Exhibit 10.4
SECURITY
AGREEMENT
1.
THE SECURITY. The undersigned, Gulfstream International
Group, Inc., a Delaware corporation (the “Pledgor”),
hereby assigns and grants to Shelter Island Opportunity Fund , LLC
(the “Purchaser”) a security interest in all assets of
Pledgor, now owned or hereafter acquired, including the following
described property now owned or hereafter acquired by the Pledgor
(“Collateral”):
(a)
All accounts, contract rights, chattel
paper, instruments, deposit accounts, letter of credit rights,
payment intangibles and general intangibles, including all amounts
due to the Pledgor from a factor; and all returned or repossessed
goods which, on sale or lease, resulted in an account or chattel
paper.
(b)
All inventory, including all materials,
work in process and finished goods.
(c)
All machinery, furniture, fixtures and
other equipment of every type now owned or hereafter acquired by
the Pledgor.
(d)
All instruments, notes, chattel paper,
documents, certificates of deposit, securities and investment
property of every type, including, without limitation, the capital
stock of all Subsidiaries. The Collateral shall include all
liens, security agreements, leases and other contracts securing or
otherwise relating to the foregoing.
(e)
All general intangibles, including, but
not limited to, (i) all patents, and all unpatented or unpatentable
inventions; (ii) all trademarks, service marks, and trade names;
(iii) all copyrights and literary rights; (iv) all computer
software programs; (v) all mask works of semiconductor chip
products; (vi) all trade secrets, proprietary information, customer
lists, manufacturing, engineering and production plans, drawings,
specifications, processes and systems. The Collateral shall
include all good will connected with or symbolized by any of such
general intangibles; all contract rights, documents, applications,
licenses, materials and other matters related to such general
intangibles; all tangible property embodying or incorporating any
such general intangibles; and all chattel paper and instruments
relating to such general intangibles.
(f)
All negotiable and nonnegotiable
documents of title covering any Collateral.
(g)
All accessions, attachments and other
additions to the Collateral, and all tools, parts and equipment
used in connection with the Collateral.
(h)
All substitutes or replacements for any
Collateral, all cash or non-cash proceeds, product, rents and
profits of any Collateral, all income, benefits and property
receivable on account of the Collateral, all rights under
warranties, indemnities and insurance contracts, letters of credit,
guaranties or other supporting obligations covering the Collateral,
and any causes of action relating to the Collateral.
(i)
All books and records pertaining to any
Collateral, including but not limited to any computer-readable
memory and any computer hardware or software necessary to process
such memory (“Books and Records”).
Notwithstanding anything set forth herein
to the contrary, the term "Collateral" shall not include any
airframe that is being held for sale (including without limitation
any Beech or Embraer airframe), and any engine (including any Pratt
& Whitney model PT6A-67D engine), propeller, controller
or other parts installed on any such airframe or that is a part
thereof, and any airframe, engine, propeller or other parts that
are leased by Pledgor, or any technical records relating to any of
the foregoing, but the term “Collateral” shall include
all inventory.
2.
THE INDEBTEDNESS
. The Collateral secures and will
secure all Indebtedness. “Indebtedness” means all
debts, obligations or liabilities now or hereafter existing,
absolute or contingent of the Pledgor to the Purchaser, whether
voluntary or involuntary, whether due or not due, or whether
incurred directly or indirectly or acquired by the Purchaser by
assignment or otherwise, including without limitation, arising
under the Transaction Documents.
3.
PLEDGOR’S COVENANTS
. The Pledgor represents, covenants
and warrants that unless compliance is waived by the Purchaser in
writing:
(a)
The Pledgor will properly preserve the
Collateral; defend the Collateral against any adverse claims and
demands; and keep accurate Books and Records.
(b)
The Pledgor’s chief executive
office is located in the state specified on the signature page
hereof. In addition, the Pledgor is incorporated in or
organized under the laws of the state specified on such signature
page. The Pledgor shall give the Purchaser at least thirty
(30) days notice before changing its chief executive office or
state of incorporation or organization. The Pledgor will
notify the Purchaser in writing prior to any change in the location
of any Collateral, including the Books and Records.
(c)
The Pledgor will notify the Purchaser in
writing prior to any change in the Pledgor’s name, identity
or business structure.
(d)
The Pledgor has not granted any security
interest in any of the Collateral except to the Purchaser, and will
keep the Collateral free of all liens, claims, security interests
and encumbrances of any kind or nature except the security interest
of the Purchaser.
(e)
The Pledgor will promptly notify the
Purchaser in writing of any event which adversely affects the value
of the Collateral, the ability of the Pledgor or the Purchaser to
dispose of the Collateral, or the rights and remedies of the
Purchaser in relation thereto, including, but not limited to, the
levy of any legal process against any Collateral and the adoption
of any marketing order, arrangement or procedure affecting the
Collateral, whether governmental or otherwise.
(f)
The Pledgor shall pay all costs
reasonably necessary to preserve, defend, enforce and collect the
Collateral, including but not limited to taxes,
assessments,
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insurance premiums, repairs, rent,
storage costs and expenses of sales, and any costs necessary to
perfect the Purchaser’s security interest (collectively, the
“Collateral Costs”). Without waiving the
Pledgor’s default for failure to make any such payment, the
Purchaser at its option may pay any such Collateral Costs, and
discharge encumbrances on the Collateral, and such Collateral Costs
payments shall be a part of the Indebtedness and bear interest at
the rate set out in the Indebtedness. The Pledgor agrees to
reimburse the Purchaser within five (5) Business Days after written
request from the Purchaser for any Collateral Costs so incurred.
Pledgor shall (i) promptly (and in any event within five
(5) Business Days after written request from Purchaser) furnish the
Purchaser any information with respect to the Collateral reasonably
requested by the Lender, (ii) allow the Purchaser or its
representatives to inspect the Collateral, during business hours
upon reasonable notice and wherever located, and
(iii) promptly (and in any event within five (5) Business Days
after written request from Purchaser) furnish the Purchaser or its
representatives such information as the Purchaser may reasonably
request to identify the Collateral, at the time and in the form
reasonably requested by the Purchaser.
(g)
Until the Purchaser exercises its rights
to make collection following the occurrence of an Event of Default,
the Pledgor will diligently collect all Collateral.
(h)
If any Collateral is or becomes the
subject of any registration certificate, certificate of deposit or
negotiable document of title, including any warehouse receipt or
bill of lading, the Pledgor shall immediately deliver such document
to the Purchaser, together with any necessary
endorsements.
(i)
The Pledgor will not sell, lease, agree
to sell or lease, or otherwise dispose of any Collateral except
with the prior written consent of the Purchaser; provided, however,
that the Pledgor may sell inventory in the ordinary course of
business and may sell its Embraer regional jet aircraft pursuant to
agreement(s) entered into prior to the date of this
Agreement.
(j)
The Pledgor will maintain and keep in
force insurance covering the Collateral against fire and extended
coverage, to the extent that any Collateral is of a type which can
be so insured. Such insurance shall require losses to be paid
on a replacement cost basis, be issued by insurance companies
acceptable to the Purchaser and include a loss payable endorsement
in favor of the Purchaser in a form reasonably acceptable to the
Purchaser. Upon the request of the Purchaser, the Pledgor
will deliver to the Purchaser a certificate of insurance listing
all insurance in force.
(k)
The Pledgor will not attach any
Collateral to any real property or fixture in a manner which might
cause such Collateral to become a part thereof unless the Pledgor
first obtains the written consent of any owner, holder of any lien
on the real property or fixture, or other person having an interest
in such property to the removal by the Purchaser of the Collateral
from such real property or fixture. Such written consent
shall be in form and substance reasonably acceptable to the
Purchaser and shall provide that the Purchaser has no liability to
such owner, holder of any lien, or any other person other than the
payment of rent until the Purchaser removes such property and the
cost of repairing any damage caused by such removal.
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(l)
Exhibit A to this Agreement is a complete
list of all patents, trademark and service mark registrations,
copyright registrations, mask work registrations, and all
applications therefor, in which the Pledgor has any right, title,
or interest, throughout the world. To the extent required by
the Purchaser in its discretion, the Pledgor will promptly notify
the Purchaser of any acquisition (by adoption and use, purchase,
license or otherwise) of any patent, trademark or service mark
registration, copyright registration, mask work registration, and
applications therefor, and unregistered trademarks and service
marks and copyrights, throughout the world, which are granted or
filed or acquired after the date hereof or which are not listed on
the Exhibit. The Pledgor authorizes the Purchaser, without
notice to the Pledgor, to modify this Agreement by amending the
Exhibit to include any such Collateral.
(m)
The Pledgor will, at its expense,
diligently prosecute all patent, trademark or service mark or
copyright applications pending on or after the date hereof, will
maintain in effect all issued patents and will renew all trademark
and service mark registrations, including payment of any and all
maintenance and renewal fees relating thereto, except for such
patents
