Document:

ex10-3.htm

    Exhibit
10.3

     

    THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES
LAWS.  THESE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN EXEMPTION UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS.

    

    VOID
AFTER 5:00 P.M., NEW YORK, NEW YORK TIME, ON THE EXPIRATION DATE (AS DEFINED
BELOW).

     

    
      	 Date of
      Issuance:  February 12, 2009	
              Number
      of Shares:  30,000,000

            

    

     

    

    WARRANT TO
PURCHASE

    SHARES OF CLASS A COMMON
STOCK OF

    DELTATHREE,
INC.

    

    

    This certifies that, for value
received, D4 Holdings, LLC, a Delaware limited liability company, and its
permitted assigns or successors in interest (the “Holder”), is entitled
to purchase from deltathree, Inc., a Delaware corporation (the “Company”), subject to
the terms and conditions hereof, at any time on or after the date of this
Warrant and before 5:00 P.M., New York, New York time on the date which is ten
(10) years after the date hereof (the “Expiration Date”),
that number of fully paid and non-assessable shares of the Company’s Class A
common stock, par value $0.001 (the “Common Stock”), as
set forth in and subject to the limitations of Section 2 hereof.

    

    This Warrant is issued by the Company
pursuant to the terms and conditions of that certain Securities Purchase
Agreement, dated as of February 10, 2009, by and between the Company and the
Holder (the “Purchase
Agreement”).

    

    1. Definitions.  As
used in this Warrant, the following terms shall have the meanings set forth
below:

     

    (a) “Affiliate” means any
person that, directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, a person, as such
terms are used and construed under Rule 144 promulgated under the Securities
Act.

     

    (b) “Exercise Price” means
$0.04 per share (as the same may be adjusted from time to time pursuant to the
terms of this Warrant).

     

    (c) “Fair Market Value”
means, on any particular date (a) if the Common Stock is then traded on a
securities exchange, the average of the closing prices of such Common Stock on
such exchange over the five trading day period ending on such date, (b) if the
Common Stock is then regularly traded over-the-counter, the average of the
closing sale prices or secondarily the closing bid of such Common Stock over the
five trading day period ending on such date, or (c) if there is no active public
trading market for the Common Stock, the fair market value of one share of the
Warrant Shares as determined in good faith by the Board of Directors of the
Company.

     

    (d) “Person” (whether or
not capitalized) means an individual, entity, partnership, limited liability
company, corporation, association, trust, joint venture, unincorporated
organization or any other form of entity not specifically listed herein, and any
government, governmental department or agency or political subdivision
thereof.

     

    (e) “Securities Act” means
the Securities Act of 1933, as amended, and all of the rules and regulations
promulgated thereunder.

     

    (f) “Warrant” means this
Warrant and all stock purchase warrants issued in exchange therefor pursuant to
the terms thereof.

     

    (g) “Warrant Shares”
means the shares of Common Stock issuable upon exercise of this
Warrant.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    2. Exercise of Warrant.

     

    (a) Number of Shares Underlying
Warrant.  This Warrant shall be exercisable for up to 30,000,000 shares of Common
Stock, as adjusted from time to time pursuant to the terms of this
Warrant.

     

    (b) Exercisability of
Warrant.  The Holder may exercise the purchase rights
represented by this Warrant, in whole or in part, at any time, from time to time
on or after the date that is thirty (30) days following the date of this
Warrant, and before 5:00 P.M. New York, New York time, on the Expiration Date
(the “Exercise
Period”).

     

    (c) Exercise Procedure.

     

    (i) The
purchase rights represented by this Warrant may be exercised by the Holder, in
whole or in part, by delivery of a notice of exercise in the form set forth on
the last page hereof (the “Exercise Notice”) at
the principal office of the Company, and by the payment to the Company of the
aggregate Exercise Price (in accordance with the next sentence) in an amount
equal to the Exercise Price per share multiplied by the number of Warrant Shares
then being purchased.  The aggregate purchase price for Warrant Shares
being purchased hereunder pursuant to such exercise may be paid either (A) by
cash or wire transfer of immediately available funds, (B) by cancellation of
indebtedness, or (C) any combination of the foregoing.

     

    (ii) No
fractional shares arising out of the above formula for determining the number of
shares to be issued to the Holder shall be issued, and the Company shall in lieu
thereof make payment to the Holder of cash in the amount of such fraction
multiplied by the Fair Market Value of one (1) share of the Warrant Shares on
the date of exercise.

     

    (iii) In the
event of any exercise of the rights represented by this Warrant, certificates
for the Warrant Shares so purchased shall be delivered to the Holder as soon as
practicable and, unless this Warrant has been fully exercised or has expired, a
new Warrant representing the portion of the Warrant Shares, if any, with respect
to which this Warrant shall not then have been exercised shall also be issued to
the Holder as soon as practicable.  Such exercise shall be deemed to
have been made immediately prior to the close of business on the date the Holder
delivers the Exercise Notice with respect to such exercise.   The
Person or Persons entitled to receive the Warrant Shares shall be treated for
all purposes as the record holder of such Warrant Shares as of such
date.

     

    (iv) The
issuance of certificates for Warrant Shares upon exercise of this Warrant will
be made without charge to the Holder for any issuance tax in respect thereof or
any other cost incurred by the Company in connection with such
exercise.

     

    3. Reservation of Warrant
Shares; Stock Fully Paid.  During the Exercise Period, the
Company shall reserve and keep available for issuance upon the exercise of the
Warrant such number of its authorized but unissued shares of Common Stock as
will be sufficient to permit the exercise in full of all outstanding
Warrants.  The Warrant Shares, upon issuance in accordance with the
terms of this Warrant, will be validly issued, fully paid and nonassessable, and
free from all taxes, liens and charges with respect to the issuance
thereof.

     

    4. No Voting Rights; Limitations of Liability.  This
Warrant will not entitle the Holder to any voting rights or other rights as a
shareholder of the Company.  No provision of this Warrant, in the
absence of affirmative action by the Holder to purchase Warrant Shares, and no
enumeration in this Warrant of the rights or privileges of the Holder, will give
rise to any liability of such Holder as a stockholder of the
Company.

     

    5. Restrictions on Transfer.

     

    (a) The
Holder agrees that the Holder will not transfer, sell or otherwise dispose of
this Warrant without the express consent of the Company in its reasonable
discretion.  Notwithstanding the foregoing, the Holder may transfer
all or any portion of this Warrant to an affiliate (as such term is defined in
Rule 405 promulgated under the Securities Act) of the Holder.

     

    (b) The
Holder agrees not to sell, pledge, distribute, offer for sale, transfer or
otherwise dispose of this Warrant or any Warrant Shares issued upon its exercise
except under circumstances which will not result in a violation of the
Securities Act.  Upon exercise of this Warrant, the Holder shall
confirm in writing, by executing the form attached hereto, that the securities
purchased thereby are being acquired for investment solely for the Holder’s own
account and not as a nominee for any other person, and not with a view toward
distribution or resale.

     

    (c) The
certificates representing the Warrant Shares shall have affixed thereto a legend
in substantially the following form, in addition to other legends required by
applicable state law:

     

    THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES
LAWS.  THESE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN EXEMPTION UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (d) With
respect to any offer, sale or other disposition of this Warrant or any Warrant
Shares, the Holder agrees to give written notice to the Company prior thereto,
describing briefly the manner thereof together with a written opinion of the
Holder’s counsel, if reasonably requested by the Company, to the effect that
such offer, sale or other disposition of this Warrant or such Warrant Shares may
be effected without registration under the Securities Act or qualification under
any applicable state securities laws, and indicating whether or not under the
Securities Act certificates for this Warrant or such Warrant Shares, as the case
may be, to be sold or otherwise disposed of require any restrictive legend as to
applicable restrictions on transferability in order to insure compliance with
the Securities Act.  If the Company shall consent to the transfer of
this Warrant or such Warrant Shares, then each certificate representing this
Warrant or the Warrant Shares thus transferred (except a transfer pursuant to
Rule 144) shall bear a legend as to the applicable restrictions on
transferability in order to insure compliance with the Securities Act, unless in
the aforesaid reasonably satisfactory opinion of counsel for the Holder or the
security holder, as the case may be, such legend is not necessary in order to
insure compliance with the Securities Act.  The Company may issue stop
transfer instructions to its transfer agent in connection with such
restrictions.

     

    6. Miscellaneous.

     

    (a) Amendment and Waiver.  Except
as otherwise provided herein, the provisions of this Warrant may be amended only
if the Company has obtained the prior written consent of the
Holder.

     

    (b) Notices.  Any
notices required to be sent to the Holder will be delivered to the address set
forth below.  Any notices required to be sent to the Company will be
delivered to the principal office of the Company as set forth on the signature
page hereto.  Any party may change the address to which correspondence
to it is to be addressed by written notification as provided
herein.  All notices required or permitted hereunder, to be effective,
shall be in writing and shall be deemed effectively given: (i) when sent by
confirmed facsimile if sent during normal business hours of the recipient, if
not, then on the next business day, (ii) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or
(iii) one (1) business day after deposit with a nationally recognized overnight
courier, specifying next day delivery, with written verification of
receipt.

     

    If to the
Holder, to:

    

    D4
Holdings, LLC

    349-L
Copperfield Blvd., #407

    Concord,
NC 28025

    Attention: Robert
Stevanovski, Manager

    Facsimile:  704.260.3304

    

    With a
copy to (which shall not constitute notice):

    

    Bingham
McCutchen LLP

    2020 K
Street, NW

    Washington,
DC 20006

    Attention:  Andrew
M. Ray, Esquire

    Facsimile:  202.373.6452

    

    (c) Descriptive Headings;
Pronouns.  The descriptive headings of the paragraphs of this
Warrant are inserted for convenience only and do not constitute a part of this
Warrant.  All pronouns or any variation thereof shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the person, persons, entity or entities may require.

     

    (d) Governing Law.  This
Warrant shall be governed by and construed in accordance with the internal and
substantive laws of the State of Delaware and without regard to any conflicts of
laws concepts which would apply the substantive law of some other
jurisdiction.

     

    (e) Successors and
Assigns.  Subject to Section 5, the provisions of this Warrant
shall be binding upon, and inure to the benefit of, the respective successors
and assigns of the parties hereto.

     

    (f) Severability.  In
the event that any one or more of the provisions of this Warrant shall for any
reason be held to be invalid, illegal or unenforceable, in whole or in part or
in any respect, or in the event that any one or more of the provisions of this
Warrant operate or would prospectively operate to invalidate this Warrant, then
and in any such event, such provision(s) only shall be deemed null and void and
shall not affect any other provision of this Warrant and the remaining
provisions of this Warrant shall remain operative and in full force and effect
and in no way shall be affected, prejudiced, or disturbed thereby.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (g) Waiver of Jury
Trial.  EACH OF THE COMPANY AND THE HOLDER WAIVES ALL RIGHTS TO
TRIAL BY JURY OF ANY SUITS, CLAIMS, COUNTERCLAIMS, AND ACTIONS OF ANY KIND
ARISING UNDER OR RELATING TO THIS AGREEMENT.  EACH OF THE COMPANY AND
THE HOLDER ACKNOWLEDGES THAT THIS IS A WAIVER OF A LEGAL RIGHT AND REPRESENTS TO
THE OTHER THAT THIS WAIVER IS MADE KNOWINGLY AND VOLUNTARILY.  THE
COMPANY AND THE HOLDER EACH AGREE THAT ALL SUCH SUITS, CLAIMS, COUNTERCLAIMS,
AND ACTIONS SHALL BE TRIED BEFORE A JUDGE OF A COURT OF COMPETENT JURISDICTION,
WITHOUT A JURY.

     

    (h) Adjustments.

     

    (i) If at any
time after the date hereof there is any change in the outstanding shares of
capital stock of the Company by reason of stock dividends, splits,
recapitalizations, reclassifications, combinations or exchanges of shares,
separations, reorganizations, liquidations, or the like, the number and class of
shares available under this Warrant in the aggregate and the Exercise Price, as
applicable, shall be correspondingly adjusted to give the Holder, on exercise
for the same aggregate Exercise Price, the total number, class, and kind of
shares as the Holder would have owned had the Warrant been exercised prior to
the event and had the Holder continued to hold such shares until after the event
requiring adjustment.  The form of this Warrant need not be changed
because of any adjustment in the number of Warrant Shares subject to this
Warrant.

     

    (ii) In case
of any reclassification or change of outstanding securities of the class and
series issuable upon exercise of this Warrant (other than a change in par value,
or from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), or in case of any consolidation or
merger of the Company with or into a continuing corporation (other than a merger
with another corporation in which the Company is a continuing corporation and
which does not result in any reclassification or change of outstanding
securities issuable upon exercise of this Warrant), or in case of a sale of all
or substantially all of the assets of the Company, unless this Warrant shall
have been exercised or terminated in accordance with its terms, the Company, or
such successor or purchasing corporation, shall execute a new Warrant, which
provides that the Holder shall have the right to exercise such new Warrant and
procure upon such exercise in lieu of each Warrant Share theretofore issuable
upon exercise of this Warrant the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification, change,
merger or transfer by a holder of one share of the type of security issuable
upon exercise of this Warrant.  Such new Warrant shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 6(h).  The provisions of this
Section 6(h)(ii) shall similarly apply to successive reclassifications, changes,
mergers or transfers.

     

    (iii) If at any
time after the date hereof any change occurs in the outstanding capital stock of
the Company or any other event occurs as to which the other provisions of this
Section 6(h) are not strictly applicable or if strictly applicable would not
protect the purchase rights of the Holder in accordance with such provisions,
then the independent members of the Board of Directors of the Company (which
members shall not be Affiliates of the Holder) shall, in their reasonable good
faith judgment, make an adjustment in the number and class of shares available
under the Warrant, the Exercise Price or the application of such provisions, as
applicable, so as to protect such purchase rights as aforesaid.  The
adjustment shall be such as to give the Holder upon exercise for the same
aggregate Exercise Price the total number, class and kind of shares as the
Holder would have owned had this Warrant been exercised prior to the event and
had the Holder continued to hold such shares until after the event requiring
adjustment.

     

    (iv) Whenever
the Exercise Price shall be adjusted pursuant to this Section 6(h), the Company
shall issue a certificate signed by its chief financial officer or other
executive officer setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated, and the Exercise Price (and, if applicable, the number and type
of security for which the Warrant may be exercised) after giving effect to such
adjustment, and shall cause copies of such certificate to be mailed (by first
class mail, postage prepaid) to the Holder.

     

    [Signature
page follows]

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized officer as of date first written above.

    

    DELTATHREE,
INC.

    

    

    By:        /s/ Efraim
Baruch                  

    Name:   Efraim
Baruch

    Title:     Chief
Executive Officer

    

    Address:

    

    419
Lafayette Street

    New York,
NY 10003

    Attention: Peter
Friedman

    Facsimile:  212.500.4888

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    NOTICE OF
EXERCISE

    

    
      	
               
      

            	
              TO:

            	
              DELTATHREE,
      INC.

            

    

    

    1.           The
undersigned hereby elects to purchase __________ shares of Class A common stock,
par value $0.001 (the “Common Stock”), of
deltathree, Inc. (the “Company”) pursuant to
the terms of that certain Warrant issued by the Company to D4 Holdings, LLC as
of ________ __, 2009, and tenders herewith payment of the purchase price of such
shares in full, together with all applicable transfer taxes, if any, in
accordance with the election set forth in paragraph 2 below.

    

    2.           Manner
of Exercise.  The undersigned Holder elects to exercise the Warrant
for such shares of Common Stock in the following manner:

    

    
       

Cash
Exercise.  The undersigned tenders herewith payment of the
aggregate Exercise Price for the Common Stock in full in the form of cash or
wire transfer of immediately available funds.

    

    

    
       

Cancellation of
Indebtedness.  The undersigned hereby elects to exercise this
Warrant by means of cancellation of outstanding indebtedness of the Company, by
delivery to the Company of instruments or certificates, duly endorsed for
transfer, evidencing debt securities of the Company having a value equal to the
aggregate Exercise Price of the Common Stock.

    

    

    3.           Please
issue a certificate or certificates representing said securities in the name of
the undersigned or in such other name as is specified below:

    

    ________________________________

    (Name)

    
 

    ________________________________

    

    ________________________________

    (Address)

    

    4.           The
undersigned represents that the aforesaid shares of Common Stock are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof, and that the
undersigned has no present intention of distributing or reselling such shares in
violation of applicable securities laws.

    

    

              
______________________________

    (Signature)

    __________________________

    (Date)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

              

      

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      
        	 	
                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.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      

       

      
        	 
      	
                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:

              	 
      	 
      

      

       

       

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      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

              	 
      

      

       

       

       

       

      7

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00152-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00152-of-00352.parquet"}]]