Document:

gia_ex104.htm

    EXHIBIT 10.4

     

    REGISTRATION RIGHTS
AGREEMENT

    

    This
Registration Rights Agreement (this "Agreement") is made
and entered into as of March 31, 2010, by and among GULFSTREAM INTERNATIONAL GROUP,
INC. (the “Company”), and the purchasers set forth on the signature pages
annexed hereto  (the "Purchaser").

    

    Introduction

    

    This
Agreement is being entered into pursuant to a securities purchase agreement,
dated as of March 31, 2010, among the Company and the Purchaser signatory hereto
as well as other purchasers of Units of securities of the Company (individually
and collectively, the "Purchase
Agreement").

    

    The
Company and the Purchaser do hereby agree as follows:

    

    1.   Definitions.

    

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

    

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

    

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

    

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

    

    "Business Day" means
any day except Saturday, Sunday and any day which shall be a legal holiday or a
day on which banking institutions in the State of New York generally are
authorized or required by law or other government actions to close.

    

    "Commission" means the
Securities and Exchange Commission.

    

    "Common Stock" means
the Company's common stock, par value $0.001 per share.

    

    “Conversion Shares”
means those specific shares of Common Stock issuable upon conversion of the
shares of Series A Preferred Stock of the Company included in the Units sold
pursuant to the Purchase Agreement.

    

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

     

    
      
         

      

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

    

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

    

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

    

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

    

    "Filing Date" means
with respect to a Registration Statement under Section 2(a), no later than April
30, 2010; provided, however that if the
Filing Date falls on a Saturday, Sunday or any other day which shall be a legal
holiday or a day on which the Commission is authorized or required by law or
other government actions to close, the Filing Date shall be the following
Business Day.

    

    "Final Closing Date"
means the date of the final closing of the purchase and sale of the Units
pursuant to the Purchase Agreement.

    

    "Holder" or "Holders" means the
collective reference to the Purchaser, the other purchasers of Units under the
Purchase Agreement and any subsequent record holder or holders, from time to
time, of Registrable Securities.

    

    "Indemnified Party"
shall have the meaning set forth in Section 5(c).

    

    "Indemnifying Party"
shall have the meaning set forth in Section 5(c).

    

    "Losses" shall have
the meaning set forth in Section 5(a).

    

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

    

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

    

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

    

    "Registrable
Securities” means the collective reference to (i) the Conversion Shares;
(ii) the Warrant Shares; and (iii) any securities issued or issuable upon any
stock split, dividend or other distribution, recapitalization or similar event
with respect to the foregoing.

    

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

     

    
      
         

      

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

    

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

    

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

    

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

    

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

    

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

    

    “Shares” means the
collective reference to the Conversion Shares and the Warrant
Shares.

    

    "Warrants" means the
warrants to purchase shares of Common Stock issued to the Purchasers pursuant to
the Purchase Agreement.

    

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

    

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

    

    2.      Resale
Registration.

     

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

     

    
      
         

      

      
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    (b)           Notwithstanding anything to the contrary set forth in this
Section 2, in the event the Commission does not permit the Company to register
all of the Registrable Securities in the
Registration Statement because of the Commission’s application of
Rule 415, the number of Registrable Securities to be registered on such
Registration Statement will be reduced in the following order (i) the
Registrable Securities represented by the total number of Conversion Shares
included in the Units that were sold under the Purchase Agreement, applied on a
pro-rata basis, as among the Holders thereof, and (ii) the Registrable
Securities represented by the total number of Warrant Shares owned by the
Holders, applied on a pro rata basis. The Company
shall use its best efforts to file subsequent Registration Statements to register the
Registrable Securities that were not
registered in the initial Registration
Statement as promptly as possible and in a manner permitted by the
Commission.  For purposes of this Section 2(b), “Filing Date”
means with respect to each subsequent Registration Statement filed
pursuant hereto, the later of (i) sixty (60) days
following the sale of substantially all of the Registrable Securities included
in the initial Registration Statement or any subsequent Registration Statement
and (ii) six (6) months following the effective date of the initial Registration
Statement or any subsequent Registration Statement, as applicable, or such earlier
date as permitted by the Commission.  For purposes of this
Section 2(b), “Effectiveness Date”
means with respect to each subsequent Registration Statement filed pursuant
hereto, the earlier of (A) the one hundred and fiftieth (150th) day
following the filing date of such Registration Statement (or in the event such
Registration Statement receives a “full review” by the Commission, the one
hundred eightieth (180th) day
following such filing date) or (B) the date which is within five (5) Business
Days after the date on which the Commission informs the Company (i) that the
Commission will not review such Registration Statement or (ii) that the Company may
request the acceleration of the effectiveness of such Registration Statement;
providedthat, if the
Effectiveness Date falls on a Saturday, Sunday or any other day which shall be a
legal holiday or a day on which the Commission is authorized or required by law
or other government actions to close, the Effectiveness Date shall be the
following Business Day.

    

    (c)           Piggy-Back
Registrations.  Notwithstanding
anything to the contrary set forth in this Section 2, if at any time
prior to the Filing Date the Company shall determine to prepare and file with
the Commission a registration statement relating to an offering for its own
account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, the Company shall send to each holder of Registrable Securities
written notice of such determination and, if within ten (10) calendar days after
receipt of such notice, or within such shorter period of time as may be
specified by the Company in such written notice as may be necessary for the
Company to comply with its obligations with respect to the timing of the filing
of such registration statement, any such holder shall so request in writing
(which request shall specify the Registrable Securities intended to be disposed
of by the Purchasers), the Company will cause the registration under the
Securities Act of all Registrable Securities which the Company has been so
requested to register by the holder, to the extent requisite to permit the
disposition of the Registrable Securities so to be registered, provided that if
at any time after giving written notice of its intention to register any
securities and prior to the effective date of the registration statement filed
in connection with such registration, the Company shall determine for any reason
not to register or to delay registration of such securities, the Company may, at
its election, give written notice of such determination to such holder and,
thereupon, (i) in the case of a determination not to register, shall be relieved
of its obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay expenses in accordance with
Section 4 hereof), and (ii) in the case of a determination to delay registering,
shall be permitted to delay registering any Registrable Securities being
registered pursuant to this Section 7(d) for the same period as the delay in
registering such other securities. The Company shall include in such
registration statement all or any part of such Registrable Securities such
holder requests to be registered; provided, however, that the
Company shall not be required to register any Registrable Securities pursuant to
this Section 7(d) that are eligible for sale pursuant to Rule 144 of the
Securities Act.  In the case of an underwritten public offering, if
the managing underwriter(s) or underwriter(s) should reasonably object to the
inclusion of the Registrable Securities in such registration statement, then if
the Company after consultation with the managing underwriter should reasonably
determine that the inclusion of such Registrable Securities would materially
adversely affect the offering contemplated in such registration statement, and
based on such determination recommends inclusion in such registration statement
of fewer or none of the Registrable Securities of the Holders, then (x) the
number of Registrable Securities of the Holders included in such registration
statement shall be reduced pro-rata among such Holders (based upon the number
of Registrable Securities requested to be included in the registration), if the
Company after consultation with the underwriter(s) recommends the inclusion of
fewer Registrable Securities, or (y) none of the Registrable Securities of the
Holders shall be included in such registration statement, if the Company after
consultation with the underwriter(s) recommends the inclusion of none of such
Registrable Securities; provided, however, that if
securities are being offered for the account of other persons or entities as
well as the Company, such reduction shall not represent a greater fraction of
the number of Registrable Securities intended to be offered by the Holders than
the fraction of similar reductions imposed on such other persons or entities
(other than the Company).

     

    
      
         

      

      
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    3.      Registration
Procedures.

    

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

     

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

    

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

     

    
      
         

      

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

     

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

    

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

    

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

    

    (g)   Promptly
deliver to each Holder, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request; and subject to the
provisions of Sections 3(m) and 3(n), the Company hereby consents to the use of
such Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto.

    

    
      
         

      

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

     

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

    

    (j)           
Upon the occurrence of any event contemplated by Section 3(c)(vi), as promptly
as possible, prepare a supplement or amendment, including a post-effective
amendment, to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference, and file any other required document so that, as thereafter
delivered, neither the Registration Statement nor such Prospectus will contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.

    

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

    

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

    

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

    

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

     

    
      
         

      

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

    

    Each
Holder agrees by its acquisition of such Registrable Securities that, upon
receipt of a notice from the Company of the occurrence of any event of the kind
described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v), 3(c)(vi) or 3(n),
such Holder will forthwith discontinue disposition of such Registrable
Securities under the Registration Statement until such Holder's receipt of the
copies of the supplemented Prospectus and/or amended Registration Statement
contemplated by Section 3(j), or until it is advised in writing (the "Advice") by the
Company that the use of the applicable Prospectus may be resumed, and, in either
case, has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement.

    

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

    

    4.      Registration
Expenses.

    

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

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    5.      Indemnification.

    

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

    

    (b)           Indemnification by
Holders.  Each Holder shall, severally and not jointly,
indemnify and hold harmless the Company, its directors, officers, agents and
employees, each Person who controls the Company (within the meaning of Section
15 of the Securities Act and Section 20 of the Exchange Act), and the directors,
officers, agents and employees of such controlling Persons, to the fullest
extent permitted by applicable law, from and against all Losses, as incurred,
arising solely out of or based solely upon any untrue statement of a material
fact contained in the Registration Statement, any Prospectus, or any form of
prospectus, or in any amendment or supplement thereto, or arising solely out of
or based solely upon any omission of a material fact required to be stated
therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading, to the extent, but
only to the extent, that such untrue statement or omission is contained in any
information so furnished in writing by such Holder or other Indemnifying Party
to the Company specifically for inclusion in the Registration Statement or such
Prospectus.  Notwithstanding anything to the contrary contained
herein, each Holder shall be liable under this Section 5(b) only for the lesser
of (a) the actual damages incurred or (b) that amount as does not exceed the
gross proceeds to such Holder as a result of the sale of his/her/its Registrable
Securities pursuant to such Registration Statement.

    

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

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

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

    

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

    

    (d)           Contribution. If a
claim for indemnification under Section 5(a) or 5(b) is due but unavailable to
an Indemnified Party because of a failure or refusal of a governmental authority
to enforce such indemnification in accordance with its terms (by reason of
public policy or otherwise), then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Losses, in such proportion
as is appropriate to reflect the relative benefits received by the Indemnifying
Party on the one hand and the Indemnified Party on the other from the offering
of the Preferred Stock and Warrants.  If, but only if, the allocation
provided by the foregoing sentence is not permitted by applicable law, the
allocation of contribution shall be made in such proportion as is appropriate to
reflect not only the relative benefits referred to in the foregoing sentence but
also the relative fault, as applicable, of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable
considerations.  The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue statement of a material
fact or omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and
the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such action, statement or omission.  The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 5(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.  In no event shall any
selling Holder be required to contribute an amount under this Section 5(d) in
excess of the gross proceeds received by such Holder upon sale of such Holder’s
Registrable Securities pursuant to the Registration Statement giving rise to
such contribution obligation.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    
 

    The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 5(d) were determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph.  No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.

     

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

    

    6.      Rule
144.

     

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

    

    7.      Miscellaneous.

    

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

    

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

    

    (c)           No Piggyback on
Registrations.  Neither the Company nor any of its security
holders (other than the Holders) may include securities of the Company in the
Registration Statement, and the Company shall not after the date hereof enter
into any agreement providing such right to any of its security holders, unless
the right so granted is subject in all respects to the prior rights in full of
the Holders set forth herein, and is not otherwise in conflict with the
provisions of this Agreement.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    (d)           Piggy-Back
Registrations.  If at any time when there is not an effective
Registration Statement covering the Registrable Securities, the Company shall
determine to prepare and file with the Commission a registration statement
relating to an offering for its own account or the account of others under the
Securities Act of any of its equity securities, other than on Form S-4 or Form
S-8 (each as promulgated under the Securities Act) or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, the Company shall
send to each holder of Registrable Securities written notice of such
determination and, if within ten (10) calendar days after receipt of such
notice, or within such shorter period of time as may be specified by the Company
in such written notice as may be necessary for the Company to comply with its
obligations with respect to the timing of the filing of such registration
statement, any such holder shall so request in writing (which request shall
specify the Registrable Securities intended to be disposed of by the
Purchasers), the Company will cause the registration under the Securities Act of
all Registrable Securities which the Company has been so requested to register
by the holder, to the extent requisite to permit the disposition of the
Registrable Securities so to be registered, provided that if at any time after
giving written notice of its intention to register any securities and prior to
the effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register or to
delay registration of such securities, the Company may, at its election, give
written notice of such determination to such holder and, thereupon, (i) in the
case of a determination not to register, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration (but
not from its obligation to pay expenses in accordance with Section 4 hereof),
and (ii) in the case of a determination to delay registering, shall be permitted
to delay registering any Registrable Securities being registered pursuant to
this Section 7(d) for the same period as the delay in registering such other
securities. The Company shall include in such registration statement all or any
part of such Registrable Securities such holder requests to be registered; provided, however, that the
Company shall not be required to register any Registrable Securities pursuant to
this Section 7(d) that are eligible for sale pursuant to Rule 144 of the
Securities Act.  In the case of an underwritten public offering, if
the managing underwriter(s) or underwriter(s) should reasonably object to the
inclusion of the Registrable Securities in such registration statement, then if
the Company after consultation with the managing underwriter should reasonably
determine that the inclusion of such Registrable Securities would materially
adversely affect the offering contemplated in such registration statement, and
based on such determination recommends inclusion in such registration statement
of fewer or none of the Registrable Securities of the Holders, then (x) the
number of Registrable Securities of the Holders included in such registration
statement shall be reduced pro-rata among such Holders (based upon the number
of Registrable Securities requested to be included in the registration), if the
Company after consultation with the underwriter(s) recommends the inclusion of
fewer Registrable Securities, or (y) none of the Registrable Securities of the
Holders shall be included in such registration statement, if the Company after
consultation with the underwriter(s) recommends the inclusion of none of such
Registrable Securities; provided, however, that if
securities are being offered for the account of other persons or entities as
well as the Company, such reduction shall not represent a greater fraction of
the number of Registrable Securities intended to be offered by the Holders than
the fraction of similar reductions imposed on such other persons or entities
(other than the Company).

     

    
      
         

      

      
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    (e)           Failure to File Registration
Statement and Other Events.  The Company and the Purchasers
agree that the Holders will suffer damages if the Registration Statement is not
filed on or prior to the Filing Date and not declared effective by the
Commission on or prior to the Effectiveness Date and maintained in the manner
contemplated herein during the Effectiveness Period or if certain other events
occur.  The Company and the Holders further agree that it would not be
feasible to ascertain the extent of such damages with
precision.  Accordingly, if (A) the Registration Statement is not
filed on or prior to the Filing Date, or (B) the Registration Statement is not
declared effective by the Commission on or prior to the Effectiveness Date, or
(C) the Company fails to file with the Commission a request for acceleration in
accordance with Rule 461 promulgated under the Securities Act within three (3)
Business Days of the date that the Company is notified (orally or in writing,
whichever is earlier) by the Commission that a Registration Statement will not
be "reviewed," or not subject to further review, or (D) the Registration
Statement is filed with and declared effective by the Commission but thereafter
ceases to be effective as to all Registrable Securities at any time prior to the
expiration of the Effectiveness Period, without being succeeded immediately by a
subsequent Registration Statement filed with and declared effective by the
Commission in accordance with Section 2(a) hereof, or (E) the Company has
breached its covenants contained in Section 3(n) of this Agreement, and has
failed or refused to cure such breach, or (F) trading in the Common Stock shall
be suspended or if the Common Stock is no longer quoted on or is delisted from
the NASDAQ (or other principal exchange on which the Common Stock is traded) for
any reason for more than three (3) Business Days in the aggregate (any such
failure or breach being referred to as an "Event," and for
purposes of clauses (A) and (B) the date on which such Event occurs, or for
purposes of clauses (C) and (F) the date on which such three (3) Business Day
period is exceeded, or for purposes of clause (D) after more than fifteen (15)
Business Days, being referred to as "Event Date"), the
Company shall pay an amount in cash as liquidated damages to each Holder equal
to two percent (2%) of the amount of the Holder’s initial investment in the
Units for each calendar month or portion thereof thereafter from the Event Date
until the applicable Event is cured; provided, however, that in no
event shall the amount of liquidated damages payable at any time and from time
to time to any Holder pursuant to this Section 7(e) exceed an aggregate of ten
percent (10%) of the amount of the Holder’s initial investment in the Units;
and provided,
further, that
in the event the Commission does not permit all of the Registrable Securities to
be included in the Registration Statement because of its application of Rule
415, liquidated damages payable pursuant to this Section shall only be payable
by the Company based on the portion of the Holder’s initial investment in the
Units that corresponds to the number of such Holder’s Registrable Securities
permitted to be registered by the Commission in such Registration Statement
pursuant to Rule 415.  For further clarification, the parties
understand that no liquidated damages shall be payable pursuant to this Section
with respect to any Registrable Securities that the Company is not permitted to
include on such Registration Statement due to the Commission’s application of
Rule 415. Notwithstanding anything to the contrary in this paragraph (e), if (a)
any of the Events described in clauses (A), (B), (C), (D) or (F) shall have
occurred, (b) on or prior to the applicable Event Date, the Company shall have
exercised its rights under Section 3(n) hereof and (c) the postponement or
suspension permitted pursuant to such Section 3(n) shall remain effective as of
such applicable Event Date, then the applicable Event Date shall be deemed
instead to occur on the second Business Day following the termination of such
postponement or suspension.  Liquidated damages payable by the Company
pursuant to this Section 7(d) shall be payable on the Event Date and the first
(1st)
Business Day of each thirty (30) day period following the Event
Date.  Notwithstanding anything to the contrary contained herein, in
no event shall any liquidated damages be payable with respect to the Warrants or
the Warrant Shares.

    

    (f)           Amendments and
Waivers.  The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the same shall be in writing and signed by the Company and the Holders of
25% the Registrable Securities.

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

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

    

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

    

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

    

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

     

    (k)           Governing Law;
Jurisdiction.  This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to any of the conflicts of law principles which would result in
the application of the substantive law of another jurisdiction.  This
Agreement shall not be interpreted or construed with any presumption against the
party causing this Agreement to be drafted.  The Company and the
Holders agree that venue for any dispute arising under this Agreement will lie
exclusively in the state or federal courts located in New York County, New York,
and the parties irrevocably waive any right to raise forum non conveniens or any
other argument that New York is not the proper venue.  The Company and
the Holders irrevocably consent to personal jurisdiction in the state and
federal courts of the state of New York.  The Company and the Holders
consent to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof.  Nothing in this
Section 7(k) shall affect or limit any right to serve process in any other
manner permitted by law.  The Company and the Holders hereby agree
that the prevailing party in any suit, action or proceeding arising out of or
relating to this Agreement or the Purchase Agreement, shall be entitled to
reimbursement for reasonable legal fees from the non-prevailing
party.  The parties hereby waive all rights to a trial by
jury.

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    

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

    

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

    

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

    

    (o)           Shares Held by the Company
and its Affiliates. Whenever the consent or approval of Holders of a
specified percentage of Registrable Securities is required hereunder,
Registrable Securities held by the Company or its Affiliates (other than any
Holder or transferees or successors or assigns thereof if such Holder is deemed
to be an Affiliate solely by reason of its holdings of such Registrable
Securities) shall not be counted in determining whether such consent or approval
was given by the Holders of such required percentage.

    

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

    

    Signature
page follows

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

     

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

     

    
      
        	 	GULFSTREAM
      INTERNATIONAL GROUP, INC.	 
	 	 	 	 
	
                 

              	
                By:
      

              	 	 
	 	 	Name:
      David Hackett	 
	 	 	Title:    President	 
	 	 	 	 
	 	 	 	 
	 	PURCHASER:	 
	 	 	 	 
	 	 	 	 
	 	By: 	 	 
	 	 	Name:	 
	 	 	Title:	 

      

    

     

    Address:________________________________

                 _________________________________

    Tel No:
______________________

    Fax
No.:______________________

    Email:_______________________

    

    

     

     

     

     

     

     

     

    
 

    [Signature
Page to Registration Rights Agreement]

    
 

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

     

    Exhibit
A

    Plan of
Distribution

    

     

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

     

    
      	
              ●

            	
              ordinary
      brokerage transactions and transactions in which the broker-dealer
      solicits purchasers;

            

    

     

    
      	
              

                ●

              

            	
              block
      trades in which the broker-dealer will attempt to sell the shares as agent
      but may position and resell a portion of the block as principal to
      facilitate the transaction;

            

    

     

    
      	
              

                ●

              

            	
              purchases
      by a broker-dealer as principal and resales by the broker-dealer for its
      account;

            

    

     

    
      	
              

                ●

              

            	
              an
      exchange distribution in accordance with the rules of the applicable
      exchange;

            

    

     

    
      	
              

                ●

              

            	
              privately
      negotiated transactions;

            

    

     

    
      	
              

                ●

              

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

            

    

     

    
      	
              

                ●

              

            	
              broker-dealers
      may agree with the selling security holders to sell a specified number of
      such shares at a stipulated price per
share;

            

    

     

    
      	
              

                ●

              

            	
              a
      combination of any of these methods of sale;
and

            

    

     

    
      	
              

                ●

              

            	
              any
      other method permitted pursuant to applicable
  law.

            

    

     

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

     

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

     

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

     

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

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

     

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

     

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

     

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

     

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

     

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

     

    
      
         

      

      
        18gia_ex105.htm

    EXHIBIT 10.5

     

    GULFSTREAM INTERNATIONAL GROUP,
INC.,

    3201
Griffin Road, 4th Floor

    Ft.
Lauderdale, Florida 33312

    

    

    

    March 31, 2010

    

    To the
Purchasers of Securities of Gulfstream International Group, Inc.

    Under a
Unit Purchase Agreement dated January 29, 2010

    

    Re:           Gulfstream
International Group, Inc. - Exchange of Securities

    

    Dear
Sir/Madam:

    

    Reference
is made to a Unit Purchase Agreement dated as of January 29, 2010 (the “Unit Purchase
Agreement”) pursuant to which Gulfstream International Group, Inc. (the
“Company”) sold
to you units of its securities (the “Units”) consisting of
(i) one share of common stock of the Company, par value $0.01 per share (the
“Common
Stock”); and (ii) warrants to purchase three-quarters of a share of
Common Stock (the “Prior Warrants”), at
a per Unit purchase price of $1.40 (the “Prior
Offering”).

    

    The
Company is currently pursuing a preferred stock and warrant private offering
(the “Offering”) through
______________, as placement agent (the “Placement Agent”),
under which the Company will sell and issue to accredited investors and/or
qualified institutional buyers (the “Investors”):

    

    (i)           up
to an aggregate of $2,500,000 (subject to increase to $4,000,000 at the
Company’s sole option) of the Company’s Series A Convertible Preferred Stock,
par value $0.001 and stated value $10.00 per share (the “Preferred Shares”),
convertible into shares of Common Stock at a conversion price of $1.00 per share
(the “Conversion
Price”); and

    

    (ii)           Warrants
(the “Warrants”) to
purchase such number of shares of Common Stock (the “Warrant Shares”) as
shall be equal to 50% of the number of shares of Common Stock issuable upon
conversion of the Preferred Shares (collectively, the “Conversion Shares”)
purchased by each Investor.  The Warrants shall be exercisable into
Common Stock at a price of $1.75 per share (the “Exercise Price”),
subject to certain adjustments as set forth therein, for a period of the date of
issuance through March 31, 2013.

    

    The
foregoing is a summary of certain material terms and conditions of the Offering
and not a complete discussion.  Accordingly, the foregoing is
qualified in its entirety by reference to the full text of the Series A
Convertible Preferred Stock Purchase Agreement, the Registration Rights
Agreement, the Warrant, and the Preferred Shares Certificate of Designations
(collectively, the “Transaction
Documents”), each of which are annexed hereto.

    

    By way of
this letter agreement (this “Agreement”), the
Company is offering you the opportunity to exchange the Units purchased by you
in the Prior Offering for Preferred Shares and Warrants to be issued and sold by
the Company in the current Offering.

    

    Through
your execution of this Agreement, you acknowledge that and agree
to:

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

     

    1.1           Exchange
the Units purchased by you in the Prior Offering for Preferred Shares and
Warrants to be issued and sold by the Company in the current
Offering.

    

    1.2           Execute
each of the applicable Transaction Documents and deliver the same to the Company
or the Placement Agent prior to the closing of the Offering.

    

    1.3           Return
to the Company the (i) original stock certificate(s) representing the shares of
Common Stock; and (ii) original Prior Warrant, each of which was purchased by
you in the Prior Offering for cancellation by the Company prior to the closing
of the Offering.

     

    1.4           The
Company shall have no further obligations or liabilities in connection with the
transaction documents executed and delivered with respect to the Prior Offering,
including, without limitation, the Unit Purchase Agreement, the Registration
Rights Agreement and the Prior Warrant, each of which shall be terminated and
deemed null and void, ab initio,
in any and all respects.

    

    2.            
Additional agreement
of the Parties. Each of the parties who are signatories hereto
(collectively, the “Parties”) do hereby
agree, as follows:

    

    2.1           Waivers.  The
waiver of a breach of this agreement or the failure of any Party hereto to
exercise any right under this agreement shall in no way constitute waiver as to
future breach whether similar or dissimilar in nature or as to the exercise of
any further right under this agreement.

    

    2.2           Amendment.  This
agreement may be amended or modified only by an instrument of equal formality
signed by the Parties or the duly authorized representatives of the respective
Parties.

    

    2.3           Assignment.  This
agreement is not assignable except by operation of law or agreement of the
Parties.

    

    2.4           Notice.  Until
otherwise specified in writing, the mailing addresses and fax numbers of the
parties of this agreement shall be made to the addresses set forth in the
Transaction Documents.  Any notice or statement given under this
agreement shall be deemed to have been given if sent by registered mail
addressed to the other party at the address indicated above or at such other
address which shall have been furnished in writing to the
addressor.

    

    2.5           Governing
Law.  This agreement shall be construed, and the legal
relations between the Parties determined, in accordance with the laws of the
State of New York, thereby precluding any choice of law rules which may direct
the application of the laws of any other jurisdiction.

    

    2.6           Publicity.  No
publicity release or announcement concerning this agreement or the transactions
contemplated hereby shall be issued by either Party hereto at any time from the
signing hereof without advance approval in writing of the form and substance by
the other Party.

    

    2.7           Headings.  The
headings in this Agreement are for reference purposes only and shall not in any
way affect the meaning or interpretation of this Agreement.

    

    2.8           Severability of
Provisions.  The invalidity or unenforceability of any term,
phrase, clause, paragraph, restriction, covenant, agreement or provision of this
agreement shall in no way affect the validity or enforcement of any other
provision or any part thereof.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    2.9           Counterparts.  This
Agreement may be executed in any number of counterparts, each of which when so
executed, shall constitute an original copy hereof, but all of which together
shall consider but one and the same document.

    

    2.10          Binding
Effect.  This Agreement shall be binding upon the Parties
hereto and inure to the benefit of the Parties, their respective heirs,
administrators, executors, successors and assigns.

    

    [the
balance of this page intentionally left blank – signature pages
follow]

     

     

     

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    If the
foregoing accurately represents the substance of our mutual agreement and
understanding, please so indicate by executing and returning a copy of this
agreement in the space provided below.

    

    Very
truly yours,

    

    

    GULFSTREAM INTERNATIONAL GROUP,
INC.,

    a
Delaware corporation

    

    By:__________________________________

    David Hackett, Chief Executive
Officer

    

    

    ACKNOWLEDGED
AND AGREED:

    

    
      	
              PURCHASER

            
	 
      
	 
      
	 
      
	
              By:___________________________________                                                                   

              Name:

              Title:

            
	 
      
	
              Address
      of Purchaser

            
	 
      
	
              _____________________________________

              _____________________________________

              Email:
      ______________________

              Telephone:
      ___________________

               

               

            

    

    

    
      
         

      

      
        4

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