall make a lump sum payment to the Officer (or, in the event of his/her death before payment, to his/her estate), in an amount equal to the value of the salary, bonus, short-term and long-term
cash compensation that the Officer received in the calendar year preceding that in which the termination of employment with the Bank occurs to compensate the Officer for the payments the Officer would have received during the Assurance Period.  Such lump sum shall be paid in lieu of all other payments of salary, bonus, short-term and long-term cash compensation provided for under this Agreement in respect of the period following any such termination.  Such payment
shall be made (without discounting for early payment) within thirty (30) days following the Officer’s termination of employment.

 

  

  

  

 

The payments and benefits described in section 6(b) are referred to in this Agreement as the “Additional Change of Control Entitlements.”

 

The Officer, the Company and the Bank agree that the termination benefits described in this section 6 are intended to be exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(4) as short-term deferrals or pursuant to Treasury Regulation Section 1.409A-1(b)(1) as non-taxable benefits.

 

Section 7.     Resignation.

 

(a)           The Officer may resign from his/her employment with the Bank at any time.  A resignation under this section 7 shall be effected by notice of resignation given by the Officer to the Bank and shall
take effect on the later of the effective date of termination specified in such notice or the date on which the notice of termination is deemed given to the Officer.  The Officer’s resignation of any of the positions within the Bank or the Company to which he/she has been assigned shall be deemed a resignation from all such positions.

 

(b)           The Officer’s resignation shall be deemed to be for “Good Reason” if the effective date of resignation occurs during the Term, but on or after the effective date of a Change of Control,
and is on account of:

 

(i)           the failure of the Bank (whether by act or omission of the Board of Directors, or otherwise) to appoint or re-appoint or elect or re-elect the Officer to the position with Bank that he/she held immediately
prior to the Change of Control (the “Assigned Office”) or to a more senior office;

 

(ii)           a material failure by the Bank, whether by amendment of the certificate of incorporation or organization, by-laws, action of the Board of Directors of the Bank or otherwise, to vest in the Officer the
functions, duties, or responsibilities customarily associated with the Assigned Office; provided that the Officer shall have given notice of such failure to the Bank, and the Bank has not fully cured such failure within thirty (30) days after such notice is deemed given;

 

(iii)           any reduction of the Officer’s rate of base salary in effect from time to time, whether or not material, or any failure (other than due to reasonable administrative error that is cured promptly
upon notice) to pay any portion of the Officer’s compensation as and when due;

 

(iv)           any change in the terms and conditions of any compensation or benefit program in which the Officer participates which, either individually or together with other changes, has a material adverse effect
on the aggregate value of his/her total compensation package; provided that the Officer shall have given notice of such material adverse effect to the Bank, and the Bank has not fully cured such material adverse effect within thirty (30) days after such notice is deemed given; provided, however, that this section 7(b)(iv)
shall not apply if the change in the terms and conditions of the compensation or benefit program affects all participants in such program equally;

 

  

  

  

 

(v)           any material breach by the Bank of any material term, condition or covenant contained in this Agreement; provided that the Officer shall have given
notice of such material adverse effect to the Bank, and the Bank has not fully cured such material adverse effect within thirty (30) days after such notice is deemed given; or

 

(vi)           a change in the Officer’s principal place of employment to a place that is not the principal executive office of the Bank, or a relocation of the Bank’s principal executive office to a location
that is both more than thirty-five (35) miles away from the Officer’s principal residence and more than thirty-five (35) miles away from the location of the Bank’s principal executive office on the day before the occurrence of the Change of Control.

 

In all other cases, a resignation by the Officer shall be deemed to be without Good Reason. In the event of resignation, the Officer shall state in his/her notice of resignation whether he/she considers his/her resignation to be a resignation with Good Reason, and if he/she does, he/she shall state in such notice the grounds which constitute
Good Reason.  The Officer’s determination of the existence of Good Reason shall be conclusive in the absence of fraud, bad faith or manifest error.

 

(c)           In the event of the Officer’s resignation for any reason, the Bank shall pay and deliver the Standard Termination Entitlements within the timeframes contained in section 2.  In the event
of the Officer’s resignation with Good Reason, the Bank shall also pay and deliver the Additional Change of Control Entitlements within the timeframes contained in section 6.

 

(d)           The Officer, the Company and the Bank agree that the termination benefits described in this section 7 are intended to be exempt from Section 409A pursuant to Treasury Regulation
Section 1.409A-1(b)(4) as short-term deferrals or pursuant to Treasury Regulation Section 1.409A-1(b)(1) as non-taxable benefits.

 

Section 8.     Terms and Conditions of the Additional Change of Control Entitlements.

 

The Bank and the Officer hereby stipulate that the damages which may be incurred by the Officer following any termination of employment are not capable of accurate measurement as of the date first above written and that the Additional Change of Control Entitlements constitute reasonable damages under the circumstances and shall be payable
without any requirement of proof of actual damage and without regard to the Officer’s efforts, if any, to mitigate damages.  The Bank and the Officer further agree that the Bank may condition the payment and delivery of the Additional Change of Control Entitlements on the receipt of:  (a) the Officer’s resignation from any and all positions which he/she holds as an officer, director or committee member with respect to the Bank or the Company or any subsidiary or affiliate
of either of them; and (b) a release of the Bank and its officers, directors, shareholders, subsidiaries and affiliates including the Company, in form and substance satisfactory to the Bank, of any liability to the Officer, whether for compensation or damages, in connection with his/her employment with the Bank and the termination of such employment except for the Standard Termination Entitlements and the Additional Change of Control
Entitlements.

 

  

  

  

 

Section 9.     No Effect on Employee Benefit Plans or Programs.

 

The termination of the Officer’s employment during the Assurance Period or thereafter, whether by the Bank or by the Officer, shall have no effect on the rights and obligations of the parties hereto under the Bank’s qualified or non-qualified retirement, pension, savings, thrift, profit-sharing or stock bonus plans, group life,
health (including hospitalization, medical and major medical), dental, accident and long term disability insurance plans or such other employee benefit plans or programs, or compensation plans or programs, as may be maintained by, or cover employees of, the Bank from time to time; provided, however, that nothing in this Agreement shall be deemed to duplicate any compensation or benefits provided under any agreement, plan or program covering the Officer
to which the Bank or Company is a party and any duplicative amount payable under any such agreement, plan or program shall be applied as an offset to reduce the amounts otherwise payable hereunder.

 

Section 10.     Successors and Assigns.

 

This Agreement will inure to the benefit of and be binding upon the Officer, his/her legal representatives and testate or intestate distributees, and the Company and the Bank and their respective successors and assigns, including any successor by merger or consolidation or a statutory receiver or any other person or firm or corporation
to which all or substantially all of the assets and business of the Company or the Bank may be sold or otherwise transferred.  Failure of the Bank to obtain from any successor its express written assumption of the Company’s or Bank’s obligations hereunder at least sixty (60) days in advance of the scheduled effective date of any such succession shall, if such succession constitutes a Change of Control, constitute Good Reason for the Officer’s resignation on or at any time during the
Term following the occurrence of such succession.

 

Section 11.     Notices.

 

Any communication required or permitted to be given under this Agreement, including any notice, direction, designation, consent, instruction, objection or waiver, shall be in writing and shall be deemed to have been given at such time as it is delivered personally, or five (5) days after mailing if mailed, postage prepaid, by registered
or certified mail, return receipt requested, addressed to such party at the address listed below or at such other address as one (1) such party may by written notice specify to the other party:

 

If to the Officer:

 

To the last address for the Officer contained in the records of the Company or Bank

 

  

  

  

 

 

If to the Company or the Bank:

 

Lake Shore Bancorp, Inc.

128 East 4th Street

Dunkirk, New York 14048

 

	
  
	
Attention:
	
Chairman, Compensation Committee of the Board of Directors

 

Section 12.     Indemnification for Attorneys’ Fees.

 

The Bank shall indemnify, hold harmless and defend the Officer against reasonable costs, including legal fees, incurred by him in connection with or arising out of any action, suit or proceeding in which he/she may be involved, as a result of his/her efforts, in good faith, to defend or enforce the terms of this Agreement; provided, however,
that the Officer shall have substantially prevailed on the merits pursuant to a judgment, decree or order of a court of competent jurisdiction or of an arbitrator in an arbitration proceeding.  The determination whether the Officer shall have substantially prevailed on the merits and is therefore entitled to such indemnification, shall be made by the court or arbitrator, as applicable.  In the event of a settlement pursuant to a settlement agreement, any indemnification payment under this
section 12 shall be made only after a determination by the members of the Board (other than the Officer and any other member of the Board to which the Officer is related by blood or marriage) that the Officer has acted in good faith and that such indemnification payment is in the best interests of the Bank.

 

Section 13.     Severability.

 

A determination that any provision of this Agreement is invalid or unenforceable shall not affect the validity or enforceability of any other provision hereof.

 

Section 14.     Waiver.

 

Failure to insist upon strict compliance with any of the terms, covenants or conditions hereof shall not be deemed a waiver of such term, covenant, or condition.  A waiver of any provision of this Agreement must be made in writing, designated as a waiver, and signed by the party against whom its enforcement is sought.  Any
waiver or relinquishment of any right or power hereunder at any one (1) or more times shall not be deemed a waiver or relinquishment of such right or power at any other time or times.

 

Section 15.     Counterparts.

 

This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same Agreement.

 

Section 16.     Governing Law.

 

This Agreement shall be governed by and construed and enforced in accordance with the federal laws of the United States and, to the extent that federal law is inapplicable, in accordance with the laws of the State of New York applicable to contracts entered into
and to be performed entirely within the State of New York.

 

  

  

  

 

Section 17.     Headings and Construction.

 

The headings of sections in this Agreement are for convenience of reference only and are not intended to qualify the meaning of any section.  Any reference to a section number shall refer to a section of this Agreement, unless otherwise stated.

 

Section 18.     Entire Agreement; Modifications.

 

This instrument contains the entire agreement of the parties relating to the subject matter hereof, and supersedes in its entirety any and all prior agreements, understandings or representations relating to the subject matter hereof.  No modifications of this Agreement shall be valid unless made in writing and signed by the parties
hereto.  Notwithstanding the preceding sentence, this Agreement shall be construed and administered in such manner as shall be necessary to effect compliance with Section 409A and shall be subject to amendment in the future, in such manner as the Company and the Bank may deem necessary or appropriate to effect such compliance; provided that any such amendment shall preserve for the Officer
the benefit originally afforded pursuant to this Agreement.

 

Section 19.     Required Regulatory Provisions.

 

The following provisions are included for the purposes of complying with various laws, rules and regulations applicable to the Bank:

 

(a)           Notwithstanding anything herein contained to the contrary, in no event shall the aggregate amount of compensation payable to the Officer hereunder exceed three (3) times the Officer’s average annual
compensation (within the meaning of OTS Examination Handbook, Thrift Activities § 310 or any successor thereto) for the last five (5) consecutive calendar years to end prior to her termination of employment with the Bank (or for his/her entire period of employment with the Bank if less than five (5) calendar years).  The compensation payable to the Officer hereunder shall be further reduced (but not below zero) if such reduction would avoid the assessment of excise taxes on excess parachute payments
(within the meaning of Section 280G of the Code).

 

(b)           Notwithstanding anything herein contained to the contrary, any payments made to the Officer by the Bank, whether pursuant to this Agreement or otherwise, are subject to and conditioned upon their compliance
with Section 18(k) of the Federal Deposit Insurance Act (“FDI Act”), 12 U.S.C. §1828(k), and any regulations promulgated thereunder, including FDIC regulation 12 C.F.R. Part 359, Golden Parachute and Indemnification Payments.

 

(c)           Notwithstanding anything herein contained to the contrary, the Bank’s Board of Directors may terminate the Officer’s employment at any time, but any termination by the Bank’s Board of
Directors other than termination for Cause, shall not prejudice the Officer’s right to compensation or other benefits under this Agreement. The Officer shall have no right to receive compensation or other benefits for any period after termination for Cause.

 

  

  

  

(d)           Notwithstanding anything herein contained to the contrary, if the Officer is suspended from office and/or temporarily prohibited from participating in the conduct of the affairs of the Bank pursuant to
a notice served under Section 8(e)(3) or 8(g)(1) of the FDI Act, 12 U.S.C. §1818(e)(3) or 1818(g)(1), the Bank’s obligations under this Agreement shall be suspended as of the date of service of such notice, unless stayed by appropriate proceedings.  If the charges in such notice are dismissed, the Bank, in its discretion, may (i) pay to the Officer all or part of the compensation withheld while the Bank’s obligations hereunder were suspended and (ii) reinstate, in whole or in part,
any of the obligations which were suspended.

 

(e)           Notwithstanding anything herein contained to the contrary, if the Officer is removed and/or permanently prohibited from participating in the conduct of the Bank’s affairs by an order issued under
Section 8(e)(4) or 8(g)(1) of the FDI Act, 12 U.S.C. §1818(e)(4) or (g)(1), all prospective obligations of the Bank under this Agreement shall terminate as of the effective date of the order, but vested rights and obligations of the Bank and the Officer shall not be affected.

 

(f)           Notwithstanding anything herein contained to the contrary, if the Bank is in default (within the meaning of Section 3(x)(1) of the FDI Act, 12 U.S.C. §1813(x)(1), all prospective obligations of the
Bank under this Agreement shall terminate as of the date of default, but vested rights and obligations of the Bank and the Officer shall not be affected.

 

(g)           Notwithstanding anything herein contained to the contrary, all prospective obligations of the Bank hereunder shall be terminated, except to the extent that a continuation of this Agreement is necessary
for the continued operation of the Bank:  (i) by the Director of the OTS or his/her designee or the Federal Deposit Insurance Corporation (“FDIC”), at the time the FDIC enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in Section 13(c) of the FDI Act, 12 U.S.C. §1823(c); or (ii) by the Director of the OTS or his/her designee at the time such Director or designee approves a supervisory merger to resolve problems related to the operation
of the Bank or when the Bank is determined by such Director to be in an unsafe or unsound condition.  The vested rights and obligations of the parties shall not be affected.

 

If and to the extent that any of the foregoing provisions shall cease to be required or by applicable law, rule or regulation, the same shall become inoperative as though eliminated by formal amendment of this Agreement.

 

Section 20.     Guaranty.

 

The Company hereby irrevocably and unconditionally guarantees to the Officer the payment of all amounts, and the performance of all other obligations, due from the Bank in accordance with the terms of this Agreement as and when due without any requirement of presentment, demand of payment, protest or notice of dishonor or nonpayment.

 

Section 21.     Payments to Key Employees.

 

Notwithstanding anything in this Agreement to the contrary, to the extent required under Section 409A, no payment to be made to a key employee (within the meaning of Section 409A) shall be made sooner than six (6) months after such termination of employment; provided, however,
that to the extent such six (6)-month delay is imposed by Section 409A as a result of a Change of Control as defined in section 1(b), the payment shall be paid into a rabbi trust for the benefit of the Officer as if the six (6)-month delay was not imposed with such amounts then being distributed to the Officer as soon as permissible under Section 409A.

 

Section 22.     Involuntary Termination Payments to Employees (Safe Harbor).

 

In the event a payment is made to an employee upon an involuntary termination of employment, as deemed pursuant to this Agreement, such payment will not be subject to Section 409A provided that such payment does not exceed two (2) times the lesser of (i) the sum of the Officer’s annualized compensation
based on the taxable year immediately preceding the year in which termination of employment occurs or (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year in which the Officer terminates service (the “Safe Harbor Amount”).   However, if such payment exceeds the Safe Harbor Amount, only the amount in excess of the Safe Harbor Amount will be subject to Section 409A.  In addition, if such Officer
is considered a key employee, such payment in excess of the Safe Harbor Amount will have its timing delayed and will be subject to the six (6)-month wait-period imposed by Section 409A as provided in section 21 of this Agreement.  The Officer and the Bank agree that the termination benefits described in this section 22 are intended to be exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(9)(iii) as the safe harbor for separation pay due to involuntary separation from service.

 

  

  

  

 

 

In Witness Whereof, the Bank and the Company have caused this Agreement to be executed and the Officer has hereunto set his/her hand, all as of the day and year first above written.

 

	 	 	 	 
	  	  	 	
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Lake Shore Savings Bank

	
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[Seal]
	  	  
	  	  	  
	  	  	  
	  	  	  
	  	  	
Lake Shore Bancorp, Inc.

	
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[Seal]

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00167-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00167-of-00352.parquet"}]]