EXHIBIT
10.1

      AGREEMENT
AND COMPLETE AND

       

      FULL
GENERAL RELEASE

       

      Kenneth
M. Wallace (“Executive”) and Applied Energetics, Inc., (the “Company”), have
agreed to conclude their employment relationship.  The parties have
agreed that, based upon Executive’s past service to Company and the parties’
mutual desire to amicably conclude the employment relationship, that Executive
and Company enter into this Agreement and Complete and Full General Release
(“Agreement”).  In consideration of the sum to be paid and other
promises set out in this Agreement, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound, the parties agree to the
following terms (capitalized terms used herein and not otherwise defined herein
shall have the same meanings as ascribed to such terms in the Employment
Agreement entered into on October 26, 2007 by and between the Company and the
Executive, as amended (the “Employment Agreement”)):

      1.           Conclusion
of Employment.  Executive’s employment by Company will terminate on
September 1, 2009 (“Separation Date”).  Executive hereby terminates
his position as Chief Financial Officer and Secretary (a reporting a person and
a named executive officer with respect to the Company under the federal
securities laws) and any other positions he holds with the Company or any
subsidiary of the Company.  Executive and the Company hereby waive any
and all rights to receive notice of termination of Executive’s employment under
the Employment Agreement.

       

      2.           Payment
Upon Separation; Consideration for Executive’s Agreements.  Assuming
the Executive does not revoke this Agreement within the revocation period set
forth in Paragraph 6, below, in consideration for executing this Agreement and
complying with its terms, Executive will receive as severance payments from the
Company pursuant to Section 5.4.2 of the Employment Agreement (i) $29,000 upon
the expiration of the revocation period set forth in Section 6, (ii) four (4)
monthly payments of $28,125 per month commencing on the first Company pay date
subsequent to the expiration of the revocation period and (iii) provide to the
Executive, payment in full of all accrued vacation pay and personal time off
allowances in accordance with the Company’s existing policies (in each case,
subject to Section 8 of this Agreement).  In addition, the Company
shall pay to the Executive a lump sum of $7,682.35 as reimbursement for health
and medical insurance premiums for the six month period following the Separation
Date.  The Executive shall be entitled to exercise any stock options
held by the Executive on a “cashless” basis at any time such options are
exercisable pursuant to their terms.

       

      The
Company shall provide to Executive the actual electronic equipment used by
Executive including computer, printer, phone and other items (a total value of
less than one thousand dollars).

      


      3.           Health
Insurance Transitional Support.  Company will comply with its
obligations and provide all required notices to Executive of Executive’s rights
under the Consolidated Omnibus Budget Reconciliation Act ("COBRA").

       

      4.           Confidentiality.  Executive
agrees to keep the terms of this Agreement strictly
confidential.  Executive may only disclose the information in this
Agreement to Executive’s immediate family, attorney(s) and/or tax advisor(s)
unless ordered to do so by a duly authorized subpoena issued by an appropriate
agency or court of law.

       

      5.           Confidential
Information; Non-solicitation; Non-disparagement and
Cooperation.   Executive acknowledges, agrees and reaffirms that
he remains bound by the provisions of Sections 7 and 8 of the Employment
Agreement, which sections are incorporated herein and remain in full force and
effect.  The Executive agrees that he will not, directly or
indirectly, disparage the commercial, business, professional or financial
representation of the Company or its current, former or future officers,
directors, employees or agents.

       

      6.           Waiver
of Claims.  Executive, individually and on behalf of Executive’s
estate, heirs, personal representatives, and assigns hereby release, remise and
forever discharge the Company of and from any and all actions, causes of action,
claims, debts, dues, accounts, accountings, losses, liabilities, contracts,
commitments, rights, obligations, damages, costs and expenses, including without
limitation litigation expenses and attorneys fees, of any nature whatsoever,
whether known or unknown, liquidated or contingent, whether now existing or
hereafter arising, (each individually a “Claim” and all of the foregoing
collectively called “Claims”), which Executive had, now has, or may in the
future have, including without limitation any Claims: (a) for libel, slander,
defamation, or tortuous interference with actual or prospective business or
contractual relations, which are based in whole or in part on any facts,
circumstances or events which are now existing or which occurred on or prior to
the date hereof, or (b) for breach of contract, wrongful discharge, non-payment
of wages or other sums with the sole exception of Claims arising under the
express provisions of this Agreement.

       

      
        
           


        

        
           


          
            

          

        

        
           


        

      


      Except as
expressly provided to the contrary in the first paragraph of this Section 6, the
Claims and rights being released in this section include, but are not limited
to: all Claims and rights arising from or in connection with any agreement of
any kind Executive may have had with Company, or in connection with Executive’s
status or separation of employment from Company; all Claims and rights for
wrongful discharge (whether in common law or pursuant to the Arizona Employment
Protection Act), breach of contract, either express or implied, emotional
distress, back pay, front pay, benefits, fraud, or misrepresentation; all Claims
and rights, if any, arising under the Civil Rights Acts of 1964 and 1991, as
amended, (which prohibits the discrimination in employment based on race, color,
national origin, religion or sex), the Americans with Disabilities Act (ADA), as
amended (which prohibits discrimination in employment based on disability), the
Age Discrimination in Employment Act (ADEA), as amended (which prohibits age
discrimination in employment), the Employee Retirement Income Act of 1974
(ERISA), as amended, all other wage and hour/wage payment statutes and laws, the
Arizona Civil Rights Act and all similar state or local fair employment
practices statutes and laws, and the Health Insurance Portability and
Accountability Act (HIPPA), to the extent such statutes and laws may be
applicable; and, any and all other Claims or rights whether arising under
federal, state, or local law, rule, regulation, constitution, ordinance or
public policy.

      


      Executive
acknowledges that the Executive is waiving any rights Executive may have under
the Age Discrimination in Employment Act, that Executive was advised to review
this Agreement with Executive’s legal counsel before signing the Agreement, that
Executive has been advised to carefully read the provisions of this release,
that Executive understands its contents, that Executive has twenty one (21) days
from the date Executive received a copy of this release to consider entering
into this release and accepting the payments provided for herein, and that if
Executive signs and returns this release before the end of the 21-day period,
Executive will have voluntarily waived Executive’s right to consider this
release for the full twenty one (21) days.

      


      Executive
acknowledges that Executive may revoke this release within seven (7) days of
Executive’s execution of this Agreement by submitting written notice of
Executive’s revocation of this release and of this Agreement to the Chief
Operations Officer of the Company.  Executive also understands that
this release and Agreement shall not become effective or enforceable until the
expiration of that 7-day period without Executive having given such
notice.  If Executive gives such notice of revocation, then this
Agreement will be null and void and of no further force and effect.

      


      Executive
agrees that if any provision of this release is or shall be declared invalid or
unenforceable by a court of competent jurisdiction, then such provision will be
modified only to the extent necessary to cure such invalidity and with a view to
enforcing the parties’ intention as set forth in this release to the extent
permissible and the remaining provisions of this release shall not be affected
thereby and shall remain in full force and effect.

      


      7.           No
Wronging by Company.  Executive acknowledges and understands that by
offering and/or executing this Agreement, Company does not admit, and indeed
expressly denies, that Company, its employees, managers, agents, directors and
officers have done anything improper or violated any law.  The signing
of this Agreement is not an admission of liability or wrongdoing by Company, its
employees, managers, agents, directors or officers.

       

      8.           Taxes.  Company
will withhold all appropriate taxes and issue to Executive an IRS Tax Form
W-2.  The parties acknowledge, however, that there may be tax
consequences for Executive in excess of the amounts withheld from the
consideration described in Paragraph 2 of this Agreement.  It is
expressly understood that Executive is responsible for all taxes which Executive
may owe as a result of Executive receiving the consideration under this
Agreement.  Executive expressly understands that if Executive or
Executive’s family owe taxes, or additional taxes, at any time as a result of
the impact of this Agreement, that Executive alone is responsible for making
those payments and that Executive will not seek additional sums from Company to
make those payments.  Similarly, if Executive seeks to recover certain
portions of or all of the withheld amounts from the appropriate taxation
authorities, such a recovery would be a private matter between Executive and the
appropriate government agency or agencies.  Company will not provide
Executive with, nor will Executive ask for, any additional funds to offset the
amount paid or owed in taxes, accrued interest, penalties or for attorneys fees
which Executive may incur in resolving Executive’s claims with any government
agency or agencies or courts of law.

       

      9.           Executive’s
Coverage Under Directors and Officers Liability Policy.  The
conclusion of Executive’s employment with Company does not affect Executive’s
coverage under Company’s Directors and Officers Liability Policy for acts or
omissions by Executive which occurred in the course of Executive’s performance
of Executive’s duties and responsibilities on behalf of
Company.  Executive will not have coverage under Company’s Directors
and Officers Liability Policy for services, acts or omissions to act by
Executive subsequent to the Separation Date.

       

      10.         Complete
Interpretation.  The terms contained in this Agreement are the only
terms agreed upon by Executive and Company.  Notwithstanding any other
statements, all benefits which Executive had as a result of Executive’s
employment, and which are not expressly listed in this Agreement, terminate in
accordance with Company’s benefit contracts, but in no case later than the end
of the revocation period referred to in Section 6.  It is the express
intent of the parties that this Agreement fully integrates and expressly
replaces any other terms (other than sections 7 and 8 of the Employment
Agreement which sections are incorporated herein and remain in full force and
effect), conditions, conversations, discussions, or any other issues which were
discussed regarding Executive’s employment at Company, or for any and all
reasons based on conduct which has occurred through the date of executing this
Agreement.  With the exception of the Confidentiality and Assignment
Acknowledgement and Agreement signed by Executive while employed by Company and
Sections 7 and 8 of the Employment Agreement (which sections are incorporated
herein and remain in full force and effect), any other conversations, promises
or conditions which do not appear in this document are waived or rejected by
agreement of Executive and Company.

       

      
        
           


        

        
           


          
            

          

        

        
           


        

      


      11.         Interpretation
and Enforcement.  Because Executive has been advised to seek counsel
prior to signing this Agreement, the parties agree that the general rule that
the document shall be interpreted against the party that drafted it shall not
apply to any subsequent issue of interpretation.  In the event a
dispute arises over the terms of this Agreement, both Executive and Company are
equal without regard to who authored this document.  All claims,
disputes or issues of interpretation which arise, or may arise, out of this
Agreement shall be resolved by an Arbitrator under the American Arbitration
Association’s Rules and Procedures for Employment Cases.  The
Arbitrator shall have the power to order appropriate remedies for any proven
breaches of this Agreement.  However, each side shall bear its own
attorneys fees.  The decision and award of any Arbitrator shall be
final and binding.  The Parties agree to keep any Decision and Award
confidential.

       

      12.         Counterparts.  This
Agreement may be signed in separate counterparts.

       

      13.         Signatures

       

      
        
          
            
              
                
                  
                    
                      
                        	
                                  /s/ Kenneth M.
    Wallace

                              	 	 
      
	 
      	 	 
      
	
                                Kenneth
      M. Wallace

                              	 	
                                Date:  September
      1, 2009

                              
	 
      	 	 
      
	
                                  /s/
      Joseph C. Hayden

                              	 	 
      
	 	 	 
	
                                Applied
      Energetics, Inc.

                              	 	
                                Date:  September
      1, 2009

                              
	 	 	 
	

                                By:

                              	
                                

                                  Joseph
      Hayden, COO

                                

                              	 	
                                 

                              
	 	 	 	 
	
                                Authorized
      Agent of Company