Document:

Exhibit 10.1

 

CONFIDENTIAL

 

CONFIDENTIAL SETTLEMENT AGREEMENT
AND RELEASE

 

This
Confidential Settlement Agreement and Release (“Settlement Agreement”) is entered into as of September 24,
2020 (“Effective Date”), by and among Applied Energetics, Inc. (“AE”), George Farley (“Farley”),
and AnneMarieCo. LLC (“AMC” and together with AE and Farley, “Parties”).

 

WHEREAS, in February 2016, while the sole
director of AE, Farley approved AE’s issuance of twenty-five million (25,000,000) shares of AE common stock to Farley;

 

WHEREAS, in April 2016, Farley transferred
twenty million (20,000,000) shares to AMC (the “AMC Shares”) and Farley retained five million (5,000,000) shares the
(“Farley Shares” and with the AMC Shares, the “Shares”);

 

WHEREAS, on July 3, 2018, AE filed an action
captioned Applied Energetics, Inc. v. George Farley and AnneMarieCo., LLC, C.A. No. 2018-0489 (the “Action”)
in the Delaware Court of Chancery (the “Court”), and an amended complaint on March 4, 2019, asserting claims for breaches
of the duty of loyalty, breaches of the duty of care, and conversion against Farley, aiding and abetting against AMC, fraudulent
transfer against Farley and AMC, and seeking to cancel and invalidate the Shares, which claims Farley and AMC deny;

 

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CONFIDENTIAL

 

WHEREAS,
on August 3, 2018, Farley filed counterclaims against AE and on July 19, 2019, filed amended counterclaims against AE asserting
claims for breach of contract and unjust enrichment relating to his salary, and seeking validation of the Shares under 8 Del.
C. § 205 (the “Farley Counterclaims”), which claims AE denies;

 

WHEREAS, on July 19, 2019, AMC filed a
counterclaim against AE seeking validation of the AMC Shares under 8 Del. C. § 205 (the “AMC Counterclaim”
and with the Farley Counterclaims, the “Counterclaims”), which claim AE denies;

 

WHEREAS, on August 21, 2018, pursuant to
an order of the Court, AE posted a bond in favor of Farley and AMC, which was subsequently increased to $582,377.26 on or about
January 29, 2019 (the “Bond”);

 

WHEREAS, on or about July 8, 2020, Farley
made a demand on AE for advancement of attorneys’ fees and expenses arising from the Action under an Indemnification Agreement
dated November 9, 2011 (the “Advancement Claim”), which claim AE denies;

 

WHEREAS, under the Indemnification Agreement
and Delaware law, Farley might have indemnification rights relating to the Action (the “Indemnification Claim”), which
AE denies;

 

WHEREAS,
on August 3, 2020, the Court issued a memorandum opinion granting AE’s motion for partial summary judgment declaring
that the Shares were invalidly issued, but denying AE’s motion on the Counterclaims under 8 Del. C. § 205
and the Farley Counterclaims for breach of contract and unjust enrichment;

 

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CONFIDENTIAL

 

WHEREAS, the Parties participated in a
confidential mediation before William Johnston, Esq. on September 3, 2020 (“Mediation”), and at the Mediation, agreed
in principle to a full and final settlement of their disputes; and

 

WHEREAS, the Parties, with the advice of
competent counsel, have concluded that a full and final settlement of their disputes, including the Action and the Advancement
Claim, is in their respective best interests;

 

NOW, THEREFORE, to give effect to the foregoing
and in consideration of the promises contained in this Settlement Agreement, and for other good and valuable consideration, the
adequacy and receipt of which hereby is acknowledged, the Parties agree as follows:

 

1. Shares Validation and Repurchase.

 

a.
On or before September 24, 2020, the Parties shall file a Stipulation and [Proposed] Final Judgment in the Action (the
“Stipulated Judgment”), in the form attached hereto as Exhibit A, providing (1) for the validation of one million
(1,000,000) of the Farley Shares and four million (4,000,000) of the AMC Shares pursuant to 8 Del. C. § 205
(collectively, the “Validated Shares”), (2) for the invalidity of the remaining 20 million (20,000,000) Shares,
(3) for the dismissal with prejudice of all claims asserted in the Action, (4) for the release of the Bond and all claims of
Farley and AMC to the Bond, and (5) that each side shall bear his/its own costs and attorneys’ fees.

 

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CONFIDENTIAL

 

b. Upon entry by the Court of the Stipulated
Judgment, AE may cancel the remaining twenty million (20,000,000) Shares.

 

c. Upon entry by the Court of the Stipulated
Judgment, AE shall purchase, and does hereby purchase, the Validated Shares for the sum of One Million Five Hundred Thousand Dollars
($1,500,000.00) (the “Settlement Amount”).

 

d. Within three (3) business days of entry
by the Court of the Stipulated Judgment, AE shall pay to Farley and AMC the sum of One Million Dollars ($1,000,000.00) of the Settlement
Amount by wire transfer to the following IOLA Trust Account (the “IOLA Account”):

 

TD Bank

2 Wall Street

New York, NY 10005

(646) 344-4800

 

IOLA Account

Gusrae Kaplan Nusbaum, PLLC as attorneys – (212) 269-1400

120 Wall Street

New York, NY 10005

ABA # 026013673

Account # 7923153741

Swift Code: NRTHUS33

 

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CONFIDENTIAL

 

e. Counsel for Farley and AMC shall hold
the Settlement Amount in trust until AE’s receipt of the original share certificates for the Farley Shares and the AMC Shares
described in subparagraph f, below.

 

f. Within three (3) business days of entry
of the Stipulated Judgment by the Court, AE shall take all steps necessary to release the funds securing the Bond and cause $500,000
of the Bond funds to be paid to Farley and AMC in partial payment of the Settlement Amount. If, for whatever reason, the funds
securing the Bond are not released and the $500,000 has not been received by Farley and AMC within thirty (30) days of entry of
the Stipulated Judgment, AE shall pay Farley and AMC $500,000 by wire transfer pursuant to instructions provided by their counsel.

 

g. Within three (3) business days of AE’s
payment of the Settlement Amount to Farley and AMC’s counsel’s IOLA Account, Farley and AMC shall return to AE the
original certificates reflecting the Farley Shares and the AMC Shares, signed by each, via hand-delivery or Federal Express with
next-day delivery to Continental Stock and Transfer Company, Attn: Henry Farrell, One State Street Plaza, 30th Floor, New York,
NY 10004. Continental Stock and Transfer Company’s receipt of the original certificates shall be considered receipt by AE
of the original stock certificates.

 

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CONFIDENTIAL

 

h. Upon
AE’s receipt of the original certificates reflecting the Farley Shares and the AMC shares, duly endorsed by each, the
receipt of which AE shall promptly notify counsel for Farley and AMC, Farley and AMC’s counsel may release the
Settlement Amount from the IOLA Account.

 

2.
Releases.

 

a. Effective upon
receipt by Farley and AMC of the full Settlement Amount and AE’s receipt of the original certificates reflecting the Farley
Shares and the AMC shares, Farley and AMC on one hand and AE on the other hand, for themselves and for each of their past, present,
and future assigns, successors, predecessors, indemnitees, indemnitors, agents, attorneys, estates, officers, employees, directors,
managers, affiliates, partners, members, limited partners, shareholders, unitholders, direct and indirect parent entities, direct
and indirect subsidiary entities, and owners (collectively, the “Global Releasors”), do hereby forever waive, release,
and discharge each other and each of their past, present, and future assigns, successors, predecessors, indemnitees, indemnitors,
agents, attorneys, estates, officers, employees, directors, managers, affiliates, partners, members, limited partners, shareholders,
unitholders, direct and indirect parent entities, direct and indirect subsidiary entities, and owners (collectively, the “Global
Releasees”) from the Global Claims (as defined below).

 

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b. Each Global Releasor shall not initiate,
cause to be initiated, or assist in initiating any adversarial suit or proceeding against any Global Releasee based upon a Global
Claim.

 

c.
For purposes of this Settlement Agreement, the term “Global Claims” shall mean any and all manner of known or
unknown claims, actions, causes of action, differences, disputes, demands, discovery requests, debts, liabilities, liens,
rights, contracts, agreements, promises, duties, suits, proceedings, restitution, penalties, judgments, damages, losses,
reckonings, executions, or other obligations whatsoever of every name and nature, in law or in equity or otherwise, direct or
derivative, fixed or contingent, accrued or not, arising from the beginning of time through the Effective Date, including
without limitation, claims asserted in the Complaint, the Farley Counterclaims, the AMC Counterclaim, the allegations made in
or circumstances underlying the Action, the Advancement Claim, or the Indemnification Claim, but specifically excluding
claims relating to the execution, performance, enforcement, or interpretation of this Settlement Agreement. Notwithstanding
the foregoing, the Global Claims being released in this Settlement Agreement shall not include the claims asserted in the
lawsuit titled Gusrae Kaplan Nusbaum PLLC et al. v. Applied Energetics, Inc. et al., United Stated District Court,
Southern District of New York Case No. 1:19-CV-06200 (DCF) (“Gusrae Kaplan Lawsuit”), any claims by anyone
arising out of the filing and prosecution of the Gusrae Kaplan Lawsuit, or any claims AE may have against Gusrae Kaplan
Nusbaum, PLLC, or any attorney at Gusrae Kaplan Nusbaum, PLLC, regarding their former representation of AE.

 

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CONFIDENTIAL

 

3.
Waiver of California Civil Code section 1542 and similar laws. The Parties understand and agree that all rights
under Section 1542 of the Civil Code of California and any similar law of any state or territory of the United States are hereby
waived with respect to the releases set forth in Section 2 hereinabove. California Civil Code Section 1542 reads as follows:

 

A general release does not extend to claims that the creditor
or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known
by him or her, would have materially affected his or her settlement with the debtor or released party.

 

4.
Representations & Warranties.

 

a. The Parties represent
and warrant that each individual executing this Settlement Agreement possesses the actual authority to bind the Party on whose behalf each individual is executing this Settlement
Agreement, including the respective Party’s past, present, and future assigns, successors, predecessors, indemnitees, indemnitors,
agents, attorneys, estates, officers, employees, directors, managers, affiliates, partners, members, limited partners, shareholders,
unitholders, and owners.

 

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CONFIDENTIAL

 

b. Each Party represents and warrants that
such Party has not assigned or otherwise transferred in whole or in part any interest in the Global Claims.

 

c. Each Party represents and warrants that
he/it is unaware of any fact, circumstance, condition, agreement or other factor which would render such Party unable to perform
this Settlement Agreement in the manner required of such Party, or otherwise has any reason to believe this Agreement cannot or
will not be fully performed by such Party under its terms..

 

d. AE represents and warrants that it will
cause to be issued to Farley and AMC Form 1099s with their respective portions of the Settlement Amount and that it will cause
no other or different tax documents to be issued, including a Form W-2.

 

e. Farley and AMC warrant that they have
not sold, transferred, pledged, hypothecated, or encumbered the Shares, or any of them, other than as specified herein. Farley
and AMC shall indemnify and hold AE harmless from any and all claims to the Shares or any interest therein from any third party.

 

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CONFIDENTIAL

 

5. Confidentiality & Non-Disparagement.

 

a. The Parties acknowledge that AE is required
by law to publicly disclose this Settlement Agreement and its material terms in filings with the Securities and Exchange Commission
(“SEC”). Specifically, AE is an issuer with a class of securities registered under Section 12 of the Securities Exchange
Act (15 U.S.C. § 78a et seq.) and is required by 17 C.F.R § 240.13a-11 to file a Form 8-K for any “material definitive
agreement not made in the ordinary course of business[.]” The Parties acknowledge that this Settlement Agreement amounts
to a “material definitive agreement not made in the ordinary course of [AE’s] business[.]” Moreover, AE is required
to publicly file this Settlement Agreement in full with the SEC as an exhibit either in a Form 8-K or in AE’s next Form 10-Q,
pursuant to Item 601 of Regulation S-K, 17 C.F.R. § 229.601(a)(4). The Parties further agree and acknowledge that no information
in this Settlement Agreement may be redacted from public disclosure pursuant to 17 C.F.R. § 229.601(a)(6) as a clearly unwarranted
invasion of personal privacy.

 

b.
Excepting AE’s reporting obligations to the SEC or as may otherwise be required by law, each Party shall keep strictly
confidential the terms of this Settlement Agreement (including without limitation the Settlement Amount); the terms of any
term sheet prepared in connection with the Mediation or the Action; the content of any other agreement or document relating
to the settlement or this Settlement Agreement (including without limitation any drafts of the Settlement Agreement); or any
of the communications, information, or transactions related to the foregoing matters or to the Mediation (“Confidential
Information”).

 

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CONFIDENTIAL

 

c.
Notwithstanding the preceding subsection b, a Party may properly respond to a legally enforceable subpoena (whether seeking
documents or testimony), document request in litigation, government investigation, or other legally enforceable process from
a third party seeking Confidential Information, so long as the responding Party has first (1) taken all reasonable steps to
designate or otherwise protect the Confidential Information pursuant to a protective order or other formal written assurance
of confidentiality; and (2) provided the other Party or Parties with prompt written notice of the third-party request and an
opportunity to object to the request. In addition, notwithstanding the preceding subsection b, the Parties may disclose (1)
this Settlement Agreement and/or the contents hereof to their spouse, accountants or auditors, financial or tax advisors, tax
authorities (including but not limited to the Internal Revenue Service or the tax authorities of any states where the Parties
must file state tax returns), and legal counsel for the purpose of obtaining professional advice and (2) Confidential
Information to tax advisors, and to tax authorities (including but not limited to the Internal Revenue Service or the tax
authorities of any states where the Parties must file state tax returns) to the extent reasonably necessary to substantiate a
tax position on or tax treatment of the Settlement Amount in response to inquiries, demands, audits, or litigation initiated
by such authorities (such substantiation, the “Permitted Purpose”)—in the cases of both (1) and (2), so
long as the producing Party has first taken all reasonable steps to obtain a formal written assurance of confidentiality from
the receiving person, entity, or agency, as applicable. Non-confidential statements, in response to press inquiries or
otherwise, regarding in any way the Confidential Information, the Action, this Settlement Agreement, or the resolution of the
Action shall be limited to a short written or oral statement that the Parties have amicably resolved their disputes on a
confidential basis and agreed to dismiss the litigation between the Parties, or words with the same essential substance and
effect.

 

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CONFIDENTIAL

 

d. The Parties shall not, directly or indirectly,
in any manner whatsoever, do or communicate (or cause or encourage their agents or representatives to do or communicate) anything
regarding, relating to, or arising from the Action, the Settlement Agreement, or the facts and circumstances of the Action’s
underlying disputes that could reasonably be expected to defame, disparage, denigrate, or injure the business or reputation of
any other Party or (to the extent a Party is a natural person) any of a Party’s family members.

 

e. The Parties agree
that a violation of this Section 5 cannot be fully compensated by damages or other legal remedy, and that the non-breaching Party
or Parties would be irreparably and immediately harmed by such an act. Therefore, the non-breaching Party or Parties shall, in
addition to all other remedies, be entitled to receive a declaratory judgment and/or an injunction (including any preliminary,
emergency, and/or mandatory relief properly demanded) against any conduct that violates or threatens to violate this Section.

 

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CONFIDENTIAL

 

6.
No Admissions. Nothing in the Settlement Agreement or any of the negotiations, communications, or transactions related
to it shall be construed or deemed as, or offered as evidence of, an admission of liability, wrongdoing, fault, or other purported
facts or legal conclusions by any Party or a Party’s representatives; provided that nothing herein shall prevent the Settlement
Agreement or any of its terms from being used, offered, or received in evidence in any proceeding to enforce any or all of the
terms of this Settlement Agreement.

 

7.
Entire Agreement; No Reliance on Matters Outside of the Agreement.

 

a. This Settlement Agreement contains the
complete agreement of the Parties and their counsel, and shall not be modified except in a writing executed by all Parties. The writing requirement contained
in the preceding sentence shall also apply to any purported agreement to waive or dispense with such writing requirement.

 

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CONFIDENTIAL

 

b. This Settlement Agreement merges and
supersedes any and all other prior agreements, discussions, negotiations, and communications among the Parties.

 

c. Each Party agrees, acknowledges, and
expressly represents and warrants that he/it has relied solely upon his/its own informed judgment, together with advice of counsel,
when deciding whether to enter into this Settlement Agreement. Each Party further agrees, acknowledges, and expressly represents
and warrants that he/it will not and has not relied on any statement, omission, promise, representation, warranty, condition, inducement,
agreement, or communication made by or on behalf of any other Party (whether oral, written, or implied or made through a course
of conduct), unless the matter relied upon is specifically contained within the text of this Settlement Agreement. Each Party agrees,
acknowledges, and expressly represents and warrants that he/it: (i) has made such investigation or inquiry as he/it deems necessary
or appropriate in connection with the subject matter of this Settlement Agreement, (ii) has been afforded the opportunity to negotiate
as to any and all terms hereof, and (iii) is executing this Settlement Agreement voluntarily, free from any undue influence, coercion,
duress, or menace of any kind.

 

8. Severability.
If at any time after the Effective Date any provision of this Settlement Agreement is held to be illegal, void, or
unenforceable, that provision will have no force and effect. However, the illegality or unenforceability of that provision
will not have any effect on, and will not impair the enforceability of, any other provision of this Settlement Agreement,
unless the illegal or unenforceable provision includes payment of the Settlement Amount or the sale/purchase, return and/or
cancellation of the Shares.

 

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CONFIDENTIAL

 

9.
Successors and Assigns. This Settlement Agreement shall be binding upon, and shall inure to the benefit of, the
Parties and their respective assigns, indemnitees, indemnitors, agents, attorneys, employees, successors, heirs, executors, or
administrators.

 

10.
Choice of Law. This Settlement Agreement and any dispute or action arising out of or relating to this Settlement
Agreement will be governed exclusively by the laws of the State of Delaware (without regard to conflict of law principles).

 

11.
Jurisdiction.

 

a. The Parties agree
to the Delaware Court of Chancery’s exclusive jurisdiction, including personal jurisdiction, over this Settlement Agreement
and any and all disputes arising out of or relating in any way to the Settlement Agreement or its interpretation, negotiation,
or effect, whether those disputes arise in contract, law, equity, tort, or otherwise, or if the Delaware Court of Chancery declines
to accept jurisdiction over a particular matter any state or federal court within the State of Delaware. The Parties knowingly
and irrevocably waive the right to a trial by jury in connection with any such action suit or proceeding. The Parties will not
contest the personal and subject matter jurisdiction over proceedings instituted pursuant to this Section 11 of the Court of Chancery
(or that of the state or federal courts within the State of Delaware if the Court of Chancery declines to accept jurisdiction),
and the Parties waive and agree not to assert by way of motion, defense, or otherwise any claim challenging such jurisdiction.
The Parties agree that the Court of Chancery (or the state or federal courts within the State of Delaware if the Court of Chancery
declines to accept jurisdiction) is a convenient forum to resolve any such disputes, and the Parties waive and agree not to assert
by way of motion, defense, or otherwise any claim (1) that some other forum would be more or equally convenient or appropriate
or (2) that any action brought pursuant to this Section 11 should be (A) dismissed on grounds of forum non conveniens,
(B) transferred or removed to any court other than the above-named court, or (C) stayed by reason of the pendency of some other
proceeding in any court other than one the above-named court.

 

b. Notwithstanding
Section 11(a), nothing in this Section 11 shall prevent a Party from enforcing any order of the Delaware Court of Chancery (or the state or federal courts within the State of
Delaware if the Court of Chancery declines to accept jurisdiction) relating to this Settlement Agreement by filing an action or
other proceeding or seeking other appropriate relief in an appropriate non-Delaware jurisdiction, to the extent such action, proceeding,
or relief is necessary to give full effect to or to fully enforce such order of the Delaware Court of Chancery.

 

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CONFIDENTIAL

 

12. Fees
& Costs. In the event any Party commences against any other Party or Parties any litigation or other action,
arbitration, or similar adjudicatory proceeding (“Proceeding”) arising out of or relating to the Settlement
Agreement or its interpretation, negotiation, or effect, the prevailing Party in such Proceeding shall be entitled to recover
from the other Party or Parties all reasonable fees, costs, and expenses (including without limitation reasonable
attorneys’ fees and litigation expenses) incurred by the prevailing Party in the Proceeding. Except as otherwise
expressly set forth in this Section 12, each Party shall bear its own legal and other fees, costs, and expenses incurred in
connection with the Action or the Mediation, including such Party’s fees, costs, and expenses incurred in the
preparation and performance of this Settlement Agreement.

 

13. Construction.
The Parties have participated jointly in the negotiation and drafting of this Settlement Agreement. In the event an ambiguity
or question of intent arises, this Settlement Agreement shall be construed as if drafted jointly by the Parties and no
presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Settlement Agreement, as the interests of each Party was ably advocated by counsel in conjunction with the
drafting and negotiation of this Settlement Agreement.

 

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CONFIDENTIAL

 

14. Survival.
All representations, warranties, and agreements set forth in this Settlement Agreement shall be deemed continuing and shall
survive the Effective Date.

 

15. Waiver.
Any Party’s failure to enforce any provision or provisions of this Settlement Agreement shall not in any way be
construed as a waiver of any such provision or provisions, nor prevent any Party from thereafter enforcing each and every
other provision of this Agreement. Any waiver by any Party of any breach of this Settlement Agreement by any other Party
shall not be deemed a waiver of any other prior or subsequent breach of this Settlement Agreement.

 

16. Modification.
This Agreement may be supplemented, amended, or modified only by a writing signed by the Party or Parties to be charged.

 

17.
Reasonable Best Efforts. The Parties agree to use their reasonable best efforts to carry out and effectuate the
terms and purposes of this Settlement Agreement.

 

18.
Headings. Any headings used herein are for convenience of reference only and shall not affect the construction
of or be taken into consideration in interpreting this Settlement Agreement.

 

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CONFIDENTIAL

 

19.
Counterparts; Effectiveness. This Settlement Agreement may be entered into in any number of counterparts and by
the Parties to it on separate counterparts, including counterparts that are provided to the other Parties by facsimile or by electronic
mail transmission (i.e., in .pdf or .tiff format), each of which when executed and delivered shall be an original, but
all the counterparts shall together constitute one and the same instrument.

 

20. Notice.
All notices pertaining to this Settlement Agreement shall be sent in writing via e-mail and prepaid overnight courier or the
equivalent thereof by a recognized delivery service. All such notices and other documents shall be sent to the following
addresses:

 

If to AE 

 

Applied Energetics, Inc.

2480 W Ruthrauff Road, Suite 140Q

Tucson AZ 85705

 

With copies (which shall not constitute notice) to:

 

Benjamin P. Pugh, Esq.

Enterprise Counsel Group, ALC

3 Park Plaza, Suite 1400

Irvine, CA 92614

 

If to Farley and/or AMC 

 

George Farley

89 Highwood Avenue

Tenafly, NJ 07670

 

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CONFIDENTIAL

 

AnneMarieCo.,
LLC

505
Ivy Arbor Way

Holly
Springs, NC 27540-4813

Attn:
Thomas Farley

 

With
copies (which shall not constitute notice) to:

 

Gusrae
Kaplan Nusbaum PLLC

120
Wall Street

New
York, NY 10005

Attn:
Ryan J. Whalen

 

IN
WITNESS WHEREOF, the Parties have caused this Settlement Agreement to be duly executed by themselves or their respective authorized
representatives as of the Effective Date.

 

	Applied
    Energetics, Inc.	 
	 	 	 
	By: 	/s/
    Gregory J Quarles	 

	Printed
    name:	Gregory
    J Quarles	 

	Title:	CEO
    	 
	 	 	 
	George
    Farley	 
	 	 
	/s/
    George Farley	 
	 	 
	 	 	 
	AnneMarieCo.,
    LLC	 
	 	 	 
	By:	/s/
    Thomas Farley          	 

	Printed
    name: 	Thomas
    Farley	 

	Title: 	Managing
    Director	 

  

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EXHIBIT
A

IN
THE COURT OF CHANCERY OF THE STATE OF DELAWARE

 

	

        APPLIED
        ENERGETICS, INC.,

        a
        Delaware Corporation,

          

        Plaintiff/Counterclaim

        Defendant,

         

        v.

         

        GEORGE
        FARLEY, an individual,

        and
ANNEMARIECO., LLC, a 

New Jersey limited liability company,

         

        Defendants/Counterclaim

        Plaintiffs.
	)

                                               )

                                               )

                                               )

                                               )

                                               )

                                               )

                                               )

                                               )

                                               )

                                               )

                                               )

                                               )

                                               )
	

C.A.
    No. 2018-0489-JTL

 

STIPULATION AND

[PROPOSED] ORDER OF FINAL JUDGMENT

 

WHEREAS, Applied Energetics, Inc. (“AE”)
filed a First Amended Verified Complaint on March 4, 2019 (the “Complaint”) (Trans ID 63023572), seeking, among other
things, to invalidate and cancel twenty-five million shares of AE’s common stock issued to George Farley in March 2016 (the
“Shares”);

 

WHEREAS, George Farley (“Farley”)
filed an Answer and Counterclaims on July 19, 2019 (“Farley Counterclaims”) (Trans ID 63566412), seeking, among other
things, to validate the Shares pursuant to 8 Del. C. § 205;

 

WHEREAS,
AnneMarieCo. LLC (“AMC”) filed an Answer to the Complaint and Counterclaim on July 19, 2019, (with Farley
Counterclaims, the “Counterclaims”) (Trans ID 63565487) seeking, among other
things, to validate a portion of the Shares pursuant to 8 Del. C. § 205;

 

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WHEREAS, on August 21, 2018, AE posted
a bond which was subsequently increased to $582,377.26 on or about January 29, 2019 (the “Bond”);

 

WHEREAS, on August 3, 2020, the Court issued
an Opinion granting AE’s motion for partial summary judgment declaring that the Shares were invalidly issued, but denying
AE’s motion on the Counterclaims under 8 Del. C. § 205 and the Farley Counterclaims for breach of contract and
unjust enrichment;

 

WHEREAS, the parties have agreed to resolve
all their disputes in this action; NOW THEREFORE IT IS HEREBY STIPULATED AND AGREED, subject to Court approval, that:

 

1. Pursuant to 8 Del. C. §
205, the AE board’s decision and approval to issue five million (5,000,000) Shares to Farley is declared a valid corporate
act. The remaining 20 million (20,000,000) of the Shares are void.

 

2. Pursuant to 8 Del. C. §
205, one million Shares (1,000,000) held by Farley are deemed to be valid.

 

3. Pursuant to 8 Del. C. §
205, four million Shares (4,000,000) held by AMC are deemed to be valid.

 

4. Upon entry of this Stipulation and Order
of Final Judgment, the Bond, and all claims against the Bond by Farley or AMC, shall be released.

 

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5. All other claims in the Complaint are hereby dismissed with
prejudice.

 

6. All other claims in the Counterclaims
are hereby dismissed with prejudice.

 

7. Each Party shall bear his/its own costs and attorneys’
fees.

 

Dated: September ___, 2020

 

	SMITH, KATZENSTEIN & JENKINS LLP	 	MORRIS JAMES LLP
	 	 	 
	/s/  	 	/s/ 
	Kathleen M. Miller (#2898)	 	Patricia A. Winston (#5248)
	1000 West Street, Suite 1501	 	Ian D. McCauley (#5930)
	Wilmington, DE 19801	 	Kirsten A. Zeberkiewicz (#4573) 
	(302) 652-8400	 	500 Delaware Avenue, Suite 1500 
	Attorney for	 	Wilmington, DE 19801
	George Farley and AnneMarieCo, LLC	 	(302) 888-6800
	 	 	 
	 	 	and
	 	 	 
	 	 	BAYARD, P.A.
	 	 	 
	 	 	/s/
	 	 	Jason C. Jowers (#4721) 
	 	 	Elizabeth A. Powers (#5522) 
	 	 	600 N. King Street, Suite 400 
	 	 	P.O. Box 25130
	 	 	Wilmington, DE 19899
	 	 	302-655-5000
	 	 	 
	 	 	Attorneys for
	 	 	Applied Energetics, Inc.

 

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SO
ORDERED this __ day of________, 2020.

  

	 	 
	 	J. Travis Laster,
    Vice Chancellor

 

 

4Exhibit 10.2

 

CONFIDENTIAL SETTLEMENT AGREEMENT

AND RELEASE OF CLAIMS

 

THIS CONFIDENTIAL SETTLEMENT AGREEMENT
AND RELEASE OF CLAIMS is made on this 2nd day of October, 2020 by and between Applied Energetics, Inc. a Delaware
Corporation, (“APPLIED ENERGETICS”) and Stein Riso Mantel McDonough, LLP, (now known as Mantel McDonough Riso,
LLP) a New York Limited Liability Partnership (“STEIN RISO”), (collectively with APPLIED ENERGETICS, “the
Parties”).

 

Definitions

 

		A.	“APPLIED ENERGETICS” shall mean Applied
Energetics, Inc. a Delaware Corporation.

 

		B.	“APPLIED ENERGETICS-Related Persons” shall
mean APPLIED ENERGETICS, its predecessors, its successors; assigns; and its current or former attorneys, agents, servants, trustees,
representatives, insurers, and employees; consultants to the company and/or to its board of directors; all past and present shareholders,
all past and present board members and all others acting for or through APPLIED ENERGETICS.

 

		C.	“STEIN RISO-Related Persons” shall mean
STEIN RISO, its predecessors, successors (including but not limited to “Mantel McDonough Riso, LLP”), assigns, subsidiaries,
affiliates, and current and former partners (including Dennis L. Stein, Gerard A. Riso, Allan D. Mantel and Kevin M. McDonough),
of counsels (including Ivan Dreyer), associates, employees, insurers, agents, attorneys and representatives.

 

		D.	“Agreement” shall mean this Confidential
Settlement Agreement and Release of Claims.

 

		E.	“Parties” shall mean APPLIED ENERGETICS
and STEIN RISO, each of which is individually a “Party.”

 

		F.	“Lawsuit” shall mean the case titled
Applied Energetics Inc., a Delaware Corporation v. Stein Riso Mantel McDonough, LLP, Case No. 1:19-cv-01232-AJN, filed
on or about May 15, 2019 in the United States District Court for the Southern District of New York.

 

		G.	“Claims” shall mean all claims,
counterclaims, demands, actions, causes of action, debts, liabilities, damages, costs, fees, expenses, rights, duties, obligations,
liens, petitions, suits, losses, controversies, executions, offsets and sums of any kind or nature, whether direct or indirect,
liquidated or unliquidated, contingent or actual, in law or equity, known or unknown, asserted or unasserted, suspected or unsuspected
or of whatever type or nature from the beginning of time to the present.

 

     

     

    

 

In consideration of the covenants contained
herein, the Parties acknowledge, promise and agree as follows:

 

1. In
exchange for the consideration set forth in Paragraph two (2) below, APPLIED ENERGETICS and APPLIED ENERGETICS-Related Persons,
on the one hand, and STEIN RISO and STEIN RISO-Related Persons, on the other hand, (together, the “Released Parties”)
release each other from the Claims, any and all past and present claims, counterclaims, demands, actions, causes of action, debts,
liabilities, damages, costs, fees, expenses, rights, duties, obligations, liens, petitions, suits, losses, controversies, executions,
offsets and sums of any kind or nature, whether direct or indirect, liquidated or unliquidated, contingent or actual, in law or
equity, known or unknown, suspected or unsuspected or of whatever type or nature.

 

2. Within
thirty (30) days of the fully executed Agreement, STEIN RISO shall (a) cause to be paid to APPLIED ENERGETICS the amount of Three
Million Dollars and Zero Cents ($3,000,000.00) in the form of a check payable to “Enterprise Counsel Group, Client Trust
Account” via check to be delivered by APPLIED ENERGETICS’ counsel; and (b) cause the return of Ten Million (10,000,000)
shares of APPLIED ENERGETICS common stock issued to STEIN RISO on or about March 23, 2016. The date of the return of the original
share certificate(s), duly endorsed, shall be deemed to be the date of the delivery of the shares to APPLIED ENERGETICS. APPLIED
ENERGETICS will provide counsel for STEIN RISO a fully executed Internal Revenue Service W-9 form providing tax identification
for said payee. APPLIED ENERGETICS agrees that it will be responsible for any tax consequences, including the payment of any and
all taxes, as a result of entering into this Agreement. The Released Parties make no representations regarding tax consequences,
if any, of the payment made pursuant to this Agreement. The Parties shall pay their own costs and attorneys’ fees.

 

3. Within
five (5) business days of the date the payment set forth in Paragraph two (2) clears the bank account wherein said check was caused
to be deposited by APPLIED ENERGETICS, APPLIED ENERGETICS shall file a stipulation of dismissal with prejudice in the Lawsuit in
its entirety against STEIN RISO, in the form annexed hereto at Exhibit A, duly signed by the attorneys for the Parties.

 

4. This
Agreement is the result of compromise, and is entered into in good faith for the purpose of fully and finally settling all disputes
arising out of the facts alleged in or capable of being alleged in the Lawsuit, and to avoid the expense and uncertainty of further
litigation. APPLIED ENERGETICS acknowledges that the consideration set forth in Paragraph two (2) of this Agreement is valuable
and is for, among other things, the purpose of termination of the Lawsuit with prejudice, and obviating further involvement in
litigation based upon disputed claims against STEIN RISO raised by APPLIED ENERGETICS in the Lawsuit and is provided without any
admission of liability or concession whatsoever by the Released Parties that they engaged in any negligent, actionable, wrongful,
tortious or unlawful act, or violated any federal, state or local statute, ordinance, law or regulation, all of which the Released
Parties expressly deny.

 

5. The
Parties warrant and represent the following:

 

		a.	That they have read this Agreement and have consulted with
an attorney of their own choice regarding the contents and significance of this Agreement;

 

    2

     

    

 

		b.	In executing this Agreement, the Parties do so with full
knowledge of any and all rights they may have, and the contents of this Agreement and its meaning, which have been fully explained
to the Parties by their selected attorney(s);

 

		c.	The Parties understand the contents and significance of
this Agreement and enter into this Agreement freely and voluntarily;

 

		d.	The Parties have executed this Agreement with full knowledge
of any and all rights and Claims it is releasing;

 

		e.	The Parties have entered enter into this Agreement freely
and voluntarily and without duress of any kind;

 

		f.	The Parties represent that each of the individuals executing
this Agreement on its behalf is a duly authorized officer or agent of such entity and has been duly authorized by all necessary
corporate or partnership action to execute and deliver this Agreement;

 

		g.	This Agreement has been duly and validly executed and delivered
by it and constitutes its valid and binding agreement, enforceable against it in accordance with its terms;

 

		h.	The execution and delivery by it of this Agreement and
the performance of its obligations hereunder do not and will not require the consent of any individual or entity that has not
been obtained;

 

		i.	That no person or entity not bound by the Parties’
Agreement has any interest or right in the matters referred to in the Lawsuit, that the Parties have the sole right and exclusive
authority to execute this Agreement on their respective behalves.;

 

		j.	Each is a duly organized and valid entity in good standing
under the laws of its jurisdiction of organization and has full authority to conduct its business as presently conducted and to
enter into and perform its obligations under this Agreement; and

 

		k.	Each has not sold, assigned, transferred, conveyed or otherwise
disposed of any Claim or demand relating to any matter covered by this Agreement.

 

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6. Except
as described herein, the terms of this Agreement, its contents and the settlement amount set forth in Paragraph two (2) are confidential
and shall not be disclosed by any Party or their counsel except as required by legal process or by regulatory obligations to regulatory
bodies. The Parties acknowledge that APPLIED ENERGETICS has represented that it may be required by law to publicly disclose this
Agreement and its material terms in filings with the Securities and Exchange Commission (“SEC”). Specifically, APPLIED
ENERGETICS may be an issuer with a class of securities registered under Section 12 of the Securities Exchange Act (15 U.S.C. §
78a et seq.) and may be required by 17 C.F.R § 240.13a-11 to file a Form 8-K for any “material definitive agreement
not made in the ordinary course of business[.]” APPLIED ENERGETICS represents that this Agreement amounts to a “material
definitive agreement not made in the ordinary course of [APPLIED ENERGETICS’s] business[.]” Moreover, APPLIED ENERGETICS
may be required to publicly file this Agreement in full with the SEC as an exhibit either in a Form 8-K or in APPLIED ENERGETICS’s
next Form 10-Q, pursuant to Item 601 of Regulation S-K, 17 C.F.R. § 229.601(a)(4), without any information in this Settlement
Agreement being redacted from public disclosure pursuant to 17 C.F.R. § 229.601(a)(6). STEIN RISO acknowledges these representations
and does not object to disclosure of this Agreement in a regulatory filing as set forth in this Paragraph (6) only. The Parties
agree not to disclose this agreement on PACER or any other public forum except for the above-referenced regulatory filings. In
the event the parties must enforce the agreement, the parties agree to file the Agreement in camera or under seal. However, in
the event the court does not accept the agreement in camera and under seal, then and only then may the agreement be publicly filed.
The Parties further acknowledge that Hon. Alison J. Nathan maintains a rule as follows: “The Court will not retain jurisdiction
to enforce confidential settlement agreements. If the parties wish that the Court retain jurisdiction to enforce the agreement,
the parties must place the terms of their settlement agreement on the public record. The parties may either provide a copy of the
settlement agreement for the Court to endorse or include the terms of their settlement agreement in their stipulation of settlement
and dismissal.” The Parties agree that neither Party shall provide a copy of this Agreement for the Court to endorse or include
the terms of this Agreement in a stipulation of settlement and dismissal except, and until, in connection with a motion or application
by a Party to enforce the other Party’s performance under, or compliance with, the terms of this Agreement. To the extent
APPLIED ENERGETICS is required to disclose the within settlement of this Lawsuit with the SEC (or any other regulatory body) APPLIED
ENERGETICS shall include in any such disclosure that the terms of the settlement are confidential; STEIN RISO entered into said
settlement without any admission of liability; the Parties filed (or will be filing) with the Court a Stipulation of Dismissal
with Prejudice as to all claims asserted or which could have been asserted in the Lawsuit; and the Parties released each other
of all Claims. Notwithstanding the foregoing, the Parties shall be allowed to disclose the terms of this Agreement with their respective
tax professionals, administrator(s), accountants, actuaries, and attorney(s) engaged to assist and advise the respective Parties.
In the event either Party is duly served with a subpoena or other governmental or judicial process seeking to compel the disclosure
of this Agreement, its terms or contents, or the negotiations underlying this Agreement, that Party shall promptly notify the other
party. The notification must include copies of the subpoena or other discovery request or judicial process and must be sent within
five (5) business days of the receiving Party’s receipt of the subpoena or other such process or request.

 

7. The
provisions of this Agreement shall inure to the benefit of, and shall be binding upon successors in interest, assigns and legal
representatives of STEIN RISO, STEIN RISO-Related Persons, APPLIED ENERGETICS, and APPLIED ENERGETICS-Related Persons.

 

8. New
York law shall govern the validity and interpretation of this Agreement without regard to its principles on conflicts of laws.

 

9. This
Agreement sets forth the entire understanding and agreement among the Parties with respect to the subject matter hereof and supersedes
any prior or contemporaneous oral and/or written agreements or representations.

 

10. This
Agreement is the product of an arms-length negotiation and any rules of construction that it be construed against the Party preparing
it shall not apply, but rather it shall be construed as if all Parties jointly prepared this Agreement, and any uncertainty and
ambiguity shall not be interpreted against any one party.

 

    4

     

    

 

11. This
Agreement may not be altered or amended in any of its provisions except by the mutual written and signed agreement of the
Parties.

 

12. Should any of the provisions
set forth herein be determined to be invalid by any court, agency or any other tribunal of competent jurisdiction, such determination
shall not affect the enforceability of the other provisions herein and to this end the provisions of this Agreement are declared
severable.

 

13. In the event that notice to
one of the Parties must be provided under the terms of this Agreement, notice is deemed provided by sending the required notice
and/or documents and materials via certified U.S. Mail, with postage prepaid, to the respective addresses:

 

	a.	For	APPLIED	ENTERPRISE COUNSEL GROUP
	 	 	ENERGETICS:	Attn: Benjamin Pugh
	 	 	 	3 Park Plaza, Suite 1400,
	 	 	 	Irvine, CA 92614-8537

 

	 	 	 	BOND, SCHOENECK & KING, PLLC. 
	 	 	 	Attn: Jonathan Fellows
	 	 	 	One Lincoln Center
	 	 	 	Syracuse, New York 13202-1355
	 	 	 	 
	b.	For	STEIN RISO:	MANTEL MCDONOUGH RISO LLP
	 	 	 	Attn: Gerard Riso
	 	 	 	410 Park Ave 17th Floor,
	 	 	 	New York, NY 10022
	 	 	 	 
	 	 	 	WILSON ELSER MOSKOWITZ EDELMAN &
	 	 	 	DICKER LLP
	 	 	 	Attn: Joseph L. Francoeur
	 	 	 	150 East 42nd Street
	 	 	 	New York, NY 10017

 

14. This Agreement may be executed
in counterparts and/or by facsimile or electronic signatures with the same force and effect as if executed in one complete document
with the original signature of all parties.

 

15. This Agreement shall become
effective on the date that the last signatory duly executes the Agreement and upon delivery of fully executed Agreement.

 

[Signatures on following page.]

 

    5

     

    

 

IN WITNESS WHEREOF, the Parties have duly
executed this Agreement effective as of the date first above written, regardless of the date on which such Agreement is signed.

 

	STEIN RISO MANTEL MODONOUGH LLP	 
	 	 	 
	By:	/s/ Gerard A. Riso	 
	Name:  	Gerard A. Riso	 
	Title:	Partner	 
	Date:	October 2, 2020	 
	 	 	 
	APPLIED ENERGETICS, INC.	 
	 	 	 
	By:	/s/ Gregory J. Quarles	 
	Name:	Gregory J. Quarles	 
	Title:	CEO	 
	Date:	October 2, 2020	 

 

    6

     

    

 

EXHIBIT
A

 

	UNITED STATES DISTRICT COURT 

SOUTHERN DISTRICT OF NEW YORK	 	 
	
         

        APPLIED ENERGETICS, INC., a Delaware

         

        Corporation

         

        Plaintiff,

         

        -against-

         

        STEIN RISO MANTEL MCDONOUGH, LLP,

        A New York Limited Liability Partnership,

         

        Defendant.
	 	
        Case No.: 1:19-cv-01232-AJN

         

        STIPULATION OF

        DISCONTINUANCE WITH PREJUDICE 

         

        Electronically Filed

 

IS HEREBY STIPULATED
AND AGREED, by and between the undersigned attorneys of record for all the parties to the above-entitled action, that whereas
no party hereto is an incompetent person for whom a committee has been appointed and no person not a party has an interest in
the subject matter of action, the above entitled action and all claims asserted, or which could have been asserted herein by either
party, are hereby discontinued, with prejudice, without costs to either party as against the other. This stipulation may be filed
without further notice with the Clerk of the Court.

 

	Dated: October 2, 2020	 	 
	 	 	 
	 	 	 
	Jonathan B. Fellows, Esq.	 	Joseph L. Francoeur
	Brendan M. Sheehan, Esq.	 	WILSON ELSER MOSKOWITZ DICKER &
	BOND, SCHOENECK & KING, PLLC	 	EDELMAN, LLP
	Attorneys for Plaintiff APPLIED ENERGETICS, INC.	 	Attorneys for Defendant
	One Lincoln Center	 	STEIN RISO MANTEL MCDONOUGH, LLP
	Syracuse, New York 13202-1355	 	150 East 42nd Street
	 	 	New York, New York 10017-5639
	 	 	File No. 12036.00137

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