Document:

gia_ex102.htm

    EXHIBIT
10.2

     

    CERTIFICATE
OF DESIGNATION,

    PREFERENCES
AND RIGHTS

    of

    SERIES
A CONVERTIBLE PREFERRED STOCK

    of

    GULFSTREAM
INTERNATIONAL GROUP, INC.

    (Pursuant
to Section 151 of the

    Delaware
General Corporation Law)

    

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

    

    I.
DESIGNATION AND AMOUNT

    

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

    

    II.
CERTAIN DEFINITIONS

    

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

    

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

    

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

     

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

    

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

     

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

     

    
      
         

      

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

    

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

    

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

     

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

     

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

     

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

    

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

    

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

    

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

     

    
      
         

      

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

    

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

    

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

    

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

     

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

    

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

    

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

    

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

     

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

    

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

     

    
      
         

      

      
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    III.
DIVIDENDS

     

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

     

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

     

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

     

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

     

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

     

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

     

    IV.
RESERVATION OF SHARES OF COMMON STOCK

    

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

    

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

     

    
      
         

      

      
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    V.
RANK

    

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

    

    VI.
LIQUIDATION PREFERENCE

    

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

    

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

    

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

    

    VII.
CONVERSION

    

    A.            Optional and Automatic
Conversion

    

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

    

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

     

    
      
         

      

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

       

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

    

    

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

    

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

    

    The Original Issue
Price

    Series A
Conversion Price then in effect

    

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

    

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

     

    
      
         

      

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

    

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

    

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

    

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

    

    All Amounts Accrued or
Payable

     Series
A Conversion Price

    

    VIII.
ADJUSTMENTS

     

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

    

    
      
         

      

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

     

    B.           [Intentionally
Omitted].

     

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

     

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

     

    
      
         

      

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

     

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

       

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

    

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    (ii)           
Issuance of
Convertible Securities.  If the Corporation in any manner
issues or sells any other series or classes of Preferred Stock (other than the
Series A Preferred Stock) or any notes, debentures, evidences of Indebtedness or
other securities that are convertible into or exchangeable for Common Stock
(“Convertible
Securities”), whether or not immediately convertible (other than where
the same are issuable upon the exercise of Options) and the price per share for
which Common Stock is issuable upon such conversion or exchange is less than the
Series A Conversion Price on the date of issuance, then the maximum total number
of shares of Common Stock issuable upon the conversion or exchange of all such
Convertible Securities will, as of the date of the issuance of such Convertible
Securities, be deemed to be outstanding and to have been issued and sold by the
Corporation for such price per share.  For the purposes of the
preceding sentence, the “price per share for which Common Stock is issuable upon
such conversion or exchange” is determined by dividing (i) the total amount, if
any, received or receivable by the Corporation as consideration for the issuance
or sale of all such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Corporation upon the conversion
or exchange thereof at the time such Convertible Securities first become
convertible or exchangeable, by (ii) the maximum total number of shares of
Common Stock issuable upon the conversion or exchange of all such Convertible
Securities.  No further adjustment to the Series A Conversion Price
will be made upon the actual issuance of such Common Stock upon conversion or
exchange of such Convertible Securities.

     

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

     

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

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

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

     

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

     

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

     

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

     

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

     

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

     

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

    

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

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

     

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

     

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

     

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

     

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

     

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

     

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

    

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

    

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

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

    IX.
VOTING RIGHTS

    

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

    

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

    

    X.
PROTECTION PROVISIONS

    

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

     

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

     

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

     

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

    

    XI.
MISCELLANEOUS

    

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

    

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

    

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

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

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

     

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

     

    

     

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

    

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

     

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

     

    
      
        	 	GULFSTREAM INTERNATIONAL GROUP,
      INC.	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ David F.
      Hackett	 
	 	 	

                David
      F. Hackett

              	 
	 	 	

                Chief
      Executive Officer

              	 
	 	 	 	 

      

    

     

     

     

    
 

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

     

    NOTICE
OF CONVERSION

     

    (To be
Executed by the Registered Holder

    in order
to Convert the Series A Preferred Stock)

    

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

    

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

    

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

    

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

    

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

     

     

    Date of
Conversion:

    
      Applicable
Series A Conversion Price:  $________

    

    

    

     

    
      	 	Signature:
      ________________
	 	

              Name:
      ___________________

            
	 	 
	 	 
	 	

              Address:

            

    

     

    

    
      
         

      

      
        16gia_ex103.htm

     

    EXHIBIT 10.3

     

    THIS
WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR
ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE
SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES UNDER
THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS
IS NOT REQUIRED.

    

    WARRANT
TO PURCHASE

    

    SHARES
OF COMMON STOCK

    

    OF

    

    GULFSTREAM
INTERNATIONAL GROUP, INC.

    

    Expires
March 31, 2013

     

     

    
      	No.:
      ___________	Number of Shares:
      ___________

    

     

    Date of
Issuance: March 31, 2010

    

    

    FOR VALUE
RECEIVED, the undersigned, GULFSTREAM INTERNATIONAL GROUP,
INC., a Delaware corporation (together with its successors and assigns,
the “Issuer”), hereby certifies that
______________________________________________ (the “Initial
Holder”) or his or its registered assigns is entitled to subscribe for
and purchase, during the Term (as hereinafter defined), up to
__________________________ (______) shares (subject to adjustment as hereinafter
provided) of the duly authorized, validly issued, fully paid and non-assessable
Common Stock of the Issuer, at an exercise price per share equal to the Warrant
Price then in effect, subject, however, to the provisions and upon the terms and
conditions hereinafter set forth. Capitalized terms used in this Warrant and not
otherwise defined herein shall have the respective meanings specified in Section
7 hereof.

    

    1.      Term. The term of
this Warrant shall commence on the Date of Issuance hereof and shall expire at
5:00 p.m., Eastern Standard Time, on March 31, 2013 (such period being the
“Term”).

    

    
      2.     
Method of Exercise; Payment;
Issuance of New Warrant; Transfer and Exchange.

    

    

    (a)           Time of Exercise. The
purchase rights represented by this Warrant may be exercised in whole or in part
during the Term.

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

     

    (b)           Method of Exercise.
The Holder hereof may exercise this Warrant, in whole or in part, by the
surrender of this Warrant (with the exercise form attached hereto duly executed)
at the principal office of the Issuer, and by the payment to the Issuer of an
amount of consideration therefor equal to the Warrant Price in effect on the
date of such exercise multiplied by the number of shares of Warrant Stock with
respect to which this Warrant is then being exercised, payable at such Holder's
election by certified or official bank check or by wire transfer to an account
designated by the Issuer.

    

    (c)           Issuance of Stock
Certificates. In the event of any exercise of this Warrant in accordance
with and subject to the terms and conditions hereof, certificates for the shares
of Warrant Stock so purchased shall be dated the date of such exercise and
delivered to the Holder’s Prime Broker as specified in the Holder’s exercise
form within a reasonable time, not exceeding five (5) Trading Days after such
exercise (the “Delivery
Date”) or, at the request of the Holder (provided that a registration
statement under the Securities Act providing for the resale of the Warrant Stock
is then in effect or that the shares of Warrant Stock are otherwise exempt from
registration), issued and delivered to the Depository Trust Company (“DTC”)
account on the Holder’s behalf via the Deposit Withdrawal Agent Commission
System (“DWAC”)  when
available, within a reasonable time, not exceeding five (5) Trading Days after
such exercise, and the Holder hereof shall be deemed for all purposes to be the
holder of the shares of Warrant Stock so purchased as of the date of such
exercise. Notwithstanding the foregoing to the contrary, the Issuer or its
transfer agent shall only be obligated to issue and deliver the shares to the
DTC on a holder’s behalf via DWAC if such exercise is in connection with a sale
or other exemption from registration by which the shares may be issued without a
restrictive legend and the Issuer and its transfer agent are participating in
DTC through the DWAC system. The Holder shall deliver this original Warrant, or
an indemnification reasonably acceptable to the Issuer undertaking with respect
to such Warrant in the case of its loss, theft or destruction, at such time that
this Warrant is fully exercised. With respect to partial exercises of this
Warrant, the Issuer shall keep written records for the Holder of the number of
shares of Warrant Stock exercised as of each date of exercise.

    

    (d)           Compensation for Buy-In on
Failure to Timely Deliver Certificates Upon Exercise. In addition to any
other rights available to the Holder, if the Issuer fails to cause its transfer
agent to transmit to the Holder a certificate or certificates representing the
Warrant Stock pursuant to an exercise on or before the second business day
following the Delivery Date, and if after such date the Holder is required by
its broker to purchase (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant
Stock which the Holder anticipated receiving upon such exercise (a “Buy-In”),
then the Issuer shall (1) pay in cash to the Holder the amount by which (x) the
Holder’s total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (A) the number of shares of Warrant Stock that the Issuer was
required to deliver to the Holder in connection with the exercise at issue times
(B) the price at which the sell order giving rise to such purchase obligation
was executed, and (2) at the option of the Holder, either reinstate the portion
of the Warrant and equivalent number of shares of Warrant Stock for which such
exercise was not honored or deliver to the Holder the number of shares of Common
Stock that would have been issued had the Issuer timely complied with its
exercise and delivery obligations hereunder. For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted exercise of shares of Common Stock with an
aggregate sale price giving rise to such purchase obligation of $10,000, under
clause (1) of the immediately preceding sentence the Issuer shall be required to
pay the Holder $1,000. The Holder shall provide the Issuer written notice
indicating the amounts payable to the Holder in respect of the Buy-In, together
with applicable confirmations and other evidence reasonably requested by the
Issuer. Nothing herein shall limit a Holder’s right to pursue any other remedies
available to it hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief with respect to the
Issuer’s failure to timely deliver certificates representing shares of Common
Stock upon exercise of this Warrant as required pursuant to the terms
hereof.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    (e)           Transferability of
Warrant. Subject to Section
2(g) hereof, this Warrant may be transferred by a Holder, in whole or in
part, without the consent of the Issuer. If transferred pursuant to this
paragraph, this Warrant may be transferred on the books of the Issuer by the
Holder hereof in person or by duly authorized attorney, upon surrender of this
Warrant at the principal office of the Issuer, properly endorsed (by the Holder
executing an assignment in the form attached hereto) and upon payment of any
necessary transfer tax or other governmental charge imposed upon such transfer.
This Warrant is exchangeable at the principal office of the Issuer for Warrants
to purchase the same aggregate number of shares of Warrant Stock, each new
Warrant to represent the right to purchase such number of shares of Warrant
Stock as the Holder hereof shall designate at the time of such exchange. All
Warrants issued on transfers or exchanges shall be dated the Original Issue Date
and shall be identical with this Warrant except as to the number of shares of
Warrant Stock issuable pursuant thereto.

    

    (f)           Continuing Rights of
Holder. The Issuer will, at the time of or at any time after each
exercise of this Warrant, upon the request of the Holder hereof, acknowledge in
writing the extent, if any, of its continuing obligation to afford to such
Holder all rights to which such Holder shall continue to be entitled after such
exercise in accordance with the terms of this Warrant, provided
that if any such Holder shall fail to make any such request, the failure shall
not affect the continuing obligation of the Issuer to afford such rights to such
Holder.

    

    (g)           Compliance with Securities
Laws.

    

    (i)           The
Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant and
the shares of Warrant Stock to be issued upon exercise hereof are being acquired
solely for the Holder's own account and not as a nominee for any other party,
and for investment, and that the Holder will not offer, sell or otherwise
dispose of this Warrant or any shares of Warrant Stock to be issued upon
exercise hereof except pursuant to an effective registration statement, or an
exemption from registration, under the Securities Act and any applicable state
securities laws.

    

    (ii)           Except
as provided in paragraph (iii) below, this Warrant and all certificates
representing shares of Warrant Stock issued upon exercise hereof shall be
stamped or imprinted with a legend in substantially the following
form:

    

    THIS
WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH
SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    
 

    (iii)           The
Issuer agrees to reissue this Warrant or certificates representing any of the
Warrant Stock, without the legend set forth above, if at such time, prior to
making any transfer of any such securities, the Holder shall give written notice
to the Issuer describing the manner and terms of such transfer and demonstrating
that the following conditions are satisfied. Such proposed transfer will not be
effected until: (a) either (i) the Issuer has received an opinion of counsel
reasonably satisfactory to the Issuer, to the effect that the registration of
such securities under the Securities Act is not required in connection with such
proposed transfer, or (ii) a registration statement under the Securities Act
covering such proposed disposition has been filed by the Issuer with the
Securities and Exchange Commission and has become and remains effective under
the Securities Act, or (b) either (i) the Issuer has received an opinion of
counsel reasonably satisfactory to the Issuer, to the effect that registration
or qualification under the securities or “blue sky” laws of any state is not
required in connection with such proposed disposition, or (ii) compliance with
applicable state securities or “blue sky” laws has been effected or a valid
exemption exists with respect thereto. The Issuer will respond to any such
notice from a holder within three (3) Trading Days. In the case of any proposed
transfer under this Section
2(g), the Issuer will use reasonable efforts to comply with any such
applicable state securities or “blue sky” laws, but shall in no event be
required, (x) to qualify to do business in any state where it is not then
qualified, (y) to take any action that would subject it to tax or to the general
service of process in any state where it is not then subject, or (z) to comply
with state securities or “blue sky” laws of any state for which registration by
coordination is unavailable to the Issuer. The restrictions on transfer
contained in this Section
2(g) shall be in addition to, and not by way of limitation of, any other
restrictions on transfer contained in any other section of this Warrant.
Whenever a certificate representing the Warrant Stock is required to be issued
to the Holder without a legend, in lieu of delivering physical certificates
representing the Warrant Stock, the Issuer shall cause its transfer agent to
electronically transmit the Warrant Stock to the Holder by crediting the account
of the Holder or Holder's Prime Broker with DTC through its DWAC system (to the
extent not inconsistent with any provisions of this Warrant or the Purchase
Agreement).

    

    (h)           Accredited Investor
Status. At the time of the exercise of this Warrant, the Holder (1) shall
be an “accredited investor” as defined in Regulation D under the Securities Act,
or (2) shall exercise this Warrant by means of a cashless exercise as provided
for in Section 2(c).

    

    3.      Adjustment of Warrant
Price. The Warrant Price shall be subject to adjustment from time to time
as set forth in this Section
3. The Issuer shall give the Holder notice of any event described below
which requires an adjustment pursuant to this Section
3 in accordance with the notice provisions set forth in Section
13.

     

    (a)           Adjustments for Stock
Splits, Combinations, Certain Dividends and Distributions.  If
the Issuer shall, at any time or from time to time after the Original Issue
Date, effect a split of the outstanding Common Stock (or any other subdivision
of its shares of Common Stock into a larger number of shares of Common Stock),
combine the outstanding shares of Common Stock into a smaller number of shares
of Common Stock, or make or issue or set a record date for the determination of
holders of Common Stock entitled to receive a dividend or other distribution
payable in shares of Common Stock, then, in each event (i) the number of shares
of Common Stock for which this Warrant shall be exercisable immediately after
the occurrence of any such event shall be adjusted to equal the number of shares
of Common Stock that a record holder of the same number of shares of Common
Stock for which this Warrant is exercisable immediately prior to the occurrence
of such event would own or be entitled to receive after the happening of such
event, and (ii) the Warrant Price then in effect shall be adjusted to equal (A)
the Warrant Price then in effect multiplied by the number of shares of Common
Stock for which this Warrant is exercisable immediately prior to the adjustment
divided by (B) the number of shares of Common Stock for which this Warrant is
exercisable immediately after such adjustment.

     

    
      
         

      

      
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    (b)         Adjustment for Other
Dividends and Distributions. If the Issuer shall, at any time or from
time to time after the Original Issue Date, make or issue or set a record date
for the determination of holders of Common Stock entitled to receive a dividend
or other distribution payable in (i) cash, (ii) any evidences of indebtedness,
or any other securities of the Company or any property of any nature whatsoever,
other than, in each case, shares of Common Stock; or (iii) any warrants or other
rights to subscribe for or purchase any evidences of indebtedness, or any other
securities of the Company or any property of any nature whatsoever, other than,
in each case, shares of Common Stock, then, and in each event, (A) the number of
shares of Common Stock for which this Warrant shall be exercisable shall be
adjusted to equal the product of the number of shares of Common Stock for which
this Warrant is exercisable immediately prior to such adjustment multiplied by a
fraction (1) the numerator of which shall be the Per Share Market Value of
Common Stock at the date of taking such record and (2) the denominator of which
shall be such Per Share Market Value minus the amount allocable to one share of
Common Stock of any such cash so distributable and of the fair value (as
determined in good faith by the Board and supported by an opinion from an
investment banking firm mutually agreed upon by the Issuer and the Holder) of
any and all such evidences of indebtedness, shares of stock, other securities or
property or warrants or other subscription or purchase rights so distributable,
and (B) the Warrant Price then in effect shall be adjusted to equal (1) the
Warrant Price then in effect multiplied by the number of shares of Common Stock
for which this Warrant is exercisable immediately prior to the adjustment
divided by (2) the number of shares of Common Stock for which this Warrant is
exercisable immediately after such adjustment. A reclassification of the Common
Stock (other than a change in par value, or from par value to no par value or
from no par value to par value) into shares of Common Stock and shares of any
other class of stock shall be deemed a distribution by the Issuer to the holders
of its Common Stock of such shares of such other class of stock within the
meaning of this Section
3(b) and, if the outstanding shares of Common Stock shall be changed into
a larger or smaller number of shares of Common Stock as a part of such
reclassification, such change shall be deemed a subdivision or combination, as
the case may be, of the outstanding shares of Common Stock within the meaning of
Section
3(a).

     

    (c)         Adjustments for
Reclassification, Exchange or Substitution. If the Common Stock for which
this Warrant is exercisable at any time or from time to time after the Original
Issue Date shall be changed to the same or different number of shares of any
class or classes of stock, whether by reclassification, exchange, substitution
or otherwise (other than by way of a stock split or combination of shares or
stock dividends provided for in Section
3(a), Section
3(b), or a reorganization, merger, consolidation, or sale of assets
provided for in Section
3(d)), then, and in each event, an appropriate revision to the Warrant
Price shall be made and provisions shall be made (by adjustments of the Warrant
Price or otherwise) so that, upon any subsequent exercise of this Warrant, the
Holder shall have the right to receive, in lieu of Warrant Stock, the kind and
amount of shares of stock and other securities receivable upon reclassification,
exchange, substitution or other change, by holders of the number of shares of
Common Stock for which this Warrant was exercisable immediately prior to such
reclassification, exchange, substitution or other change.

     

    
      
         

      

      
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    (d)         Adjustments for
Reorganization, Merger, Consolidation or Sales of Assets. If at any time
or from time to time after the Original Issue Date there shall be a capital
reorganization of the Issuer (other than by way of a stock split or combination
of shares or stock dividends or distributions provided for in Section
3(a), and Section
3(b), or a reclassification, exchange or substitution of shares provided
for in Section
3(c)), or a merger or consolidation of the Issuer with or into another
corporation where the holders of the Issuer’s outstanding voting securities
prior to such merger or consolidation do not own over 50% of the outstanding
voting securities of the merged or consolidated entity, immediately after such
merger or consolidation, or the sale of all or substantially all of the Issuer's
properties or assets to any other person (an “Organic
Change”), then as a part of such Organic Change an appropriate revision
to the Warrant Price shall be made if necessary and provision shall be made if
necessary (by adjustments of the Warrant Price or otherwise) so that, upon any
subsequent exercise of this Warrant, the Holder shall have the right to receive,
in lieu of Warrant Stock, the kind and amount of shares of stock and other
securities or property of the Issuer or any successor corporation resulting from
the Organic Change. In any such case, appropriate adjustment shall be made in
the application of the provisions of this Section
3(d) with respect to the rights of the Holder after the Organic Change to
the end that the provisions of this Section
3(d) (including any adjustment in the Warrant Price then in effect and
the number of shares of stock or other securities deliverable upon exercise of
this Warrant) shall be applied after that event in as nearly an equivalent
manner as may be practicable.  In any such case, the resulting or
surviving corporation (if not the Issuer) shall expressly assume the obligations
to deliver, upon the exercise of this Warrant, such securities or property as
the Holder shall be entitled to receive pursuant to the provisions hereof, and
to make provisions for the protection of the rights of the Holder as provided
above.

     

    (e)         No Impairment. The
Issuer shall not, by amendment of its Articles of Incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder, but will at all times in good faith assist in the carrying out of all
the provisions of this Section
3 and in the taking of all such action as may be necessary or appropriate
in order to protect against impairment the right of the Holder to exercise this
Warrant. In the event the Holder shall elect to exercise this Warrant, in whole
or in part, as provided herein, the Issuer cannot refuse exercise based on any
claim that the Holder or anyone associated or affiliated with such holder has
been engaged in any violation of law, unless (i) the Issuer receives an order
from the Securities and Exchange Commission prohibiting such exercise or (ii) an
injunction from a court, on notice, restraining and/or adjoining exercise of this
Warrant.

     

    (f)          Certificates as to
Adjustments. Upon occurrence of each adjustment or readjustment of the
Warrant Price or number of shares of Common Stock for which this Warrant is
exercisable pursuant to this Section
3, the Issuer at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to the Holder a
certificate setting forth such adjustment and readjustment, showing in detail
the facts upon which such adjustment or readjustment is based. The Issuer shall,
upon written request of the Holder, at any time, furnish or cause to be
furnished to the Holder a like certificate setting forth such adjustments and
readjustments, the Warrant Price in effect at the time, and the number of shares
of Common Stock and the amount, if any, of other securities or property which at
the time would be received upon the exercise of this Warrant. Notwithstanding
the foregoing, the Issuer shall not be obligated to deliver a certificate unless
such certificate would reflect an increase or decrease of at least one percent
of such adjusted amount; if the Issuer so postpones delivering a certificate,
such prior adjustment shall be carried forward and made as soon as such
adjustment, together with other adjustments required by this Section
3 and not previously made, would result in an adjustment of one percent
or more.

     

    (g)         Issue Taxes. The
Issuer shall pay any and all issue and other taxes, excluding federal, state or
local income taxes, that may be payable in respect of any issue or delivery of
shares of Common Stock on exercise of this Warrant; provided, however, that the
Issuer shall not be obligated to pay any transfer taxes resulting from any
transfer requested by any holder in connection with any such
conversion.

     

    
      
         

      

      
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    (h)         Fractional Shares. No
fractional shares of Common Stock shall be issued upon exercise of this Warrant.
In lieu of any fractional shares to which the Holder would otherwise be
entitled, the Holder shall round the number of shares to be issued upon exercise
up to the nearest whole number of shares.

     

    (i)          Reservation of Common
Stock. The Issuer shall, during the period within which this Warrant may
be exercised, reserve and keep available out of its authorized and unissued
Common Stock, solely for the purpose of effecting the exercise of this Warrant,
such number of shares of Common Stock equal to at least one hundred ten percent
(110%) of the aggregate number of shares of Common Stock as shall from time to
time be sufficient to effect the exercise of this Warrant.

     

    (j)          Retirement of this
Warrant. Exercise of this Warrant shall be deemed to have been effected
on the date of exercise hereof. Upon exercise of this Warrant only in part, the
Issuer shall issue and deliver to the Holder, at the expense of the Issuer, a
new Warrant covering the unexercised balance of the Warrant Shares.

     

    (k)         Regulatory
Compliance. If any shares of Common Stock to be reserved for the purpose
of exercise of this Warrant require registration or listing with or approval of
any governmental authority, stock exchange or other regulatory body under any
federal or state law or regulation or otherwise before such shares may be
validly issued or delivered upon conversion, the Issuer shall, at its sole cost
and expense, in good faith and as expeditiously as possible, endeavor to secure
such registration, listing or approval, as the case may be.

     

    4.      No Preemptive Rights.
The Holder shall not be entitled to rights to subscribe for, purchase or receive
any part of any new or additional shares of any class, whether now or
hereinafter authorized, or of bonds or debentures, or other evidences of
indebtedness convertible into or exchangeable for shares of any class, but all
such new or additional shares of any class, or any bond, debentures or other
evidences of indebtedness convertible into or exchangeable for shares, may be
issued and disposed of by the Board on such terms and for such consideration (to
the extent permitted by law), and to such person or persons as the Board in its
absolute discretion may deem advisable.

     

    5.      Exercise Restriction.
Notwithstanding anything to the contrary set forth in this Warrant, at no time
may the Holder exercise this Warrant, in whole or in part, if the number of
shares of Common Stock to be issued pursuant to such exercise would cause the
number of shares of Common Stock beneficially owned by the Holder and its
affiliates at such time, when aggregated with all other shares of Common Stock
beneficially owned by the Holder and its affiliates at such time, result in the
Holder beneficially owning (as determined in accordance with Section 13(d) of
the Securities Exchange Act of 1934, as amended, and the rules thereunder) in
excess of 9.99% of the then issued and outstanding shares of Common Stock
outstanding at such time; provided, however, that upon
the Holder providing the Issuer with sixty-one (61) days notice (pursuant to
Section
13 hereof) (the "Waiver
Notice") that the Holder would like to waive Section
5 of this Warrant with regard to any or all shares of Common Stock for
which this Warrant is exercisable, this Section
5 shall be of no force or effect with regard to those shares referenced
in the Waiver Notice.

    

    6.      Registration
Rights.

     

    The
Holder of this Warrant is entitled to the benefit of certain registration rights
with respect to the shares of Warrant Stock issuable upon the exercise of this
Warrant, pursuant to that certain Registration Rights Agreement, of even date
herewith, by and among the Issuer and Persons listed on Schedule I thereto (the
“Registration
Rights Agreement”) and the registration rights with respect to the shares
of Warrant Stock issuable upon the exercise of this Warrant by any subsequent
Holder may only be assigned in accordance with the terms and provisions of the
Registrations Rights Agreement.

     

    
      
         

      

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

     

    “Board”
shall mean the Board of Directors of the Issuer.

     

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

     

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

     

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

     

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

     

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

     

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

     

    “AMEX”
means the NYSE:American Stock Exchange

     

    “Other
Common” means any other Capital Stock of the Issuer of any class which
shall be authorized at any time after the date of this Warrant (other than
Common Stock) and which shall have the right to participate in the distribution
of earnings and assets of the Issuer without limitation as to
amount.

     

    “Outstanding
Common Stock” means, at any given time, the aggregate amount of
outstanding shares of Common Stock, assuming full exercise, conversion or
exchange (as applicable) of all Common Stock Equivalents that are outstanding at
such time.

     

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

     

    
      
         

      

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

     

    “Purchase
Agreement” means the  Securities Purchase Agreement dated as of
March 31, 2010, among the Issuer and the Purchasers.

     

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

     

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

     

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

     

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

     

    “Term”
has the meaning specified in Section
1 hereof.

     

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

     

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

     

    
      
         

      

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

     

    “Warrant
Price” initially means One Dollar Seventy Five Cents ($1.75) per share,
as such price may be adjusted from time to time as shall result from the
adjustments specified in this Warrant, including Section
3 hereto.

     

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

     

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

    

    10.           Other Notices. In
case at any time:

    

    (i) the
Issuer shall make any distributions to the holders of Common Stock;
or

    

    (ii) the
Issuer shall authorize the granting to all holders of its Common Stock of rights
to subscribe for or purchase any shares of Capital Stock of any class or other
rights; or

    

    (iii) there
shall be any reclassification of the Capital Stock of the Issuer;
or

    

    (iv) there
shall be any capital reorganization by the Issuer; or

    

    (v) there
shall be any (i) consolidation or merger involving the Issuer or (ii) sale,
transfer or other disposition of all or substantially all of the Issuer's
property, assets or business (except a merger or other reorganization in which
the Issuer shall be the surviving corporation and its shares of Capital Stock
shall continue to be outstanding and unchanged and except a consolidation,
merger, sale, transfer or other disposition involving a wholly-owned
Subsidiary); or

    

    (vi) there
shall be a voluntary or involuntary dissolution, liquidation or winding-up of
the Issuer or any partial liquidation of the Issuer or distribution to holders
of Common Stock;

    

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

     

    
      
         

      

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

    

    12.           Governing Law;
Jurisdiction. This Warrant shall be governed by and construed in
accordance with the internal laws of the State of New York, without giving
effect to any of the conflicts of law principles which would result in the
application of the substantive law of another jurisdiction. This Warrant shall
not be interpreted or construed with any presumption against the party causing
this Warrant to be drafted. The Issuer and the Holder agree that venue for any
dispute arising under this Warrant will lie exclusively in the state or federal
courts located in New York County, New York, and the parties irrevocably waive
any right to raise forum non
conveniens or any other argument that New York is not the proper venue.
The Issuer and the Holder irrevocably consent to personal jurisdiction in the
state and federal courts of the state of New York. The Issuer and the Holder
consent to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to it
under this Warrant and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing in this Section
12 shall affect or limit any right to serve process in any other manner
permitted by law. The Issuer and the Holder hereby agree that the prevailing
party in any suit, action or proceeding arising out of or relating to this
Warrant or the Purchase Agreement, shall be entitled to reimbursement for
reasonable legal fees from the non-prevailing party. The parties hereby waive
all rights to a trial by jury.

    

    13.           Notices. All notices
and other communications hereunder shall be in writing and shall be deemed given
if delivered personally or by facsimile or three (3) business days following
being mailed by certified or registered mail, postage prepaid, return-receipt
requested, addressed to the holder of record at its address appearing on the
books of the Issuer. The Issuer will give written notice to the Holder at least
twenty (20) calendar days prior to the date on which the Issuer closes its books
or takes a record (I) with respect to any dividend or distribution upon the
Common Stock, (II) with respect to any pro rata subscription offer to holders of
Common Stock or (III) for determining rights to vote with respect to any Organic
Change, dissolution, liquidation or winding-up and in no event shall such notice
be provided to such holder prior to such information being made known to the
public. The Issuer will also give written notice to the Holder at least twenty
(20) days prior to the date on which any Organic Change, dissolution,
liquidation or winding-up will take place and in no event shall such notice be
provided to such holder prior to such information being made known to the
public. The addresses for such communications shall be as is set forth in the
Purchase Agreement. Any party hereto may from time to time change its address
for notices by giving written notice of such changed address to the other party
hereto.

     

    
      
         

      

      
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    14.           Warrant Agent. The
Issuer may, by written notice to each Holder of this Warrant, appoint an agent
having an office in New York, New York for the purpose of issuing shares of
Warrant Stock on the exercise of this Warrant pursuant to subsection (b) of
Section
2 hereof, exchanging this Warrant pursuant to subsection (d) of Section
2 hereof or replacing this Warrant pursuant to Section
15 hereof, or any of the foregoing, and thereafter any such issuance,
exchange or replacement, as the case may be, shall be made at such office by
such agent.

     

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

    

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

    

    17.           Specific Shall Not Limit
General; Construction. No specific provision contained in this Warrant
shall limit or modify any more general provision contained herein. This Warrant
shall be deemed to be jointly drafted by the Company and all initial purchasers
of the Warrant and shall not be construed against any person as the drafter
hereof.

    

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

    

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

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

    20.           Headings. The
headings of the Sections of this Warrant are for convenience of reference only
and shall not, for any purpose, be deemed a part of this Warrant.

    

    

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

     

     

    
 

     

     

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    

    IN
WITNESS WHEREOF, the Issuer has executed this Warrant as of the day and year
first above written.

     

    
 

    
      
        	 	GULFSTREAM INTERNATIONAL GROUP,
      INC	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ 	 
	 	 	Name:
      David Hackett	 
	 	 	Title:    President	 
	 	 	 	 

      

     

     

    

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

     

     

    EXERCISE
FORM

    WARRANT

    

    GULFSTREAM
INTERNATIONAL GROUP, INC.

    

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

     

     

    
      	Dated:
      _________________	 	Signature     ____________________________________
	 	 	 
	 	 	Address       ___________________________
	 	 	                     
      ___________________________

    

     

     

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

    

    The
undersigned is an “accredited investor” as defined in Regulation D under the
Securities Act of 1933, as amended.o
Yeso No

     

    The
Holder shall pay the sum of $________ by certified or official bank check (or
via wire transfer) to the Issuer in accordance with the terms of the
Warrant.

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    

    ASSIGNMENT

    

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

     

    
       

      
        	Dated:
      _________________	 	Signature     ____________________________________
	 	 	 
	 	 	Address       ___________________________
	 	 	                     
      ___________________________

      

      
         

      

    

    PARTIAL
ASSIGNMENT

    

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

    

    
       

      
        	Dated:
      _________________	 	Signature     ____________________________________
	 	 	 
	 	 	Address       ___________________________
	 	 	                     
      ___________________________

      

    FOR USE
BY THE ISSUER ONLY:

    

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

     

     

    
 

    
      
         

      

      
        16

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