Document:

gia_ex106.htm

     

    Exhibit 10.6

     

    REGISTRATION RIGHTS
AGREEMENT

    

    This
Registration Rights Agreement (this "Agreement") is made
and entered into as of February 26, 2010, by and among GULFSTREAM INTERNATIONAL GROUP,
INC. (the “Company”), and the purchaser set forth on the signatures pages
hereto  (the "Purchaser").

    

    Introduction

    

    This
Agreement is being entered into pursuant to a Purchase Agreement for Senior
Secured Notes and Warrants, dated as of February 26, 2010, among the Company and
the Purchasers signatory hereto (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(k).

    

    "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(l).

    

    "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 the shares of Common Stock of the Company that are issuable upon
conversion of the Notes.

    

    "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 the date it is filed with the
Commission.

    

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

    

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    "Holder" or "Holders" means the
collective reference to the Purchasers of Securities 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).

    

    “Notes” means the 8%
Senior Secured Notes issued to the Purchasers pursuant to the Purchase
Agreement.

    

    "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.

    

    "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.

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    “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 and to Taglich Brothers, Inc. (“Taglich”) as
placement agent to the Company.

    

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

    

    2.            
Registration.

     

    (a)           Piggy-Back
Registrations.  If at any time, 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.  

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    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).

     

    3.            
Registration
Procedures.

    

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

     

    (a)           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.

     

    (b)           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.

     

    (c)           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.

    

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

       

      (d)             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.

       

      (e)             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.

       

      (f) 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.

       

      (g)           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.

       

      (h)           Upon
the occurrence of any event contemplated by Section 3(a)(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.

       

      (i)           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.

       

      (j)           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.

    

    

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

       

      (k)           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.

       

      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(a)(ii), 3(a)(iii), 3(a)(iv), 3(a)(v), 3(a)(vi) or 3(l),
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(h), 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.

       

      (l)           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.

    

    

    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.

    

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    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.

    

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

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

    

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

    

    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.  

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    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.

    

        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.

    

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

       

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

       

      (c)           Amendments and
Waivers.  The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the same shall be in writing and signed by the Company and the Holders
of  51% the Registrable Securities.

       

      (d)           Notices.  Any
notice, demand, request, waiver or other communication required or permitted to
be given hereunder shall be in writing and shall be effective (a) upon hand
delivery, telecopy or facsimile at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur.  The
addresses for such communications shall be as 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.

       

      (e)           Successors and
Assigns.  This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted assigns and shall
inure to the benefit of 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.

       

      (f)           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 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.

       

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

    

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

       

      (h)           Governing Law;
Jurisdiction.  This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to any of the conflicts of law principles which would result in
the application of the substantive law of another jurisdiction.  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.

       

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

       

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

       

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

       

      (l)           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.

    

    

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    (m)           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

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

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

     

    

    
      
        	 	GULFSTREAM INTERNATIONAL GROUP,
      INC.
	 	 	 
	
                Date

              	
                By:
      

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

      

     

    
      Address:________________________________

                 

        _________________________________

       

      Tel No:
________________________________

       

      Fax
No.:________________________________

       

      Email:_________________________________

       

    

    

    [Signature
Page to Registration Rights Agreement]

     

    
      
        
        

      

      
        13gia_ex107.htm

     

    Exhibit
10.7

     

    
 

    FORBEARANCE
AGREEMENT AND

    AMENDMENT
TO DEBENTURE

     

    This
Forbearance Agreement and Amendment to Debenture (the “Agreement”) is entered into
this 26th day
of February, 2010 by and between Gulfstream International Group, Inc., a
Delaware corporation (“Company”) and Shelter Island
Opportunity Fund, LLC (“Holder”).

     

    W I T N E
S S E T H:

     

    WHEREAS,
Company and Holder are parties to a certain Securities Purchase Agreement dated
as of August 31, 2008, (as amended, the “Securities Purchase
Agreement”), relating to the sale and issue of a $5,100,000 Secured
Original Issue Discount Debenture dated as of August 31, 2008 (the “Debenture”) and certain
related warrants (the “Original
Warrants”) to purchase Common Stock, par value $0.01 per share (the
“Common Stock”), by
Company to Holder, and the purchase by Holder of such Debenture from Company
(capitalized terms used but not specifically defined herein shall have the
meanings provided for such terms in the Securities Purchase Agreement);
and

     

    WHEREAS, as at the date of this Agreement the outstanding unpaid Face
Amount of the Debenture is $3,659,000; and

     

    WHEREAS,
the following Events of Default have occurred and are continuing (collectively,
the “Existing Events of
Default”):

     

    
      	
              (a)  

            	
              Company
      failed in the payment of interest for December 31, 2009 and January 31,
      2010, as required by Section 5(a)(i) of the Debenture (the “Payment Default”);
      and

            

    

     

    
      	
              (b)  

            	
              Company
      failed to achieve minimum quarterly EBITDA of not less than $350,000 for
      the fiscal quarter ending December 31, 2009, as required by Section 4.16
      of the Securities Purchase Agreement (the “Covenant
      Default”)

            

    

     

    WHEREAS,
Company has requested that Holder (a) forbear from exercising its rights and
remedies under the Transaction Documents as a result of the Existing Events of
Default and (b) amend certain terms of the Debenture as set forth
herein;

     

    WHEREAS,
Holder has reviewed this request and, in an effort to continue to work with
Company, has agreed to forbear from exercising certain of its rights and
remedies as set forth herein provided the Securities Purchase Agreement is
amended as provided herein; and

     

    WHEREAS,
as an accommodation to Company and to enable it to obtain an additional
$1,000,000 of debt financing, Holder has agreed to subordinate (to the extent of
such additional debt financing and accrued interest thereon) its lien and
security interest in and to the Accounts of Company and its subsidiaries and the
proceeds thereof, pursuant to the terms of an Intercreditor and Subordination
Agreement, dated of even date, among Holder, the Company and Taglich Brothers,
Inc., as collateral agent for certain Investors (the “Intercreditor
Agreement”).

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    NOW,
THEREFORE, for and in consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:

     

    1. Acknowledgments of
Company.  Company acknowledges and agrees that:

     

    (a) The
recital of facts set forth in this Agreement is true and correct in all material
respects.

     

    (b) Except as
set forth in the Intercreditor Agreement, Holder has a valid and perfected first
priority security interest in and to the Collateral (as defined in the Security
Agreements).

     

    (c) The
Existing Events of Default have occurred and are continuing.

     

    (d) Except as
expressly provided herein, Holder’s agreement to forbear as provided in this
Agreement shall not invalidate, impair, negate, or otherwise affect Holder’s
ability to exercise its rights and remedies under the Transaction Documents and
otherwise.

     

    2. Forbearance.

     

    (a) In
consideration for, and subject to, compliance by Company with the terms and
conditions of this Agreement, Holder hereby agrees to forbear from exercising
its rights and remedies under the Transaction Documents and applicable law as a
result of the occurrence of the Existing Events of Default until the occurrence
of a Termination Event (as defined below).  This forbearance is given
as a one time accommodation by Holder to Company and nothing contained herein
shall require Holder to waive any other Event of Default or forbear from
exercising any of its rights or remedies with respect to the occurrence of any
other Event of Default existing on the effective date of this Agreement or
occurring after the effective date of this Agreement.

     

    (b) For
purposes of this Agreement, a “Termination Event” shall mean
the earlier to occur of any one or more of the following:

     

    (1) the
failure of Company to comply with the terms, covenants, agreements and
conditions of this Agreement; or

     

    (2) if any
representation or warranty made herein shall be incorrect in any material
respect; or

     

    (3) the
occurrence of any Event of Default under the Debenture, the Securities Purchase
Agreement or the Promissory Note dated as of the date hereof executed by Company
in favor of Holder in the amount of $250,000 (the “Note”), other than the
Existing Events of Default; or

     

    (4) Company
shall fail to close and fund by March 22, 2010 a transaction which results in
the infusion of a tranche of new debt or equity financing for the Company in an
amount of not less than $1,499,999 (the “Additional Financing”), upon
terms and conditions acceptable to the Company; provided,
however, that if such Additional Financing shall involve the issuance of
any additional debt securities by Company, the terms thereof shall be reasonably
acceptable to the Holder.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    (c) In the
event that a Termination Event shall not have occurred and the Company shall
have obtained the Additional Financing within the period specified above,
simultaneous with or immediately following receipt of such Additional Financing
(i) the Company shall (to the extent not previously paid), pay to Holder all
amounts constituting the Payment Default and other interest owed through
February 28, 2010 in accordance with the provisions of Section 5 below; and
(ii) Holder shall waive all prior Covenant Defaults.

     

    (d) Upon the
occurrence of a Termination Event, Holder's agreement to forbear from exercising
its rights and remedies under the Transaction Documents and applicable law shall
automatically terminate, with or without notice to Company.

     

    (e) Except as
set forth in Section 2(c), nothing in this Section 2 shall be deemed a waiver by
Holder of the Existing Events of Default or of future compliance by Company with
the covenants set forth above or otherwise set forth in the Transaction
Documents.

     

    (f) This
Agreement is written without prejudice as to the rights of Holder to pursue any
and all remedies available to Holder pursuant to the Loan Documents, at law and
in equity, upon the occurrence of a Termination Event.  Except as
provided herein, this Agreement shall not constitute a waiver or modification of
any of Holder's rights and remedies, the Existing Events of Default, any other
Defaults or Events of Default under the Loan Documents, or any of the terms,
conditions, warranties, representations or covenants contained in the Loan
Documents.

     

    3.           Conditions
Precedent.  Holder’s agreement to forbear from exercising its
rights and remedies pursuant to this Agreement is conditioned upon:

     

    (a) execution
and delivery by Company and Holder of this Agreement;

     

    (b) execution
and delivery by Company of the Note;

     

    (c) execution
and delivery by Company and Holder of an amendment to the Put Option
Agreement;

     

    (d) execution
and delivery by each Guarantor of the Omnibus Amendment to the Guaranty
Agreements;

     

    (e) in
accordance with Section 4(b) of the Original Warrant, Company shall have divided
the Original Warrant into (a) a warrant in the form of the Original Warrant
initially exercisable into 70,000 shares of Common Stock (the “Put Warrant”) and (b) a
warrant in the form of the Original Warrant (the “Remaining Warrant”, and
together with the Put Warrant, the "Divided Warrants") such that
the aggregate number of shares of Common Stock of Company that are initially
exercisable under the Divided Warrants (inclusive of the 70,000 Shares of Common
Stock initially issuable under the Put Warrant) shall equal, in the aggregate,
fifteen percent (15%) of the fully-diluted shares of Company Common Stock issued
and outstanding immediately following consummation of the transactions
contemplated hereby and under the Intercreditor Agreement, after giving
pro-forma effect to the conversion into Common Stock of all Company convertible
securities and the exercise of all Company options and warrants, including
warrants issued to the Taglich Brothers Inc. investors (the “Company Fully-Diluted
Stock”).  The Put Warrant and the Remaining Warrant, consisting
the Divided Warrants, to be issued to Holder on the date hereof in exchange for
the Original Warrant are being issued in reliance on the exemption from
registration provided by Rule 3(a)(9) of the Securities Act;

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    (f) execution
and delivery by each Guarantor of the Acknowledgement and Agreement of the
Guarantors attached hereto;

     

    (g) execution
and delivery by the Subordinated Creditor of the Acknowledgement and Agreement
of the Subordinated Creditor attached hereto;

     

    (h) execution
and delivery by Company and Holder of a side letter agreement with respect to an
amendment of the Securities Purchase Agreement;

     

    (i) receipt
by Company of $1,000,000 of new debt from Taglich Brothers, Inc. and/or
investors introduced by Taglich Brothers, Inc. in form and substance reasonably
acceptable to the Holder and the receipt by the Holder of the Intercreditor
Agreement in form and substance reasonably satisfactory to Holder;

     

    (j) payment
of Holder’s legal fees and expenses in connection with this Agreement;
and

     

    (k) such
other matters as Holder may require.

     

    4.           Amendments to
Debenture.  As of the date of this Agreement, the Debenture is
amended as follows:

     

    (a) Section
2(b) of the Debenture is hereby amended and restated in its entirety to read as
follows:

     

    “(b) Payments of Principal and
Interest.  Company shall pay Holder interest on the outstanding
unpaid Face Value monthly in cash, commencing March 31, 2010.  Company
shall pay Holder the unpaid Face Value in installments monthly in accordance
with Schedule 1
hereto, commencing April 30, 2010 and on the last Trading Day of each month
thereafter until the Maturity Date.  The unpaid Face Value, and all
accrued interest thereon, will be paid in full on the Maturity
Date.”

     

    (b) The
first sentence of Section 2(e) of the Debenture is amended and restated in its
entirety to read as follows:

     

    “(e) Prepayments.  Subject
at all time to the provisions of the Intercreditor Agreement, the Company may
prepay all or any portion of the Face Value upon at least two Trading Days’
notice to Holder by paying the Face Value desired to be prepaid together with a
payment equal to 5.00% of the Face Value being prepaid, provided, however, if such
prepayment is made in 2011 there shall be no prepayment penalty
applicable.”

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    (c) Schedule 1 of the
Debenture is hereby amended and restated in its entirety to read as
follows:

     

    
      	
              Payment

            	
              Date

            	
              Principal

            	
              Balance

            
	
              1

            	
              4/30/2010

            	
              $25,000

            	
              $3,634,000

            
	
              2

            	
              5/31/2010

            	
              $25,000

            	
              $3,609,000

            
	
              3

            	
              6/30/2010

            	
              $75,000

            	
              $3,534,000

            
	
              4

            	
              7/31/2010

            	
              $75,000

            	
              $3,459,000

            
	
              5

            	
              8/31/2010

            	
              $75,000

            	
              $3,384,000

            
	
              6

            	
              9/30/2010

            	
              $75,000

            	
              $3,309,000

            
	
              7

            	
              10/31/2010

            	
              $75,000

            	
              $3,234,000

            
	
              8

            	
              11/30/2010

            	
              $75,000

            	
              $3,159,000

            
	
              9

            	
              12/31/2010

            	
              $75,000

            	
              $3,084,000

            
	
              10

            	
              1/31/2011

            	
              $140,000

            	
              $2,944,000

            
	
              11

            	
              2/28/2011

            	
              $140,000

            	
              $2,804,000

            
	
              12

            	
              3/31/2011

            	
              $250,000

            	
              $2,554,000

            
	
              13

            	
              4/30/2011

            	
              $250,000

            	
              $2,304,000

            
	
              14

            	
              5/31/2011

            	
              $250,000

            	
              $2,054,000

            
	
              15

            	
              6/31/2011

            	
              $250,000

            	
              $1,804,000

            
	
              16

            	
              7/31/2011

            	
              $250,000

            	
              $1,554,000

            
	
              17

            	
              8/31/2011

            	
              1,554,000

            	
              $0

            

    

    

     

    5.           Past Due Interest
Payments.   In addition to other payments required
hereunder and under the Transaction Documents, Company agrees to pay interest
owed for December 31, 2009, January 31, 2010 and February 28, 2010 in five equal
monthly installments of $20,124.00, commencing April 30, 2010 and continuing on
the last Trading Day of each month thereafter until August 31,
2010.

     

    6.           Sums Secured;
Estoppel.  Company acknowledges and reaffirms that its
obligations to Holder as set forth in and evidenced by the Transaction Documents
are due and owing without any defenses, set-offs, recoupments, claims or
counterclaims of any kind as of the date hereof.  To the extent that
any defenses, set-offs, recoupments, claims or counterclaims may exist as of the
date hereof, Company waives and releases Holder from the same.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    7.           Waiver and Release of Claims
and Defenses.  Company hereby waives and releases all claims
and demands of any nature whatsoever that they now have or may have against
Holder, whether arising under the Transaction Documents or by any acts or
omissions of Holder, or any of its directors, officers, employees, affiliates,
attorneys or agents, or otherwise, and whether known or unknown, existing as of
the date of the execution of this Agreement, and further waive and release any
and all defenses of any nature whatsoever to the payment of the obligations or
the performance of their obligations under Transactions Documents.

     

    8.           Reaffirmation of Transaction
Documents.  Company hereby agrees with, reaffirms and
acknowledges its representations and warranties contained in the Transaction
Documents.  Furthermore, Company represents that its representations
and warranties contained in the Transaction Documents continue to be true and in
full force and effect.  This agreement, reaffirmation and
acknowledgment is given to Holder by Company without defenses, claims or
counterclaims of any kind.  To the extent that any such defenses,
claims or counterclaims against Holder may exist, Company waives and releases
Holder from same.  Company and Holder hereby acknowledges that the
Divided Warrants (as defined above) constitute “Warrants” for all purposes under
the Transactions Documents.

     

    9.           Ratification and
Reaffirmation of Transaction Documents.  Company ratifies and
reaffirms all terms, covenants, conditions and agreements contained in the
Transaction Documents.

     

    10.        Other
Warrants. Holder acknowledges that Company has issued warrants to
the Taglich Brother investors in connection with obtaining the $1,000,000 of
additional debt financing (the “Other
Warrants”).  In the event and to the extent that any of the
anti-dilution provisions of the Other Warrants (or any other provisions
adjusting the number of shares of Common Stock issuable upon exercise of the
Other Warrants set forth therein or in any other agreement related thereto other
than any limitations on exercise set forth in the Other Warrants or in any other
agreement related thereto) shall be more beneficial to the holders thereof than
the terms and/or conditions that are currently contained in the Divided
Warrants, then and in such event, without any further action by the Holder, the
Divided Warrants shall be automatically amended and modified in an economically
and legally equivalent manner such that the Holder shall receive the benefit of
such more beneficial terms and/or conditions (as the case may be) set forth
in (or related to) the Other Warrants, provided that upon written
notice to Company at any time the Holder may elect not to accept the benefit of
any such amended or modified term or condition, in which event the term or
condition contained in the Divided Warrants shall apply to the Holder as it was
in effect immediately prior to such amendment or modification as if such
amendment or modification never occurred with respect to the
Holder.

     

    11.        Holding
Period.  For the purposes of Rule 144, Company acknowledges
that the holding period of the shares of Common Stock issuable upon exercise of
the Divided Warrants (if acquired using Cashless Exercise Rights (as defined in
the Divided Warrants)) may be tacked onto the holding period of the Original
Warrant, and Company agrees not to take a position contrary to this Section
11.  Company agrees to take all actions, including, without
limitation, the issuance by its legal counsel of any necessary legal opinions,
necessary to issue shares of Common Stock issuable upon exercise of the Divided
Warrants  (if acquired using Cashless Exercise Rights (as defined in
the Divided Warrants)) that are freely tradable without restriction and not
containing any restrictive legend without the need for any action by
Holder.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    12.         Public
Information.  On or before 8:30 a.m., New York time, on the
first Business Day following the date of this Agreement, Company shall file a
Current Report on Form 8-K describing the terms of the transactions contemplated
by this Agreement and attaching this Agreement and the forms of any material
agreements contemplated by this Agreement as exhibits to such filing (including
all attachments, the “8-K
Filing”).  From and after the filing of the 8-K, Holder shall
not be in possession of any material, nonpublic information received from
Company or any of its Subsidiaries or any of its respective officers, directors,
employees or agents based upon information communicated to Holder (or its
officers, directors, employees or agents) on or prior to the time of the
issuance of the 8-K Filing.

     

    13.         No Preferential
Treatment.   Company has not entered into this Agreement
to provide any preferential treatment to Holder or any other
creditor.  Company does not intend to file for protection or seek
relief under the United States Bankruptcy Code or any similar federal or state
law providing for the relief of debtors.

     

    14.         WAIVER OF JURY
TRIAL.  EACH OF THE PARTIES HERETO WAIVE THE RIGHT TO A TRIAL
BY JURY, AS TO ANY ACTION WHICH MAY ARISE AS A RESULT OF THE LOAN DOCUMENTS,
THIS AGREEMENT OR ANY DOCUMENT EXECUTED IN CONNECTION HEREWITH.

     

    15.         Legal
Representation.  Each of the parties hereto acknowledge that
they have been represented by independent legal counsel in connection with the
execution of this Agreement, that they are fully aware of the terms and
conditions contained herein, and that they have entered into and executed the
within Agreement as a voluntary action and without coercion or duress of any
kind.

     

    16.         Partial Invalidity; No
Repudiation. If any of the provisions of this Agreement shall contravene
or be held invalid under the laws of any jurisdiction, the Agreement shall be
construed as if not containing such provisions and the rights, remedies,
warranties, representations, covenants, and provisions hereof shall be construed
and enforced accordingly in such jurisdiction and shall not in any manner affect
such provision in any other jurisdiction, or any other provisions of this
Agreement in any jurisdiction.

     

    17.         Binding
Effect.  This Agreement is binding upon the parties hereto and
their respective heirs, administrators, executors, officers, directors,
representatives and agents.

     

    18.         Governing
Law.  This Agreement shall be governed by the laws of the State
of New York.

     

    19.         Counterparts.  This
Agreement and/or any documentation contemplated or required in connection
herewith may be executed in any number of counterparts, each of which shall be
deemed an original and all of which shall be considered one and the same
document.  Delivery of an executed counterpart of a signature page of
this document by facsimile shall be effective as delivery of a manually executed
counterpart of this document.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

       

    

    IN
WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby, do
hereby execute this Agreement the date and year first above
written.

     

     

    
      
        	 	GULFSTREAM INTERNATIONAL GROUP,
      INC., Company	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ Thomas A.
    McFall	 
	 	 	Name: Thomas
      A. McFall	 
	 	 	Title: Chairman	 
	 	 	 	 

      

    

     

    
      
        	 	SHELTER ISLAND OPPORTUNITY
      FUND, LLC, Holder	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ Michael Coiley 	 
	 	 	Name: Michael
      Coiley	 
	 	 	Title: Authorized
      Signor	 
	 	 	 	 

      

    

     

    
    

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    ACKNOWLEDGMENT
AND AGREEMENT OF GUARANTORS

     

    The
undersigned, each a guarantor of the indebtedness of Gulfstream International
Group, Inc., a Delaware corporation (“Company”) to Shelter Island
Opportunity Fund, LLC (“Holder”), pursuant to the
separate Guaranty of each dated as of August 21, 2008 (each, as amended from
time to time, a “Guaranty”), hereby (i)
acknowledges receipt of the foregoing Forbearance Agreement and Amendment to
Securities Purchase Agreement and Debenture (the “Agreement”);
(ii) consents to the terms and execution thereof; (iii) reaffirms all
obligations to Holder pursuant to the terms of the Guaranty; and
(iv) acknowledges that Holder may amend, restate, extend, renew or
otherwise modify the Transaction Documents and any indebtedness or agreement of
Company, or enter into any agreement or extend additional or other credit
accommodations, without notifying or obtaining the consent of the undersigned
and without impairing the liability of the undersigned under the Guaranty for
all of Company’s present and future indebtedness to Holder.

     

     

    
      	 	
              GULFSTREAM
      INTERNATIONAL AIRLINES, INC.

            	 
	 	 	 	 
	
               

            	
              By:
      

            	/s/ David F.
    Hackett	 
	 	 	Name: David
      F. Hackett	 
	 	 	Title: President	 
	 	 	 	 

    

    

    
      	 	GULFSTREAM
      CONNECTION, INC.	 
	 	 	 	 
	
               

            	
              By:
      

            	/s/ David F.
    Hackett	 
	 	 	Name: David
      F. Hackett	 
	 	 	Title: President	 
	 	 	 	 

    

     

    
      	 	GULFSTREAM
      TRAINING ACADEMY, INC.	 
	 	 	 	 
	
               

            	
              By:
      

            	/s/ Thomas P.
    Cooper	 
	 	 	Name:
      Thomas P. Cooper	 
	 	 	Title: Corporate
      Secretary	 
	 	 	 	 

    

     

    
      	 	 	
              GIA
      HOLDINGS CORP., INC.

            	 
	 	 	 	 	 	 
	 	
               

            	 	
              By:
      

            	/s/ David F.
    Hackett	 
	 	
               

            	 	 	Name: David
      F. Hackett	 
	 	
               

            	 	 	Title: President	 
	 	 	 	 	 	 

    

     

    

    
      
        
           

        

        
          9

          
            

          

        

        
           

        

      

    

     

    ACKNOWLEDGMENT
AND AGREEMENT OF SUBORDINATED CREDITOR

    

    The
undersigned, the subordinated creditor of the indebtedness of Gulfstream
International Group, Inc., a Delaware corporation (“Company”) to Shelter Island
Opportunity Fund, LLC (“Holder”), pursuant to the
separate Subordination Agreement (as amended from time to time, the “Subordination Agreement”),
hereby (i) acknowledges receipt of the foregoing Forbearance Agreement and
Amendment to Securities Purchase Agreement and Debenture (the “Agreement”);
(ii) consents to the terms and execution thereof; (iii) reaffirms all
obligations to Holder pursuant to the terms of the Subordination Agreement; and
(iv) acknowledges that Holder may amend, restate, extend, renew or
otherwise modify the Transaction Documents and any indebtedness or agreement of
Company, or enter into any agreement or extend additional or other credit
accommodations, without notifying or obtaining the consent of the undersigned
and without impairing the liability of the undersigned under the Subordination
Agreement.

     

     

    
      
        	 	GULFSTREAM
      FUNDING, LLC	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ Robert C.
      Schroeder	 
	 	 	Name: Robert
      C. Schroeder	 
	 	 	Title:
      Managing Member	 
	 	 	 	 

      

    

    
      
         

      

      
        10

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00169-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00169-of-00352.parquet"}]]