EXHIBIT 10.7

 
 WAIVER, CONSENT AND INTERCREDITOR AGREEMENT
 
THIS WAIVER, CONSENT, AND INTERCREDITOR AGREEMENT is entered into as of the 31st
day of August, 2010 (this “Agreement”) by and among TAGLICH BROTHERS, INC., a
New York corporation ("Taglich") with an address of 275 Madison Avenue, Suite
1618, New York, NY 10016, as collateral agent on its own behalf and for the
Purchasers listed on Exhibit A to the Taglich Debt Documents (as hereinafter
defined) (together with Taglich, individually and collectively, the “Taglich
Note Purchasers”); SHELTER ISLAND OPPORTUNITY FUND, LLC, a Delaware limited
liability company (“Shelter Island”) with a place of business, c/o RAM Capital
Resources, LLC, at 535 Fifth Avenue, 25th floor, New York, NY 10017; SAH-VUL
STRATEGIC PARTNERS I, LLC, a Florida limited liability company (“SVSP”) with an
address of 1690 S. Congress Avenue, Suite 200, Delray Beach, FL 33445;
GULFSTREAM INTERNATIONAL GROUP, INC. a  Delaware corporation (“Gulfstream” or
the “Debtor”) with a place of business at 3201 Griffin Road, Ft. Lauderdale,
Florida 33312; and the Gulfstream Subsidiaries signatory hereto below.
 
RECITALS
 
WHEREAS, Gulfstream is currently indebted to Shelter Island in the aggregate
principal amount of $3,634,000 together with accrued and unpaid interest thereon
as of the date hereof in the amount of $11,731.27 (the “Shelter Island Debt”)
pursuant to a Securities Purchase Agreement dated August 31, 2008, between
Shelter Island and Gulfstream (the “Shelter Island Securities Purchase
Agreement”), and that certain $5,100,000 Secured Original Issue Discount
Debenture entered into on September 19, 2008, and effective on August 31, 2008,
as amended by that Forbearance Agreement and Amendment to Debenture dated
February 26, 2010  (together with all other documents executed in connection
with the Shelter Island Debt and in effect on the date hereof, collectively, the
“Shelter Island Debt Documents”); and
 
WHEREAS, the obligations of Gulfstream under the Shelter Island Debt Documents
are secured by a lien and security interest (the “Shelter Island Lien”) in and
to all of the assets and properties of Gulfstream and its Subsidiaries and, all
stock in the Subsidiaries, whether now owned or hereafter acquired and any and
all additions and accessions to any of the foregoing, and any and all
replacements, products, proceeds (including insurance proceeds) and
substitutions of any of the foregoing wherever located (collectively, the
“Collateral”), subject and subordinate to the first priority lien and security
interest in favor of SVSP in the Cuba Business Collateral in accordance with the
terms hereof and the first priority lien and security interest in favor of
Taglich in the Accounts (other than Accounts arising from the Cuba Business
Collateral) ; and
 
WHEREAS, Gulfstream is currently indebted to the Taglich Note Purchasers in the
aggregate principal amount of $1,050,000, together with accrued and unpaid
interest thereon as of the date hereof in the amount of $67,148.92 (the "Taglich
Debt") pursuant to a Purchase Agreement dated as of February 26, 2010 among
Gulfstream, Taglich and the Taglich Note Purchasers (the “Taglich Purchase
Agreement”), which Taglich Debt is evidenced by Gulfstream’s notes in the
aggregate principal amount of $1,050,000 in favor of the Taglich Note
Purchasers, and which are guaranteed by each Subsidiary of Gulfstream  (together
with all other documents executed in connection with the Taglich Debt and in
effect on the date hereof, collectively, the “Taglich Debt Documents”); and
 
WHEREAS, the obligations of Gulfstream under the Taglich Debt Documents are
secured by a lien and security interest (the “Taglich Lien”) in the “Accounts”
(as that term is defined in the Security Agreement dated as of February 26, 2010
among Gulfstream, Taglich, as agent for the Taglich Note Purchasers, and certain
subsidiaries of Gulfstream) annexed as an exhibit to the Taglich Purchase
Agreement) of Gulfstream and its Subsidiaries, whether now owned or hereafter
acquired and any and all additions and accessions to any of the foregoing, and
any and all replacements, proceeds (including credit insurance proceeds of such
Accounts) and substitutions of any of the foregoing wherever located
(collectively, the “Taglich Collateral”) subject and subordinate to the first
priority lien and security interest in favor of SVSP in the Cuba Business
Collateral in accordance with the terms hereof; and
 
WHEREAS, Gulfstream (a) is currently indebted to SVSP for $500,000 and may be
indebted to SVSP for up to $1,500,000 pursuant to a $1,500,000 Secured
Convertible Promissory Note dated as of August 31, 2010 (the "Initial SVSP
Note") evidencing a loan or loans from SVSP to Gulfstream in the aggregate
principal amount of up to $1,500,000, and (b) may be further indebted to SVSP
for up to an additional $1,000,000 upon exercise of an option (the “SVSP
Option”) to purchase at any time on or before November 30, 2010, up to an
additional $1,000,000 secured convertible promissory note (the “Additional SVSP
Note” and with the Initial SVSP Note, the “SVSP Notes”); which SVSP Notes is and
will be guaranteed by each Subsidiary of Gulfstream (together with the Loan
Documents (as defined in the SVSP Notes) and all other documents executed in
connection with the SVSP Debt , collectively, the “SVSP Debt Documents”); and
 
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WHEREAS, the obligations of Gulfstream under the SVSP Debt Documents are secured
by: (i) a first priority perfected lien and security interest in favor of SVSP
in the Cuba Business Collateral, including without limitation the Assigned
Agreement (defined below), (ii) subject and subordinate to the priority lien and
security interest in favor of Shelter Island, the Collateral (other than the
Cuba Business Collateral) in accordance with the terms hereof, and (iii) subject
and subordinate to the first priority lien and security interest in favor of
Taglich and the second priority lien and security interest in favor of Shelter
Island, in the Accounts (other than Accounts arising from the Cuba Business
Collateral), in accordance with the terms hereof; and
 
WHEREAS, SVSP would not agree to make the loans evidenced by the SVSP Notes
unless: (i) the Existing Lenders agree to subordinate their respective Shelter
Island Lien and Taglich Lien to the Priority SVSP Lien, and (ii) the Existing
Lenders waive any and all financial covenants contained in the Existing Debt
Documents for one year from the date of this Agreement, including with respect
to Shelter Island, but not limited to, those covenants contained in Section 4.16
of the Shelter Island Securities Purchase Agreement; and
 
WHEREAS, Shelter Island and Taglich would not agree to permit the Debtor to
grant to SVSP the security interests granted under the SVSP Debt Documents
unless SVSP enters into this Agreement with such holders of the Existing
Debt(s).
 
TERMS
 
NOW THEREFORE, the parties hereto agree as follows:
 
1.             Definitions.  As used herein, the following terms shall be
defined as follows:
 
“Assigned Agreement” means the Services Agreement, dated August 3, 2003,
between Gulfstream International Airlines, Inc., a Florida corporation
("GIA"), and Gulfstream Air Charter, Inc., a Delaware corporation (successor to
Gulfstream Air Charter, Inc., a Florida corporation), as amended on March 14,
2006, and as may be further amended from time to time, and all rights thereunder
and all proceeds thereof, including without limitation: (a) any revenues or
other benefits arising thereunder, and all monies, documents or instruments, or
other property at any time and from time to time payable, receivable, or
otherwise distributable in connection therewith, including, without limitation,
proceeds of any insurance, indemnity, warranty or guaranty with respect thereto;
(b) all rights, claims, powers, privileges, and remedies thereunder; and (c) all
power and authority to enforce, compel performance, perform, collect, receive,
and receipt for all or any of the foregoing; as more specifically described in
the Collateral Assignment.
 
 
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“Autec Agreements” means the collective reference to (a) the subcontract
agreement (number 05-C-1277-03) dated as of April 1, 2006, between GIA and
Computer Sciences Corporation, and (b) the Used Beechcraft 1900D Airliner
Operating Lease Agreement dated June 8, 2006, between CSC Applied Technologies
LLC, as lessor, and GIA, as lessee.
 
"Collateral Assignment" means the Security Agreement and Collateral Assignment
of Contract from GIA in favor of SVSP dated August 31, 2010.
 
"Cuba Business Collateral" means the Assigned Agreement and all other rights,
revenues, and assets directly or indirectly arising or related to aircraft
travel between the United States and Cuba, and all proceeds thereof, as more
specifically described in the Collateral Assignment, including, without
limitation, special collateral account number: _________; account name:
_________; with _________ (together with all amendments, modifications and
replacements thereof, the “Collateral Account”), which Collateral Account may be
amended, modified or replaced at the sole discretion of SVSP.
 
"Debt" means any or all of the Existing Debt and the SVSP Debt.
 
"Debt Documents" means the Shelter Island Debt Documents, the Taglich Debt
Documents, and the SVSP Debt Documents.
 
"Default" means an Existing Debt Default and/or an SVSP Debt Default.
 
“Enforcement Action” means with respect to Gulfstream or any Subsidiary: (a) to
take from or for the account of Gulfstream or any Subsidiary, by set-off or in
any other manner, except acceptance of regularly scheduled payments in
accordance with the terms of any of applicable debt documents, the whole or any
part of any moneys which may now or hereafter be owing by Gulfstream or any
Subsidiary, (b) to sue for payment of, or to initiate or participate with others
in any suit, action or proceeding against Gulfstream or any Subsidiary to (i)
enforce payment of or to collect the whole or any part of any debt, or (ii)
commence judicial enforcement of any of the rights and remedies regarding any
debt, (c) to accelerate any debt, (d) to take any action under the provisions of
any state or federal law, including, without limitation, the Uniform Commercial
Code, or under any contract or agreement, to enforce, foreclose upon, take
possession of or sell any property or assets of Gulfstream or any such
co-obligor or guarantor, (e) to file or join in filing any involuntary petition
in bankruptcy, or otherwise initiate or participate in similar insolvency
reorganization, or moratorium proceedings for the benefit of creditors; (g) to
repossess or sell, through judicial proceedings or otherwise, any of the
Collateral; or (h) initiate Proceedings to enforce the existing guaranties.
 
"Equity Rights" means all rights of SVSP under the SVSP Notes with respect to
equity in Gulfstream, including without limitation the right to convert the SVSP
Debt to equity as provided in the SVSP Notes, and all other rights and remedies
of SVSP under the SVSP Notes relating to SVSP's potential equity interest in
Gulfstream.
 
“Existing Debt(s)” means the Shelter Island Debt and the Taglich Debt.

“Existing Debt Default” means a default in the payment of any of the Existing
Debt, or a default in the performance of any term, covenant or condition
contained in any of the Existing Debt Documents, or any other occurrence
permitting a Existing Lender to accelerate the payment of all or any portion of
any of the Existing Debt, and shall also include any SVSP Debt Default.
 
 
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“Existing Debt Documents” means the Shelter Island Debt Documents and the
Taglich Debt Documents.
 
“Existing Lender(s)” means Taglich, the Taglich Note Purchasers, and Shelter
Island.
 
“Existing Lien(s)” means the Shelter Island Lien and the Taglich Lien. 
 
"Lender(s)" means the individual or collective reference, as applicable, to
Shelter Island, Taglich and/or SVSP.
 
"Liens" means the Existing Liens and the SVSP Liens.
 
"Priority Shelter Island Lien" means a first priority perfected lien and
security interest in favor of Shelter Island in all Collateral (other than the
Accounts and the Cuba Business Collateral, as to which Shelter Island's liens
and security interests shall have the respective priorities set forth herein).

"Priority SVSP Lien" means a first priority perfected lien and security interest
in favor of SVSP in the Cuba Business Collateral, including without limitation,
the Assigned Agreement to secure up to $2.5 million of SVSP Notes, plus accrued
interest thereon.

"Priority Taglich Lien" means a first priority perfected lien and security
interest in favor of Taglich in all Accounts, but excluding the Cuba Business
Collateral.

“Proceeding” means any voluntary or involuntary insolvency, bankruptcy,
receivership, custodianship, liquidation, dissolution, reorganization,
assignment for the benefit of creditors, appointment of a custodian, receiver,
trustee or other officer with similar powers or any other proceeding for the
liquidation, dissolution or other winding up of Gulfstream or any Subsidiary.

"Subordinated Existing Lender Liens" means any and all liens and security
interests in favor of any Existing Lender in the Cuba Business Collateral, which
shall be junior, subject, and subordinated to the Priority SVSP Lien, subject to
and in accordance with the terms hereof.

"Subordinated SVSP Lien" means a perfected lien and security interest in favor
of SVSP in (i) all Collateral (other than the Cuba Business Collateral), junior
only to the Priority Shelter Island Lien, subject to and in accordance with the
terms hereof; and (ii) Accounts (other than Accounts arising from the Cuba
Business Collateral), junior only to the Priority Taglich Lien and the Priority
Shelter Island Lien, subject to and in accordance with the terms hereof.

“Subsidiaries” means the collective reference to Gulfstream International
Airlines, Inc., a Florida corporation, Gulfstream Training Academy, Inc., a
Florida corporation, Gulfstream Connection, Inc., a Florida corporation and GIA
Holdings Corp., Inc., a Delaware corporation.

“SVSP Debt ” means indebtedness of up to $2,500,000, as may be evidenced by the
SVSP Notes, and interest accrued thereonall obligations of Gulfstream and its
Subsidiaries to SVSP under the SVSP Notes and the other Loan Documents (as
defined in the SVSP Notes).
 
“SVSP Debt Default” means a default in the payment of the SVSP Debt or in the
performance of any term, covenant or condition contained in any SVSP Debt
Documents, or any other occurrence permitting SVSP to accelerate the payment of
all or any portion of the SVSP Debt , and shall also include any Existing Debt
Default.

"SVSP Liens" means the Priority SVSP Lien and the Subordinated SVSP Lien.

 
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2.             Consent, Subordination, Waiver and Covenants.  

(a) Subject in each case to the terms of this Agreement, each Existing Lender
hereby:
 
(i) consents to the SVSP Debt Documents, the SVSP Debt, the Priority SVSP Lien,
the  Subordinated SVSP Lien, and the incurrence, granting, performance and
enforcement thereof, and agrees that the entering into and performance thereof
by Gulfstream and the Subsidiaries in accordance with their terms shall not
constitute a default under any of the Existing Debt Documents, and waives any
and all terms, covenants and conditions of the Existing Debt Documents that
conflict with or are inconsistent with the foregoing;
 
(ii) subordinates, and, as between SVSP and each Existing Lender, as applicable,
makes inferior in priority, operation and effect, for all purposes and in all
respects, the Subordinated Existing Lender Liens to the Priority SVSP Lien,
regardless of the time, manner or order of perfection of any such liens and
security interests;
 
(iii) agrees that it will not contest the validity, perfection, or
enforceability of the SVSP Debt, the SVSP Debt Documents, the Priority SVSP
Lien, the Subordinated SVSP Lien, and that the priority among the Lenders with
respect to the Liens shall be as set forth in this Agreement; and
 
(iv) consents to the filing by SVSP and its agents of UCC Financing Statements
related to the SVSP Debt, the Priority SVSP Lien, the Subordinated SVSP Lien,
and to evidence the priority thereof in accordance with the terms of this
Agreement.
 
(b) Taglich hereby further agrees to waive the application of any and all
financial covenants contained in the Taglich Debt Documents through December 31,
2010.  Shelter Island hereby further agrees to waive the application of the
financial covenants arising under Section 4.16 of the Shelter Island Securities
Purchase Agreement for the periods ending June 30, 2010, September 30, 2010 and
December 31, 2010 and the application of the covenants under Section 4.14 of the
Shelter Island Securities Purchase Agreement.
 
(c) Subject in each case to the terms of this Agreement, and without limiting
any Equity Rights of SVSP, SVSP hereby:
 
(i) consents to the Existing Debt Documents, the Existing Debt, the Priority
Shelter Island Lien, the Priority Taglich Lien, and the incurrence, granting,
performance and enforcement thereof, and agrees that the entering into and
performance thereof by Gulfstream and the Subsidiaries in accordance with their
terms shall not constitute a default under any of the SVSP Debt Documents; and
 
(ii) subordinates, as between SVSP and each Existing Lender, as applicable, and
makes inferior in priority, operation and effect, for all purposes and in all
respects, the Subordinated SVSP Lien to the Priority Shelter Island Lien and the
Priority Taglich Lien, regardless of the time, manner or order of perfection of
any such liens and security interests.
 
(iii)  agrees that it will not contest the validity, perfection, or
enforceability of the Shelter Island Lien, the Taglich Lien or the Existing Debt
Documents and that the priority among the Lenders with respect to the Liens
shall be as set forth in this Agreement; and
 
(iv) consents to the filing by the Existing Lenders and their agents of UCC
Financing Statements or continuation statements related to the Existing Debt,
the Existing Liens and to evidence the priority thereof in accordance with the
terms of this Agreement.
 
 
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(d) Should any party to this Agreement accept or receive any payment from
Gulfstream or any of its Subsidiaries in contravention of this Agreement, such
party shall promptly notify the other parties hereto, and the party or parties
receiving such payment will hold the same in trust for the party or parties
entitled to receive the same.
 
3.             Enforcement Actions.  No Lender will, while this Agreement is in
effect, initiate any Enforcement Action to seek or enforce collection of any
debt, or otherwise accelerate such debt, including the filing of a claim or a
petition for relief in bankruptcy or similar proceedings, except to the extent
otherwise permitted under its respective Debt Documents, each Lender may proceed
to declare a default under its Debt Documents, accelerate or demand payment of
the Debt Documents held by it, and enforce any other right or remedy available
to it against Gulfstream or any Subsidiary; provided, however, that if a Lender
determines to accelerate the Debt owed to it, or to demand payment thereof, or
to declare a default thereunder, or take any other action to enforce rights or
remedies thereunder, it shall give no less than five (5) business days' prior
written notice to the other Lenders that there exists a Default, and such
Default has not been cured or waived.  Any and all proceeds or recoveries from
such efforts by Lenders shall be subject to the provisions of this Agreement.
 
4.             Lien Priorities.  Without limiting any of the foregoing, each of
the parties hereto acknowledge and agree, notwithstanding the date, manner, or
order of perfection of the security interests in and liens on any collateral,
and notwithstanding any provision of the Uniform Commercial Code or any
applicable law or decision, as between the Lenders, the Lenders shall rank as
follows with respect to their respective security interests in the collateral
referenced herein:

(a) With respect to the Cuba Business Collateral: (i) SVSP has a first priority
lien and security interest in the Cuba Business Collateral, and all payments and
proceeds arising thereunder at any time; (ii) any payments or proceeds arising
under the Cuba Business Collateral received by or on behalf of any Existing
Lender before payment in full of the SVSP Debt shall be held in trust for and
promptly paid to SVSP; (iii) Shelter Island’s lien and security interest in the
Cuba Business Collateral shall be second in priority, subject only to the
Priority SVSP Lien; and (iv) Taglich shall have no lien or security interest in
the Cuba Business Collateral.

(b) With respect to the Collateral (other than the Cuba Business Collateral and
the Accounts), that: (i) Shelter Island has a first priority lien and security
interest in the Collateral (other than the Cuba Business Collateral and the
Accounts), and all payments and proceeds arising thereunder at any time; (ii)
any payments or proceeds arising under the Collateral (other than the Cuba
Business Collateral and the Accounts) received by or on behalf of any Lender
other than Shelter Island before payment in full of the Shelter Island Debt
shall be held in trust for and promptly paid to Shelter Island; (iii) SVSP’s
liens and security interests in the Collateral (other than the Cuba Business
Collateral and the Accounts), shall be second in priority, subject only to
Shelter Island’s lien and security interest in the Collateral; and (iv) Taglich
shall not have a lien or security interest in the Collateral or the Cuba
Business Collateral.

(c) With respect to the Accounts (other than accounts arising from the Cuba
Business Collateral), that: (i) Taglich has a first priority lien and security
interest therein, and all payments and proceeds arising thereunder at any time;
(ii) any payments or proceeds arising under the Accounts (other than accounts
arising from the Cuba Business Collateral) received by or on behalf of any
Lender other than Taglich before payment in full of the Taglich Debt shall be
held in trust for and promptly paid to Taglich; (iii) Shelter Island’s lien and
security interest in the Accounts (other than accounts arising from the Cuba
Business Collateral) shall be second in priority, subject only to the Priority
Taglich Lien therein; and (iv) SVSP’s lien and security interest in the Accounts
(other than accounts arising from the Cuba Business Collateral) shall be third
in priority, subject only to the Priority Taglich Lien and the Priority Shelter
Island Lien in such Accounts (other than accounts arising from the Cuba Business
Collateral) as provided for herein.

 
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5.             Intentionally Omitted.
 
6.             Payments After Declaration of Default, Acceleration, or Demand
for Payment.  In the event of receipt by a Lender of any payments under its
respective Debt Documents after the first to occur of a declaration of default
under the Debt Documents of any Lender or acceleration or demand for payment of
any Lender, all money collected or received by the Lenders such payments shall
be held in trust by the Lender receiving any such payment, and shall promptly be
applied as follows:
 
(a) All proceeds of the Cuba Business Collateral shall be paid to SVSP for
application to the SVSP Debt.  After the SVSP Debt is paid in full, and to the
extent that Shelter Island has a security interest therein, the remaining
proceeds thereof shall be paid to Shelter Island for application to the Shelter
Island Debt.
 
(b) All proceeds of the Collateral (other than the Cuba Business Collateral and
the Accounts) shall be paid to Shelter Island for application to the Shelter
Island Debt.  After the Shelter Island Debt is paid in full, any remaining
proceeds thereof shall be paid to SVSP for application to the SVSP Debt.
 
(c) All proceeds of the Accounts (other than the Cuba Business Collateral) shall
be paid to Taglich for application to the Taglich Debt.  After the Taglich Debt
is paid in full, any remaining proceeds of the Accounts (other than Accounts
arising from the Cuba Business Collateral) shall be paid to Shelter Island for
application to the Shelter Island Debt.  After the Shelter Island Debt is paid
in full, any remaining proceeds of the Accounts shall be paid to SVSP for
application to the SVSP Debt.
 
7.             Notice of Default.  Each Lender agrees to give the other Lenders
notice of the occurrence of any Default of the Debt owed to such Lender in
accordance with the terms hereof.  Notwithstanding the foregoing, the failure to
provide any such notice shall not affect the rights of the party to whom such
notice is owed under this Agreement.
 
8.           Prepayments.  Except for the absolute rights upon the occurrence
and during the continuation of a Default or Event of Default of (i) SVSP to
demand and receive prepayments of SVSP Debt with respect to the Priority SVSP
Lien, (ii) Shelter Island to demand and receive prepayments of Shelter Island
Debt with respect to the Priority Shelter Island Lien, and (iii) Taglich to
demand and receive prepayments of Taglich Debt with respect to the Priority
Taglich Lien; neither the Debtor nor any Subsidiary shall prepay, in whole or in
part, any indebtedness or other obligations in respect of Debt without the prior
written consent of the Lenders
 
9.             Additional Agreements of the Parties.

9.1           Offering Proceeds.

(a) In the event of any public or private offering of equity securities of
Gulfstream or any debt securities of Gulfstream that are convertible into or
exchangeable for equity securities of Gulfstream, which, either in one such
offering or a series of offerings, raises less than $3,500,000 of equity, the
net proceeds (defined as gross proceeds less sales commissions, underwriting
discounts and other customary offering expenses) received by Gulfstream shall be
applied as follows:
 
(1)  first to the purchase of aircraft currently under lease;

(2)  second, to pay the cash portion of the consideration payable for the
potential acquisition of “Project M” (the terms of which have been previously
identified to SVSP); provided, that the terms of such acquisition do not
otherwise violate any affirmative or negative covenants of the Debtor to the
Lenders;
 
 
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(3)  third, to provide Gulfstream and its Subsidiaries with working capital in
such amounts as shall be reasonably acceptable to Gulfstream and reasonably
acceptable to the Lenders; and
 
(4) fourth, to the Lenders in pro-rata amounts, as the then outstanding amount
of the respective Debt held by each of them bears to aggregate Debt then owed to
all Lenders.

(b)  In the event of any public or private offering of equity securities of
Gulfstream or any debt securities of Gulfstream that are convertible into or
exchangeable for equity securities of Gulfstream which, in one such offering or
a series of offerings, raises in excess of $3,500,000 of equity, the net
proceeds (defined as gross proceeds less sales commissions, underwriting
discounts and other customary offering expenses) received by Gulfstream shall be
applied as follows: 10% of each dollar of net proceeds raised in excess of
$3,500,000 (the “Excess”) shall be delivered to Shelter Island as a prepayment
on the Shelter Island Debt which shall be applied in the inverse order of
maturity and Shelter Island shall waive the prepayment fee on such
proceeds.  The remaining balance of such proceeds shall be applied in accordance
with clause (a) above.

9.2           Sale of Certain Specific Assets.  In the event that by December
31, 2010, Gulfstream shall have not raised at least $3,500,000 of equity
capital, at the request of SVSP, the Debtor shall engage the services of an
independent investment banker acceptable to SVSP and the Existing Lenders to
sell all of its rights under the Autec Agreements or the Assigned Agreement (the
“Specific Assets”).  In such connection, the Debtor shall complete an offering
memorandum or information statement in respect of the Specific Assets by
November 30, 2010 and engage the services of an acceptable investment banker by
January 10, 2011.  The final terms and conditions under which such Specific
Assets shall be sold shall be acceptable to SVSP and Shelter
Island.  Notwithstanding anything to the contrary in this Agreement, all net
proceeds from a sale of (i) the Autec Agreements shall be delivered (A) first,
to the extent of any proceeds from the Accounts included in the Autec
Agreements, to Taglich for application against the then outstanding amount of
the Taglich Debt and all interest accrued thereon, (B) then to Shelter Island
for application against the then outstanding amount of the Shelter Island Debt
and all interest accrued thereon, and (C) thereafter, any excess net proceeds
available, if any, shall be payable to SVSP in reduction of the SVSP Debt, and
(ii) the Assigned Agreement shall be delivered first, to SVSP for application
against the then outstanding amount of the SVSP Debt and all interest accrued
thereon, and thereafter any excess net proceeds, if any, shall be payable to
Shelter Island in reduction of the Shelter Island Debt.

9.3           Subordination Fee.  In consideration for its entering into this
Agreement and subordinating its Shelter Island Lien to the Priority SVSP Lien,
the Debtor agrees to pay to Shelter Island a fee in the amount of $250,000,
which fee shall be fully earned upon execution of this Agreement, and payable as
follows:

(a)  $125,000 payable in cash, at the rate of $41,667 on the date of this
Agreement, and $41,666 in two additional installments payable immediately
following each $500,000 advance by SVSP under the Initial SVSP Note, which are
expected to be made on or before September 10, 2010 and September 24, 2010,
respectively.  In the event that the additional $500,000 advances are not made
by SVSP in accordance with the previous sentence, the two remaining installments
of $41,667 payable to Shelter Island shall be due and payable 45 days from the
execution of this Agreement; and

(b) a $125,000 increase in the notes evidencing the Shelter Island Debt upon
execution of this Agreement.

 
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10.           Representations and Warranties.
 
(a) Shelter Island hereby represents and warrants to SVSP that as of the date
hereof: (i) Shelter Island is duly formed and validly existing under the laws
governing its formation; (ii) Shelter Island has the power and authority to
enter into, execute, deliver and carry out the terms of this Agreement, all of
which have been duly authorized by all proper and necessary action; (iii) the
execution of this Agreement by Shelter Island will not violate or conflict with
the organizational documents of Shelter Island, any material agreement binding
upon Shelter Island or any law, regulation or order or require any consent or
approval which has not been obtained; (iv) this Agreement is the legal, valid
and binding obligation of Shelter Island, enforceable against Shelter Island in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors’ rights generally and by equitable
principles; (v) Shelter Island is the sole owner, beneficially and of record, of
the Shelter Island Debt Documents and the Shelter Island Debt, and (vi) Shelter
Island has a warrant to purchase 900,257 shares of Gulfstream’s common stock and
a warrant to purchase 70,000 shares of Gulfstream’s common stock.
 
(b) Taglich hereby represents and warrants to SVSP that as of the date hereof:
(i) Taglich is duly formed and validly existing under the laws governing its
formation; (ii) Taglich has the power and authority to enter into, execute,
deliver and carry out the terms of this Agreement, (iii) Taglich has obtained
the approval of a majority of the Taglich Note Purchasers which approval is all
of the authorization required of the Taglich Note Purchasers, (iv) Taglich will
obtain approvals from 100% of the Taglich Note Purchasers by not later than
September 10, 2010, (v) this Agreement is valid and binding with respect to the
Taglich Debt, the Taglich Collateral, and the Taglich Note Purchasers; (vi) the
execution of this Agreement by Taglich will not violate or conflict with the
organizational documents of Taglich, any material agreement binding upon
Taglich, including, without limitation the Taglich Purchase Agreement, or any
law, regulation or order or require any consent or approval which has not been
obtained; (vii) this Agreement is the legal, valid and binding obligation of
Taglich, enforceable against it in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors’ rights generally and by equitable principles; and (viii) the Taglich
Note Purchasers are the sole owners, beneficially and of record, of the Taglich
Debt and the notes evidencing such debt.  Taglich hereby further represents and
warrants to SVSP that Taglich has provided written notice of this Agreement and
the terms hereof to the Taglich Note Purchasers.
 
(c) SVSP hereby represents and warrants to the Existing Lenders that as of the
date hereof: (i) SVSP is duly formed and validly existing under the laws of the
State of Florida; (ii) SVSP has the power and authority to enter into, execute,
deliver and carry out the terms of this Agreement, all of which have been duly
authorized by all proper and necessary action; (iii) the execution of this
Agreement by SVSP will not violate or conflict with the organizational documents
of SVSP, any material agreement binding upon SVSP or any law, regulation or
order or require any consent or approval which has not been obtained; and
(iv) this Agreement is the legal, valid and binding obligation of SVSP,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally or by equitable principles.

(d) Gulfstream hereby represents and warrants to SVSP and Existing Lenders that
as of the date hereof: (i) Gulfstream is duly formed and validly existing under
the laws of the State of Delaware; (ii) Gulfstream has the power and authority
to enter into, execute, deliver and carry out the terms of this Agreement, all
of which have been duly authorized by all proper and necessary action; (iii) the
execution of this Agreement by Gulfstream will not violate or conflict with the
organizational documents of Gulfstream, any material agreement binding upon
Gulfstream or any law, regulation or order or require any consent or approval
which has not been obtained; and (iv) this Agreement is the legal, valid and
binding obligation of Gulfstream, enforceable against Gulfstream in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors’ rights generally or by equitable principles.
 
 
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11.           SVSP Equity Rights.  Notwithstanding anything to the contrary
herein, nothing in this Agreement will limit or impair SVSP's Equity Rights.

12.           Costs.  Gulfstream shall pay or reimburse the Lenders for all of
their costs and expenses incurred in connection with the administration,
supervision, collection, or enforcement of or preservation of any rights under,
this Agreement, including, without limitation, the fees and disbursements of
counsel for the Lenders, including attorneys’ fees out of court, in trial, on
appeal, in bankruptcy Proceedings, or otherwise.  If Taglich fails to obtain
100% of the consents required by Section 10(b)(iv) of this Agreement, and any
claim is asserted by any holder of Taglich Debt or any other third party that
Taglich was not authorized to execute this Agreement, Taglich agrees to pay SVSP
for all of its costs and expenses incurred in connection with the enforcement
of, or the preservation of any rights under, this Agreement against any holder
of Taglich Debt or Taglich, including, without limitation, the fees and
disbursements of counsel for SVSP, including attorneys’ fees out of court, in
trial, on appeal, or otherwise, regardless of whether SVSP is the prevailing
party.

13.           Modification.  Any modification or waiver of any provision of this
Agreement, or any consent to any departure by any party from the terms hereof,
shall not be effective in any event unless the same is in writing and signed by
the Lenders, and then such modification, waiver or consent shall be effective
only in the specific instance and for the specific purpose given. Any notice to
or demand on any party hereto in any event not specifically required hereunder
shall not entitle the party receiving such notice or demand to any other or
further notice or demand in the same, similar or other circumstances unless
specifically required hereunder.
 
14.           Further Assurances.  Each party to this Agreement promptly will
execute and deliver such further instruments and agreements and do such further
acts and things as may be reasonably requested in writing by any other party
hereto that may be necessary or desirable in order to effect fully the purposes
of this Agreement.
 
15.           Notices.  Unless otherwise specifically provided herein, any
notice delivered under this Agreement shall be in writing addressed to the
respective party as set forth in the Recitals and may be personally served,
telecopied or sent by overnight courier service or certified or registered
United States mail and shall be deemed to have been given (a) if delivered in
person, when delivered; (b) if delivered by telecopy, on the date of
transmission if transmitted on a business day before 12:00 noon (New York time)
or, if not, on the next succeeding business day; (c) if delivered by overnight
courier, one business day after delivery to such courier properly addressed; or
(d) if by United States mail, four business days after deposit in the United
States mail, postage prepaid and properly addressed.
 
16.           Successors and Assigns.  This Agreement shall inure to the benefit
of, and shall be binding upon, the respective successors and assigns of SVSP,
Existing Lenders and Gulfstream. To the extent permitted under their respective
debt documents, any lender may, from time to time, without notice to is the
other lender, assign or transfer any or all of their debt or any interest
therein to any person or entity, provided however, that any assignee must agree
to assume and be bound by all terms hereof, and must accept such assignment
subject to the terms of this Agreement, and, notwithstanding any such assignment
or transfer, or any subsequent assignment or transfer, the assigned debt shall,
subject to the terms hereof, be and remain subject to the terms and conditions
of this Agreement, and every permitted assignee or transferee of any of the
assigned debt or of any interest therein shall, to the extent of the interest of
such permitted assignee or transferee in the assigned debt, be entitled to rely
upon and be the third party beneficiary of the subordination provided under this
Agreement and shall be entitled to enforce the terms and provisions hereof to
the same extent as if such assignee or transferee were initially a party hereto.
 
 
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17.           Relative Rights.  This Agreement shall define the relative rights
of SVSP and Existing Lenders.  Nothing in this Agreement shall (a) impair, as
among Gulfstream and SVSP and as between Gulfstream and Existing Lenders, the
obligation of Gulfstream with respect to the payment of the SVSP Debt and the
Existing Debt in accordance with their respective terms or (b) affect the
relative rights of SVSP or any Existing Lender with respect to any other
creditors of Gulfstream.
 
18.           Conflict.  In the event of any conflict between any term, covenant
or condition of this Agreement and any term, covenant or condition of any of the
Existing Debt Documents, the provisions of this Agreement shall control and
govern; provided that, solely as between and with respect to the Existing
Lenders, in the event of any conflict between any term, covenant or condition of
this Agreement and any term, covenant or condition of that certain Waiver,
Consent and Intercreditor Agreement dated as of February 26, 2010 among Taglich,
as Collateral Agent, Shelter Island and Gulfstream (the “February Intercreditor
Agreement”), solely as to any of the relative rights, remedies and obligations
of Taglich or the Taglich Note Purchasers, on the one hand, and Shelter Island,
on the other hand, not relating to or involving any of the rights, remedies and
obligations of SVSP, the provisions of the February Intercreditor Agreement
shall govern.
 
19.           Headings.  The paragraph headings used in this Agreement are for
convenience only and shall not affect the interpretation of any of the
provisions hereof.
 
20.           Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
 
21.           Severability.  In the event that any provision of this Agreement
is deemed to be invalid, illegal or unenforceable by reason of the operation of
any law or by reason of the interpretation placed thereon by any court or
governmental authority, the validity, legality and enforceability of the
remaining provisions of this Agreement shall not in any way be affected or
impaired thereby, and the affected provision shall be modified to the minimum
extent permitted by law so as most fully to achieve the intention of this
Agreement.
 
22.           Applicable Law.  This Agreement shall be governed by and shall be
construed and enforced in accordance with the internal laws of the State of
Florida, without regard to conflicts of law principles.
 
23.           CONSENT TO JURISDICTION.  EACH OF THE PARTIES HERETO HEREBY
CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE
STATE OF FLORIDA AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING
OUT OF OR RELATING TO THIS AGREEMENT SHALL BE LITIGATED IN SUCH COURTS. EACH OF
THE PARTIES HERETO EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS. IN ANY
LITIGATION, TRIAL, ARBITRATION OR OTHER DISPUTE RESOLUTION PROCEEDING RELATING
TO THIS AGREEMENT, EACH PARTY WILL USE ALL COMMERCIALLY REASONABLE EFFORTS TO
COMPLY WITH DISCOVERY REQUIREMENTS AND SCHEDULES AS SET BY THE COURT OR OTHER
DULY APPOINTED ARBITER OF SUCH PROCEEDING.
 
 
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24.           WAIVER OF JURY TRIAL.  EACH OF THE PARTIES HERETO HEREBY WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE DEBT DOCUMENTS. EACH PARTY
ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT
AND THE RESPECTIVE DEBT DOCUMENTS AND THAT EACH WILL CONTINUE TO RELY ON THE
WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH OF PARTIES WARRANTS AND REPRESENTS
THAT EACH HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH LEGAL
COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.

25.           Bankruptcy.  To the extent that any Lender receives payments on or
proceeds of any collateral that is subject to this Agreement which are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law, or equitable cause, then, to
the extent of such payment or proceeds actually returned or repaid by such
Lender, the debt owed to such Lender, or part thereof, intended to be satisfied
shall be revived and continue in full force and effect as if such payments or
proceeds had not been received by such Lender.  Each of the Lenders further
agrees that if any Lender determines to provide debtor-in-possession financing
to the Debtor, no Lender shall “roll-up” its existing pre-petition Debt into a
debtor-in-possession credit facility without the prior written consent of all of
the other Lenders.

26.           Additional Indebtedness.  Each of the parties hereto acknowledge
and agree that after giving effect to the transactions contemplated by the SVSP
Debt Documents, the Debtor’s assets are fully encumbered and there is no
remaining equity in the Debtor’s assets to provide collateral security for
additional indebtedness for borrowed money without resulting in the diminution
in the value of each of the Lender’s liens and security interests.  Debtor and
each of its Subsidiaries shall be required to obtain the consent of each of the
Lenders before any of them shall be authorized to incur any further indebtedness
for borrowed money, regardless of whether  bankruptcy proceedings have commenced
regarding Debtor or any Subsidiary.

 
[The remainder of this page intentionally left blank – signature page follows.]
 
 
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IN WITNESS WHEREOF, the parties hereto have executed the within as of the date
first above written.
 

 
TAGLICH BROTHERS, INC.,
a  New York corporation, on its own behalf and as collateral agent (for the
Purchasers):
           
By:
  /s/ Robert C.
Schroeder                                                                                     
     
Name: Robert C. Schroeder
     
Title: Vice President
         

 

 
SHELTER ISLAND OPPORTUNITY FUND, LLC, a Delaware limited liability company
           
By:
  /s/ Michael
Coiley                                                                           
     
Name: Michael Coiley
     
Title: Authorized Signatory
         

 

 
GULFSTREAM INTERNATIONAL GROUP, INC., a  Delaware corporation
           
By:
  /s/ David F. Hackett 
     
Name: David F. Hackett
     
Title: President
         

 

 
SAH-VUL STRATEGIC PARTNERS I, LLC, a Florida limited liability company
           
By:
  /s/ William J. Caragol 
     
Name:  William J. Caragol
     
Title:  Manager
         

 
ACCEPTED AND AGREED TO:
 
GIA HOLDINGS CORP., INC., a Delaware corporation
               
By:
  /s/ David F. Hackett 
       
Name: David F. Hackett
       
Title: President
           

 
 
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GULFSTREAM INTERNATIONAL AIRLINES, INC., a  Florida corporation
           
By:
  /s/ David F. Hackett 
     
Name: David F. Hackett
     
Title: President
         

 
GULFSTREAM TRAINING ACADEMY, INC., a Florida corporation
           
By:
  /s/ David F. Hackett 
     
Name: David F. Hackett
     
Title: President
         

 

 
GULFSTREAM CONNECTION, INC., a Florida corporation
           
By:
  /s/ David F. Hackett 
     
Name: David F. Hackett
     
Title: President
         

 
 
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