ex10-1.htm


    
      

    

    Exhibit 10.1

     

     

    
      KRONOS
ADVANCED TECHNOLOGIES, INC.

      464
Common Street, Box 301

      Belmont,
Massachusetts 02478

       

      February
11, 2009

       

      AIRWORKS FUNDING LLLP, as
agent for the

      the
Noteholders (as defined below)

      655
Madison Avenue, 23rd Floor

      New York,
New York 10021.

       

      
        	 
      	
                Re:

              	
                Peaceful Possession of
      Collateral

              


      

       

      Gentlemen:

       

      Reference
is made to the Funding Agreement dated June 19, 2007 (the “Funding Agreement”)
among, inter alia, the undersigned (“Kronos”) and AirWorks Funding LLLP
(“AirWorks” and the “Agent”), Hilltop Holding Company LP, by assignment from RS
Properties I LLC (“Hilltop” and together with AirWorks, the “the Noteholders”),
that certain Secured Convertible Promissory Note due June 19, 2010 made by
Kronos in favor of AirWorks, that certain Secured Convertible Promissory Note
due June 19, 2010 made by Kronos in favor of RS Properties I LLC and
subsequently assigned to Hilltop (collectively, the “Notes”), and all of the
instruments, agreements and other documents executed and/or delivered in
connection therewith or otherwise evidencing, governing, or securing obligations
of Kronos to the Noteholders (all of the foregoing, as the same now exist or may
hereafter be amended, restated, renewed, extended, substituted, supplemented or
otherwise modified, collectively, the “Agreements”).

       

      1.     Acknowledgment of
Obligations and Security Interests

       

      Kronos
hereby acknowledges, confirms and agrees that;

       

      (a)    As of
February 11, 2009, Kronos is indebted to the Noteholders in the aggregate
principal amount of not less than $4,223,559.80, plus interest accrued and
accruing thereon, plus the commissions, costs, expenses, attorneys’ fees and
other charges or contractual obligations now or hereafter payable by Kronos to
the Noteholders under the Agreements, plus all amounts which may be paid by the
Noteholders in connection with the sale or other disposition of Kronos’s assets,
plus all other “Obligations” (as defined in the Agreements), all of which are
unconditionally owed by Kronos to the Noteholders without offset, defense or
counterclaim of any kind, nature or description whatsoever (hereinafter, the
“Obligations”);

       

      (b)    The
Noteholders have and shall continue to have, valid, enforceable and perfected
first liens upon and security interests in the Collateral (as described and
defined in the Agreements), which liens and security interests secure payment
and performance of all of the Obligations.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      2.     Acknowledgment of
Default.

       

      (a)    Kronos
hereby acknowledges and agrees that Kronos is in default under the Agreements
and in the payment of its Obligations to the Noteholders which entitles the
Noteholders to exercise immediately their rights and remedies under the
Agreements, applicable law and otherwise. The Noteholders have not waived,
presently do not intend to waive, and do not hereby waive, any such defaults and
nothing contained herein or the transactions contemplated hereby shall be deemed
to constitute any such waiver, including, without limitation, the Noteholders’
right to recover any deficiency from Kronos.

       

      (b)    Kronos
hereby confirms that Kronos is insolvent, is unable to pay its debts as they
become due and does not have sufficient working capital to continue its business
or the means to protect the Collateral.

       

      (c)    Kronos
hereby waives any and all of its rights to notification or otherwise under
Section 9-611 of the Uniform Commercial Code (“UCC”) as
to the sale or other disposition by the Noteholders of the Collateral, under
Section 9-620 of the UCC regarding acceptance of the Collateral as discharge of
Obligations and under Section 9-623 of the UCC regarding Kronos’s right to
redeem the Collateral.

       

      3.     Surrender of
Collateral.

       

      (a)    Kronos
hereby surrenders, delivers and grants to the Noteholders peaceful possession of
the Collateral wherever located.  Such surrender and delivery of the
Collateral to the Noteholders is in recognition of the rights of the Noteholders
as a secured party under the UCC and other applicable law. Kronos knowingly
waives any rights Kronos may have to notice and a hearing before any Court of
competent jurisdiction and consents to the Noteholders’ possession, sale,
transfer or other disposition of the Collateral, including, but not limited to,
the sale, license or other use in any way of Kronos’s trademarks or tradenames
in the sale, license, transfer or other disposition of the Collateral. Kronos
agrees that the Noteholders may, at any time enter and remove any or all of the
Collateral from the premises where the same is located and take such action as
they may deem appropriate with respect thereto, and the Noteholders may, at any
time, exercise their rights to dispose of any Collateral as provided for under
the Agreements and applicable law, without prejudice to any of the rights of the
Noteholders, including any claim for any deficiency. All proceeds of the
Collateral received and retained by the Noteholders shall be applied by the
Noteholders to the Obligations in such order and manner as the Noteholders shall
determine in their sole and absolute discretion.  Kronos shall be and
remain liable for any deficiency until all Obligations are fully and
indefeasibly paid and satisfied.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      (b)    Kronos
hereby assigns, transfers and delivers to the Agent, for the benefit of the
Noteholders, all of its right to receive any and all payments and receivable
owing or accruing to Kronos arising out of any agreement, license or other
contractual arrangement to which Kronos is a party, including, without
limitation, the right to collect and receive any and all amounts from each of
Tessera Technologies, Inc. (“Tessera”) and EUL, Ltd. (“EUL”) under any and all
agreements between Kronos and Tessera EUL, respectively, until such time that
all Obligations are fully and indefensibly paid and satisfied.  Kronos
will execute and deliver to the Agent, on behalf of the Noteholders,
notification letters signed by Kronos addressed to such of Kronos’s account
debtors as the Noteholders shall require, to be completed and sent by the Agent,
on behalf of the Noteholders, hereafter from to time, directing payment of
Kronos’s accounts or other monies due to Kronos to the Noteholders.

       

      4.     Reimbursement.  Kronos
acknowledges and consents that it is obligated to reimburse the Noteholders for
any and all amounts paid by the Noteholders (including without limitation,
reasonable attorneys’ fees) in connection with this letter, the transactions
evidenced thereby and the sale or other disposition of Kronos’s assets, and that
such amounts shall be included in and become part of the
Obligations.

       

      5.     Acknowledgement.  This
letter is the result of a full and complete negotiation at arms’ length between
Kronos and the Noteholders. Kronos represents and warrants to the Noteholders
that it has read and wholly understands the terms and effect of the
letter.

       

      6.     Further
Assurances.  Upon the reasonable request of the Noteholders,
Kronos  shall execute and deliver or cause to be executed and
delivered to the Noteholders all such additional documents, instruments and
agreements as the Noteholders may reasonably determine are necessary or
desirable to effectuate the purposes and intent of this letter.

       

      7.     Binding
Effect.  This letter shall be binding upon the parties hereto
and their respective permitted successors and assigns.  No party
hereto may assign any of its rights, duties and obligations hereunder or any
part thereof to any other person or entity; provided, however, that the
Noteholders shall be permitted to freely assign any of their respective rights,
duties or obligations hereunder.

       

      8.     Entire
Agreement.  This letter together with the Agreements, sets
forth the entire agreement and understanding among the parties as to the subject
matter hereof and merges and supersedes all prior discussions, agreements and
understandings of every kind and nature among them with respect to such subject
matter.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      9.     Severability.  If
any provision of this letter or the application of any provision hereof to any
person or circumstances is held invalid, the remainder of this letter and the
application of such provision to other persons or circumstances shall not be
affected unless the provision held invalid shall substantially impair the
benefits of the remaining portions of this letter.  Notwithstanding
the foregoing, any provision of this letter held invalid, illegal or
unenforceable only in part or degree shall remain in full force and effect to
the extent not held invalid or unenforceable, and the determination that any
provision of this letter is invalid, illegal or unenforceable as applied to
particular circumstances shall not affect the application of such provision to
circumstances other than those as to which it is held invalid, illegal or
unenforceable.

       

      10.    Modification.  This
letter may be amended, modified or supplemented only by an agreement in writing
signed by the party or parties against whom such amendment, modification or
supplement is sought to be enforced.

       

      11.    Waiver;
Consent.  A waiver by a party of any section, term or condition
of this letter in any instance shall not be deemed or construed to be a waiver
of such section, term or condition for the future or of any subsequent breach
thereof, and any such waiver must be in writing, signed by the party or parties
to be charged.  All rights and remedies contained in this letter are
cumulative, and none of them shall be construed so as to limit any other right
or remedy of a party.  Any consent required or permitted by this
letter is binding only if in writing.

       

      12.    Notice.  All notices,
requests and demands to or upon the respective parties hereto shall be in
writing and shall be deemed to have been duly given or made: if delivered in
person, immediately upon delivery; if by facsimile transmission, immediately
upon sending and upon confirmation of receipt; if by nationally recognized
overnight courier service with instructions to deliver the next business day,
one (1) business day after sending; and if by registered or certified mail,
return receipt requested, five (5) days after mailing.  All notices,
requests and demands upon the parties are to be given to the following addresses
(or to such other address as any party may designate by notice in accordance
with this section):

       

      
        	 	
                If
      to Kronos:

              	
                KRONOS
      ADVANCE TECHNOLOGIES, INC.

              
	 	 
      	
                464
      Common Street

              
	 	 
      	
                Suite
      301

              
	 	 
      	
                Belmont,
      Massachusetts 02478

              
	 	 
      	
                Attention:
      Richard F. Tusing

              
	 	 
      	
                Telephone:
      (617) 364-5089

              
	 	 
      	
                Telecopy:  (617)
      364-5085

              
	 	 	 
	 	
                With
      a copy to:

              	
                PAUL,
      HASTINGS, JANOFSKY & WALKER LLP

              
	 	 
      	
                600
      Peachtree Street

              
	 	 
      	
                Suite
      2400

              
	 	 
      	
                Atlanta,
      Georgia 30308

              
	 	 
      	
                Attention:
      Renaldo Pascual

              
	 	 
      	
                Telephone:
      (404) 815-2227

              
	 	 
      	
                Telecopy:
      (404) 685-5227

              


      

       

      
        
          
          

        

        
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                If
      to the Noteholders:

              	
                AIRWORKS
      FUNDING, LLLP

              
	 	 
      	
                655
      Madison Avenue, 23rd
      Floor

              
	 	 
      	
                New
      York, New York 10021

              
	 	 
      	
                Attention:
      Richard E. Perlman

              
	 	 
      	
                Telephone:
      (212) 223-8633

              
	 	 
      	
                Telecopy:
      (212) 888-8133

              
	 	 
      	 
      
	 	
                With
      a copy to:

              	
                HILLTOP
      HOLDING COMPANY LP

              
	 	 
      	
                660
      Madison Avenue

              
	 	 
      	
                15th
      Floor

              
	 	 
      	
                New
      York, New York 10065

              
	 	 
      	
                Attention:
      Jack Silver

              
	 	 
      	
                Telephone:

              
	 	 
      	
                Telecopy:

              
	 	 	 
	 	
                With
      a copy to:

              	
                KATTEN
      MUCHIN ROSENMAN LLP

              
	 	 
      	
                575
      Madison Avenue

              
	 	 
      	
                New
      York, New York 10022

              
	 	 
      	
                Attention:
      Joel A. Yunis, Esq.

              
	 	 
      	
                Telephone:
      (212) 940-8666

              
	 	 
      	
                Telecopy:
      (212) 940-8627

              


      

       

      13.    Governing
Law.  This letter and the rights and obligations hereunder of
each of the parties hereto shall be governed by and interpreted and determined
in accordance with the laws of the State of New York.

       

      14.    JURISDICTION.  THE
PARTIES HERETO HEREBY CONSENT TO THE EXCLUSIVE JURISDICTION OF THE, COURTS OF
THE STATE OF NEW YORK FOR THE CITY OF NEW YORK AND THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK IN ANY ACTION OR PROCEEDING UNDER,
ARISING OUT OF OR RELATED TO THIS LETTER AND THE OTHER AGREEMENTS.  IN
ANY ACTION, SUIT OR OTHER PROCEEDING, EACH OF THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY WAIVES AND AGREES NOT TO ASSERT BY WAY OF MOTION, AS A DEFENSE
OR OTHERWISE ANY CLAIMS THAT IT IS NOT SUBJECT TO THE JURISDICTION OF THE ABOVE
COURTS, THAT SUCH ACTION OR SUIT IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE
VENUE OF SUCH ACTION, SUIT OR OTHER PROCEEDING IS IMPROPER.

       

      15.    WAIVERS OF JURY
TRIAL.  EACH OF THE PARTIES HERETO HEREBY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING UNDER, ARISING OUT OF OR RELATED TO
THIS LETTER OR THE OTHER AGREEMENTS.

       

      16.    Counterparts.  This
letter may be executed in counterparts, each of which when so executed and
delivered shall be an original, but all of which shall constitute one and the
same instrument.

       

      
        
          
          

        

        
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                Very
      truly yours,

              	 
      
	 	 	 
	 	 	 
	 
      	
                KRONOS
      ADVANCED TECHNOLOGIES, INC.

              	 
      
	 	 	 
	 
      	
                By:

              	
                /s/
      Richard F. Tusing

              	 
      
	 	 	 	 
	 
      	
                Name:

              	
                Richard
      F. Tusing

              	 
      
	 	 	 	 
	 
      	
                Title:

              	
                Acting
      President and Chief Operating
Officer

              


      

      


       

      
        	
                ACCEPT
      AND AGREED:

              	 
      
	 	 
	
                AIRWORKS
      FUNDING LLP, as agent for the Noteholders

              
	 
	
                By:

              	/s/
      Richard Perlman	 
      
	 	 	 
	
                Name:

              	Richard
      Perlman	 
      
	 	 	 
	
                Title:

              	 
      	 
      


      

       

       

       

      
        
          
          

        

        
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      STATE OF
VIRGINIA)

      )ss.:

      COUNTRY
OF FAIRFAX)

       

      On this
11 day of February, 2009, before me personally came Richard Tusing to me known,
who, being duly sworn, did depose and say, that (s)he is the Acting President
and Chief Operating Officer of KRONOS ADVANCED TECHNOLOGIES,
INC., the corporation described in and which executed the foregoing
instrument; and that he signed his name thereto with the consent of the board of
directors thereof.

       

       

      
        	 
      	
                /s/ Anthony Williams

              	 
      
	 
      	
                Notary
      Public

              	 
      


      

       

       

       

       

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