Document:

Exhibit 10.1

 

 

 

 

 

 

 

 

LEASE
AGREEMENT

 

between

 

 

CAMPUS
RESEARCH CORPORATION, 

as
Landlord

 

 

and

 

 

APPLIED
ENERGETICS, INC.,

as
Tenant

 

for

 

Suite
1500 in Building 9070

 

     

     

    

 

TABLE
OF CONTENTS

 

	1.	Premises.	5
	2.	Term.	5
	3.	Rent.	5
	4.	Project Operation Agreement.	8
	5.	Landlord Services.	9
	6.	Alterations.	9
	7.	Use of Premises; Compliance with Laws; Conduct.	10
	8.	Environmental Matters.	11
	9.	Relocation.	11
	10.	Reporting Requirements.	12
	11.	Title.	12
	12.	Condition of Premises.	12
	13.	Insurance.	12
	14.	Maintenance and Repairs Outside the Premises.	13
	15.	Signage.	13
	16.	Parking.	13
	17.	Indemnification.	14
	18.	Landlord’s Access.	13
	19.	Default of Tenant; Landlord’s Remedies.	13
	20.	Default by Landlord.	14
	21.	Subleasing.	14
	22.	Expiration or Termination; Holdover.	14
	23.	Casualty.	15
	24.	Condemnation.	15
	25.	Notices.	16
	26.	Estoppel Certificates.	17
	27.	Landlord’s Financing.	17
	28.	Brokers.	17
	29.	Landlord’s Consent and Approval.	17
	30.	Confidentiality.	17
	31.	Arbitration; Waiver of Jury Trial.	18
	32.	Additional Provisions.	18

 

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EXHIBITS

 

	Exhibit A	-	Premises
	 	 	 
	Exhibit B	-	Internet Connectivity
	 	 	 
	Exhibit C	-	Map of Tenant Non-Exclusive Parking Area
	 	 	 
	Exhibit D	-	Disbursement Request
	 	 	 
	Exhibit E-1	-	Contractor’s Release, Waiver of Liens and Indemnification
	 	 	 
	Exhibit E-2	-	Contractor’s Partial Release, Waiver of Liens and Indemnification
	 	 	 
	Exhibit F	-	Landlord’s Work

 

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LEASE

 

This
Lease (“Lease”) is entered into as of March 15, 2021, between CAMPUS RESEARCH CORPORATION, an Arizona
non-profit corporation (“Landlord”), and APPLIED ENERGETICS, INC., a Delaware corporation registered as a foreign
corporation in Arizona (“Tenant”).

 

The
Arizona Board of Regents (“ABOR”) owns the real property known as the University of Arizona Science and Technology
Park (the “UA Tech Park”), a portion of which is known as the Project. ABOR has leased the Project, including the
Premises (as defined below), to Landlord under a lease dated August 5, 1994 (as amended, the “ABOR-CRC Lease”). Tenant
is willing to sublease the Premises from Landlord as provided in this Lease.

 

In
consideration of the mutual covenants contained in this Lease, the parties agree as follows:

 

1.
Premises.

 

a.
Lease. Landlord leases to Tenant, and Tenant leases from Landlord, the premises known as Suite 1500 (the “Suite”),
a portion of the building located at 9070 South Rita Road (the “Building”) as indicated on Exhibit A, together with
internet connectivity consisting of a number of addresses and an allocation of bandwidth (if any) as Landlord and Tenant may mutually
agree from time to time. The initial number of addresses and bandwidth are indicated on Exhibit B. The Suite and the internet
connectivity are collectively referred to as the “Premises.” Landlord hereby represents and warrants that it is not
in material breach of the ABOR-CRC Lease and that it has all right and authority thereunder to enter into this Lease.

 

b.
Area. The “Usable Area” of the Premises is 11,419 square feet and the “Rentable Area” of the Premises
is 13,369 square feet (the Usable Area multiplied by the current Building load factor of 1.1708). The Rentable Area is subject
to adjustment effective each January 1st during the Term if the current Building load factor is recalculated (according
to reasonable engineering estimates as agreed upon in advance by the parties) following any internal or external reconfiguration
of other portions of the Building.

 

c.
Use of Common Areas. Tenant may use the common building entrances and hallways, restrooms and other common facilities of
the Building (the “Common Areas”) in common with Landlord, Landlord’s invitees and other subtenants of the Building.

 

2.
Term. The term of this Lease (“Term”) commences on May 1, 2021 (“Commencement Date”) and expires
on April 30, 2026 (“Expiration Date”).

 

3.
Rent.

 

a.
Payment of Rent. The Annual Base Rent shall be payable in 12 equal monthly installments, commencing on or before the Commencement
Date and thereafter in advance not later than the 25th day of the preceding calendar month. “Rent” consists
of Base Rent plus Base Operating Costs (collectively, the Base Monthly Payment), plus Additional Rent, each as defined below.

 

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b.
Base Rent.

 

Base
Rent Schedule

 

	Rent
    Year	 	Rent
    RSF	 	 	Monthly
    Rental	 	 	Annual
    Rental	 
	 	 	 	 	 	 	 	 	 	 
	May 1, 2021 – April
    30, 2022 
	 	$	6.7626	 	 	$	7,534.10	 	 	$	90,409.20	 
	May 1, 2022 – April 30, 2023
    
	 	$	9.2009	 	 	$	10,250.57	 	 	$	123,006.83	 
	May 1, 2023 – April 30, 2024
    
	 	$	11.4806	 	 	$	12,790.35	 	 	$	153,484.14	 
	May 1, 2024 – April 30, 2025	 	$	13.1740	 	 	$	14,676.94	 	 	$	176,123.20	 
	May 1, 2025 – April 30, 2026	 	$	14.9306	 	 	$	16,633.93	 	 	$	199,607.10	 

 

c.
If the Rentable Area is adjusted under paragraph 1(b), the Annual Base Rent will remain constant but amount per square foot will
adjust. The Rent will be prorated for any partial calendar months.

 

d.
Operating Costs.

 

i.
“Operating Costs” is the charge to Tenant for the Landlord services described in paragraph 5 below.

 

ii.
The monthly “Base Operating Costs” are initially estimated at $8.50 per square foot of Rentable Area.

 

iii.
If the Rentable Area is adjusted under paragraph 1(b), the Base Operating Costs will be adjusted accordingly. Before the start
of each calendar year during the Term, Landlord shall give Tenant a written statement showing the Landlord’s good faith estimated
Operating Costs for the upcoming calendar year and the amount, if any, by which such Operating Costs exceed the Base Operating
Costs. Tenant shall pay as Additional Rent the amount by which the estimated Operating Costs exceed the Base Operating Costs for
each calendar year during the Term, prorated monthly.

 

iv.
Reconciliation. Before June 1 of each year, Landlord shall give Tenant a written statement of reconciliation showing the Landlord’s
actual Operating Costs for the preceding calendar year, together with a full statement of any adjustments necessary to reconcile
the amounts paid by the Tenant and the actual Operating Costs. If the reconciliation shows that additional sums are due from the
Tenant, Tenant shall pay such sums to the Landlord within 30 days of receipt of the reconciliation. If the reconciliation shows
that a credit is due the Tenant, such credit will be credited against the next amounts coming due from the Tenant or refunded
to the Tenant, at the option of Landlord.

 

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e.
Base Monthly Payment. The Base Monthly Payment consists of Base Rent plus Base Operating Costs. The initial Base Monthly
Payment is estimated to be $17,003.81.

 

f.
Additional Rent. The monthly “Additional Rent” is all sums payable by Tenant to Landlord under this Lease other
than the Base Rent and Base Operating Costs. Tenant shall (i) pay before delinquency all excise, sales, transaction privilege,
rental occupancy or other similar taxes payable with respect to this Lease and all real property or lease excise taxes assessed
against Landlord or Tenant with respect to the Premises, and (ii) pay Landlord, with each Base Monthly Payment, Landlord’s
charge for internet connectivity (if applicable) based on Tenant’s address and bandwidth allocation and the rates established
by Landlord from time to time for users at the Project. The initial charge for internet connectivity is indicated on Exhibit B.

 

g.
Fitness Center. Tenant shall pay its pro rata share of the costs of the Fitness Center (the “Fitness Center Costs”)
located in Building 9052, including capital and operating costs. Tenant’s annual pro rata share of the Fitness Center Costs
is initially estimated at $.10 per RSF. Tenant’s pro rata share of the Fitness Center Costs will constitute Additional Rent.
A separate amount will be charged to Tenant’s employees who use the Fitness Center, subject to applicable disclosures to and authorizations
from Tenant’s employees in compliance with applicable employment laws and regulations, which will be Tenant’s responsibility
to obtain.

 

h.
Late Payments. All Late Payments of Rent will include a 6% late fee to compensate Landlord for related administrative expenses
and will bear interest at the rate of 10% per annum from the due date until paid. The term “Late Payment” shall mean
a payment of any amount due to Landlord under this Lease which has not been made within five business days following receipt by
Tenant of notice of such late payment from Landlord.

 

i.
Security Deposit. On or before execution of this Lease, Tenant shall deposit with Landlord a “Security Deposit”
of $17,004. If any of the Base Rent, Operating Costs, Additional Rent or any other sum payable by Tenant should be overdue and
unpaid or if Landlord should make payments on behalf of Tenant, or if Tenant should fail to perform any of the terms of this Lease
imposed upon Tenant, then Landlord may, at its option, without prejudice to any other remedy and without waiving any default thereby,
apply said Security Deposit or so much thereof as may be necessary to compensate Landlord toward the payment of Rent or Additional
Charges, actual expenses, costs, loss or damage (excluding indirect, incidental or consequential damages) sustained by Landlord
due to such breach on the part of Tenant, and Tenant shall within 5 business days after demand restore said Security Deposit to
the original sum deposited, failure to do so being a material default hereunder. Should Tenant comply with all of the terms of
this Lease, said Security Deposit or any balance thereof shall be returned to Tenant or, at the option of Landlord, to the last
assignee of Tenant’s interest in this Lease at the expiration of the Lease Term. Tenant expressly acknowledges and agrees,
however, that said Security Deposit may be held by Landlord beyond the expiration or earlier termination of the Lease Term until
all Rent and other sums due or to become due hereunder have been fully paid by Tenant, including without limitation the pro rating,
billing and payment of all year-end adjustments made or to be made under this Lease. In the event of bankruptcy by or against
Tenant, the Security Deposit shall be deemed immediately the property of Landlord and not part of the debtor’s estate to
be applied first to the payment of Rent and Additional Charges due Landlord for the earliest period prior to filing of such proceedings.

 

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4.
Project Operation Agreement. Except as may otherwise be prohibited by federal, state, or local laws or regulations, Tenant
shall comply with, and shall ensure that its employees and their respective invitees comply with, all provisions applicable to
an Occupant under the Project Operation Agreement between IBM and Landlord dated August 5, 1994, as amended from time to time
(collectively, the “POA”), including without limitation the rules and regulations established under the POA. Landlord
shall provide Tenant with a complete and accurate copy of the POA and any and all amendments or modifications thereto as soon
as they become available. All defined terms used in the POA have the same meaning in this Lease unless otherwise noted.

 

5.
Landlord Services.

 

a.
Maintenance and Repair. Landlord shall maintain and repair the interior of the Premises in good condition and shall provide
ordinary cleaning and trash removal service for the Premises. Landlord shall pay all charges allocated to the Premises under the
POA, including Common Services Expense and Utility Usage Charges. Tenant’s reimbursement to Landlord for Landlord services
is included in the Operating Costs as defined in paragraph 3(b). Utility Usage Charges (as defined in Section 5.2 of the POA)
will initially be apportioned based on the Rentable Area, but if Landlord reasonably determines that Tenant’s usage is disproportionate
to the Rentable Area of the Premises, then allocations related to Utility Usage Charges will be based on metering or reasonable
engineering estimates as provided for in Section 5.3 of the POA. Tenant, and not Landlord, shall obtain and timely pay for any
other utilities or telephone installation and services for the Premises.

 

b.
Tenant Improvements. After the Commencement Date of the Lease, and on Tenant’s compliance with subsections 6(a),
(b), (c), and (d) above, Landlord shall provide Tenant a tenant improvement allowance of $10,026.75 (the “Allowance”),
payable to Tenant or Tenant’s contractors within 15 business days following delivery by Tenant to Landlord of a disbursement
request accompanied by the pertinent contractor invoices in the format identified on Exhibit D, Tenant’s written approval
that the subject of the disbursement request is satisfactory to Tenant, and conditional lien waivers for such disbursement request,
all in the format identified on Exhibit E. From and after May 1, 2022, Tenant will not be entitled to obtain further advances
of the Allowance even if the full Allowance has not been disbursed as of such date, and even though tenant improvement costs of
Tenant remain unpaid as of such date.

 

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6.
Alterations.

 

a.
Defined. “Alterations” means any alterations or improvements by Tenant to the Premises. Tenant shall not make
any Alterations without Landlord’s written consent, which consent will not unreasonably be withheld but which may be given
subject to reasonable conditions. If Tenant requests Landlord’s agents, employees, contractors, or vendors to assist in
the installation of tenant improvements or to make other changes to the Premises, then Tenant shall pay Landlord a reasonable
sum, as determined by Landlord in its sole discretion, for such employees’ time and assistance. Before commencing any Alterations,
Tenant shall deliver to Landlord final plans and specifications for review and approval by Landlord and its consultants, which
approval will not unreasonably be withheld.

 

b.
Compliance. Tenant shall not commence any Alterations until Tenant has provided Landlord with written authority to proceed
from the State Fire Marshal. Tenant shall perform any Alterations in accordance with the Standard (as defined in the POA); in
conformity with all applicable laws, regulations, codes, the POA, the UA Tech Park Development Guidelines, and the UA Tech Park
Development Review Process Guide; with all necessary permits, licenses and certificates; and in substantial compliance with the
plans and specifications approved by Landlord.

 

c.
As-Built Drawings. On completion of any Alterations, Tenant shall provide Landlord with a set of as-built drawings of the
subject portion of the Premises both in hard copy and in a standard electronic computer assisted design (“CAD”) format.
Failure of Tenant to provide the as-built drawings to Landlord, both electronically and in hard-copy format within a reasonable
period of time following receipt by Tenant of notice of such failure, will constitute a Default by Tenant under this Lease. During
construction of any Alterations, Tenant shall use commercially reasonable efforts to prevent undue interference with access to
and use of the remainder of the Building and the businesses operated in the Building; provided, however, that if Tenant uses Landlord’s
agents, employees, contractors, or vendors to assist in the installation of tenant improvements or to make other changes to the
Premises in accordance with Section 6.a. of this Lease, then Landlord shall use commercially reasonable efforts to ensure that
such agents, employees, contractors or vendors do not cause any such interference.

 

d.
Liens. Tenant shall not cause any liens to be created or imposed against the Project, the Building or the Premises. In
any event, Tenant shall immediately pay, cure, discharge or bond around any such lien within a reasonable time following receipt
by Tenant of notice of such lien..

 

e.
Insurance. In connection with all construction and any Alterations performed by or on behalf of Tenant, Tenant or Tenant’s
general contractor shall maintain a policy of public liability and builder’s risk form of casualty insurance with limits
of not less than two million dollars ($2,000,000), and with the following named as additional insureds: Landlord, the State of
Arizona, ABOR, The University of Arizona, the Managing Operator under the POA (currently IBM), Wells Fargo Bank, N.A. (or its
successors) and, on Landlord’s request, any other lenders providing financing to Landlord which is secured by the Project,
the Building or the Premises. Tenant shall deliver a certificate evidencing such insurance to Landlord before commencing construction.

 

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7.
Use of Premises; Compliance with Laws; Conduct.

 

a.
Tenant may use the Premises for general office, administration and research and development activities associated with directed
energy systems.

 

b.
Tenant agrees to maintain and use, and to require in any permitted sublease that the Premises must be maintained and used as a
“project” in a “research park” under and in accordance with applicable laws, including without limitation,
Arizona Revised Statutes 35-701 et seq. and 15-1636, for so long as and to the extent that the Premises are the subject
of financing under Arizona Revised Statutes 35-701 et seq. or are designated as a “research park.” Tenant further
agrees that it shall not engage in or allow any permitted subtenant to engage in “unlimited manufacturing” so long
as the Premises are designated as a “research park.”

 

c.
Tenant shall comply with all statutes, rules, ordinances, orders, codes and regulations that are applicable to Tenant’s
use, improvement or occupancy of the Premises. Tenant shall not conduct activities that may be dangerous to life, limb or property.
The rules promulgated under the POA generally prohibit the presence of animals in the Premises. If, in the future, the rules permit
the presence of animals, then Tenant shall nevertheless be prohibited from bringing animals into the Premises for laboratory use
without Landlord’s written consent, which consent may be subject to health, safety and insurance conditions imposed by Landlord
from time to time but otherwise will not unreasonably be withheld.

 

d.
Tenant may not bring or maintain, and shall cause any subtenants to not bring or maintain, any infectious substances above Biosafety
Level 1 (as established by Biosafety in Microbiological and Biomedical Laboratories, 4th Edition, published by the Center for
Disease Control and the National Institutes of Health, as revised or supplemented from time to time (“BMBL”) on the
Premises for any purpose without Landlord’s written consent, which may be granted or withheld in Landlord’s sole discretion,
and which consent may be subject to health, safety and insurance conditions imposed by Landlord from time to time (including without
limitation review by The University of Arizona’s Institutional Biosafety Committee). In connection with the use of infectious
substances on the Premises, Tenant shall comply with the applicable procedures and protocols set forth in BMBL.

 

e.
Tenant shall conduct its activities in the Premises in such a manner that (i) no unreasonably disturbing noise from the Premises
is audible in the Premises of any other user of the Building or Project or disturbs any person in the Common Areas, (ii) no unreasonably
offensive odors are detectable outside the Premises, and (iii) no unreasonably dangerous or unsafe activities are conducted on
the Premises. However, with respect to occasional activities outside of the normal course of business such as equipment deliveries,
construction, remodeling and painting, Tenant shall make reasonable efforts to minimize any disturbing noise and offensive odors
emanating from the Premises.

 

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f.
Tenant shall comply, and cause its subtenants to comply, with A.R.S. §36-601.01 (Smoke-Free Arizona Act). In addition, Tenant
shall use reasonable efforts to cause its employees and invitees at the Premises not to smoke within thirty-five feet of the Building
or any other Building at the Project unless within designated smoking areas.

 

8.
Environmental Matters.

 

a.
Compliance. Tenant shall comply with all laws and regulations now in effect or hereafter enacted relating to the regulation
or protection of the environment, including the ambient air, groundwater, surface water, and land use, including sub-surface land
(together, “Environmental Laws”). Tenant shall immediately notify Landlord of (i) any correspondence or communication
received by Tenant from any governmental entity regarding the application of any Environmental Laws to the Premises or Tenant’s
use and occupancy of or operations conducted on the Premises, or (ii) the presence, release or discharge known to the Tenant on
or from the Premises of any hazardous material or substance regulated under any Environmental Laws.

 

b.
Environmental Indemnification. Tenant shall indemnify, defend and hold harmless Landlord, the State of Arizona, ABOR, the
University of Arizona, and their respective agents, successors and assigns from and against any loss, damage, cost, expense or
liability (including, without limitation, costs and attorneys’ fees) directly or indirectly arising out of or attributable
to the use, generation, manufacture, production storage, release, discharge, disposal or presence on or from the Premises (or
off-site of the Premises) of any hazardous material or substance regulated under any Environmental Laws caused by Tenant and its
employees, agents, contractors, licensees and invitees, including, without limitation, the costs of any required or necessary
repairs, cleanup, decontamination or detoxification of the Premises and the preparation and implementation of any closure, remedial
or other required plans.

 

c.
Decontamination. If, at any time during the Term, Tenant operates a chemistry laboratory in the Premises or otherwise stores
or uses chemicals or hazardous materials in the Premises, then within 30 days following the expiration or sooner termination of
this Lease, Tenant shall deliver to Landlord a decontamination report prepared by a qualified environmental consultant that describes
in reasonable detail the Tenant’s reasonable procedures undertaken to remove the chemicals or hazardous materials from the
Premises and to clean the pertinent areas of the Premises.

 

d.
Survival. The provisions of this paragraph survive the termination, cancellation or expiration of this Lease.

 

9.
Relocation. Landlord reserves the right at its sole discretion to relocate the Tenant to other premises within the Building
or the Project which are reasonably suitable for the Tenant’s use and occupancy of the Premises effective as of the date
provided in a notice delivered by Landlord to Tenant describing the proposed relocation, but not sooner than 90 days after the
date of the notice. If Landlord relocates Tenant under this paragraph, Landlord shall pay directly or reimburse Tenant for the
costs (subject to Landlord’s prior approval, which will not unreasonably be withheld) of moving Tenant’s personal
property and such fixtures installed by Tenant that can be removed without causing damage to the Premises.

 

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10.
Reporting Requirements. On April 1 of each year during the Term, Tenant shall provide Landlord a report showing the number
of Tenant’s employees at the Project, the annualized total payroll (with and without benefits), and the number of Tenant’s
employees residing within the Vail School District. In addition, Tenant shall provide Landlord with such other information as
Landlord may from time to time reasonably request, such as information on Tenant’s expenditures on equipment, tenant improvements,
and other construction activities at the Project, hotel and restaurant expenses, and personal service items. Landlord shall keep
such information confidential except as required by law; provided, however, that Landlord may incorporate such information, without
Tenant’s data being specifically identified, into non-confidential reports concerning aggregate employment and payroll statistics
for the Project, and Landlord may provide the information to third parties who have executed non-disclosure agreements.

 

11.
Title. Tenant’s lease of the Premises is subject to, without limitation, the following instruments and agreements
and the rights created therein: the POA; the ABOR-CRC Lease as amended from time to time; the First Amended and Restated Declaration
of Covenants and Restrictions recorded in the Office of the Pima County Recorder at Docket 10480 commencing at Page 311; and the
Leasehold Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing recorded in the Office of the Pima County
Recorder at 11832 commencing at Page 1003. Landlord hereby represents and warrants that it is in compliance with any applicable
requirements contained in the aforementioned agreements and instruments. Tenant shall not violate or cause Landlord to be in violation
of any of the aforementioned agreements and instruments.

 

12.
Condition of Premises. Tenant shall take possession of the Premises “AS-IS, WHERE IS AND WITH ALL FAULTS.”
Tenant acknowledges and agrees that Landlord has not made and Tenant has not relied on and will not rely on any representation,
warranty, assurance or guaranty whatsoever, express or implied, oral or written, regarding the condition of the Premises or the
Building, the suitability of the Premises for Tenant’s use, or any other matter pertaining to the Premises.

 

13.
Insurance. Tenant agrees that it will at all times during the term of this Lease maintain the insurance policies required
by the POA. Tenant shall name the following as additional insureds on all of its insurance policies: Landlord, ABOR, the State
of Arizona, the University of Arizona, the Managing Operator under the POA (currently IBM), Wells Fargo Bank, N.A. (or its successors)
and, at Landlord’s request, any other lenders providing financing to Landlord. Tenant’s commercial general liability
insurance shall insure against the pollution and environmental risks created by Tenant’s research activities, but may exclude
acts of vandalism. Tenant shall, before taking occupancy of the Premises, provide Landlord with certificates evidencing the insurance
policies, and shall provide Landlord with copies of the policies on Landlord’s request.

 

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14.
Maintenance and Repairs Outside the Premises. Landlord shall maintain, repair and replace the building exterior walls,
roof and structural elements, HVAC system, plumbing (to the fixtures in the Premises) and electrical system (to the lighting fixtures
and outlets in the Premises) in a commercially reasonable manner and condition, and will have the right to enter the Premises
at all reasonable times in connection with maintenance and repairs; provided, however, that Tenant shall reimburse Landlord for
such maintenance and repairs to the extent occasioned by the negligence or willful acts of Tenant, its employees and their respective
invitees. Notwithstanding any other provision of this Lease, Tenant shall repair any damage to the Premises, the Building or the
Project caused by Tenant, its employees and their respective invitees, regardless of whether caused by their negligence or otherwise.

 

15.
Signage. Landlord shall install or cause to be installed exterior signage in accordance with the POA. Subject to Landlord’s
prior review and approval, Tenant may place signs within the Premises.

 

16.
Parking. Tenant and Tenant’s employees, agents, contractors and invitees may use the non-exclusive parking spaces
allocated to Landlord under the POA. Tenant shall make all reasonable efforts to cause its employees, agents, contractors and
invitees to park only in the area indicated in Exhibit C. Tenant will provide its employees with copies of all POA parking rules
and regulations that may be promulgated or amended from time to time and provided to Tenant by Landlord.

 

17.
Indemnification. Tenant shall indemnify Landlord and hold Landlord, the State of Arizona, ABOR, and The University of Arizona
and their respective agents, successors and assigns harmless from and against any and all claims of any nature in connection with
Tenant’s breach of any of the provisions of this Lease or Tenant’s occupancy or use of the Premises, the Project or
Common Areas (including, without limitation, claims based on the conduct of Tenant, its employees and their respective invitees,
whether or not resulting from their negligence), except to the extent caused by Landlord’s negligence or willful misconduct.
Landlord shall promptly notify Tenant of any such claim; provided, however, that Landlord’s failure to notify Tenant will
not relieve Tenant of any obligation under this paragraph.

 

18.
Landlord’s Access. Landlord has the right to enter and inspect the Premises and to show the Premises to prospective
mortgagees, subtenants and tenants at all reasonable times during Tenant’s business hours and on reasonable written, oral
or telephonic notice to Tenant.

 

19.
Default of Tenant; Landlord’s Remedies.

 

The
following events, or any of them, committed by Tenant, will constitute a material breach and default by Tenant of this Lease:

 

a.
Failing to pay when due any installment or installments of Rent or any other monetary obligation of Tenant under this Lease, if
such failure continues unremedied for a period of five business days following written notice thereof given by Landlord to Tenant;
or

 

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b.
Defaulting in the observance or performance of any other material covenant, agreement or obligation of Tenant contained in this
Lease if such default continues for 10 days after Landlord gives written notice thereof to Tenant (provided Tenant will not be
deemed to be in default if the default is not reasonably subject to cure within that 10-day period, and Tenant commences
the curing of such default within the 10-day period and thereafter continuously prosecutes the curing thereof with diligence,
and in all events completes the cure within 90 days after Landlord’s original notice).

 

In
the event of any default by Tenant that is not cured within the applicable cure period (if any), Landlord may, at its option,
and without further notice or demand, do any or all of the following: (i) terminate this Lease, enter in and on the Premises with
or without process of law and remove all persons therefrom; (ii) cure the default for the account of Tenant, in which event Tenant
shall reimburse Landlord with interest from the time incurred to the time repaid at the rate of 10% per annum; and (iii) exercise
any and all other legal and equitable remedies.

 

20.
Default by Landlord. In the event that Landlord defaults in the observance or performance of any covenant, agreement or
obligation of Landlord contained in this Lease, and such default continues for 15 days after Tenant gives written notice thereof
to Landlord (provided Landlord will not be deemed to be in default if Landlord commences the curing of such default within the
15-day period and thereafter continuously prosecutes the curing thereof with diligence), then Tenant’s exclusive remedy
is to terminate this Lease.

 

21.
Subleasing. Tenant may not assign or sublease any or all of its interest in this Lease without Landlord’s prior written
consent, which consent may be withheld in Landlord’s sole discretion. Notwithstanding any assignment or sublease, Tenant
shall remain primarily liable for the performance of Tenant’s obligations under this Lease. Whether or not Landlord has
consented to an assignment or sublease, the amount by which the consideration received by Tenant under any such assignment or
sublease exceeds, in any month, the rent and other amounts payable by Tenant under this Lease will be payable by Tenant directly
to Landlord as additional rent on or before the last day of each such month.

 

22.
Expiration or Termination; Holdover.

 

a.
Surrender of Premises. On the expiration of the Term or sooner termination of this Lease, Tenant shall peaceably quit and
surrender the Premises in reasonably good condition and repair and broom clean; Tenant shall reimburse Landlord on demand for
Landlord’s cost to clean the Premises if Tenant fails to do so adequately. Except as otherwise provided in this paragraph
22, no later than 30 days before the expiration of the Term or sooner termination of this Lease, Landlord shall determine in writing
which Alterations will become the property of Landlord and which Alterations will be removed by Tenant. All of Tenant’s trade
fixtures will remain the property of Tenant and shall be removed by Tenant before the expiration or sooner termination of this
Lease. Tenant shall promptly repair all damage to the Premises caused by removal of any such trade fixtures.

 

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b.
Removal of Alterations. On receipt of Landlord’s notice described in Section 22.a. above, Tenant shall remove the
Alterations that Landlord designated for removal and shall restore the Premises to at least the condition existing at the Commencement
Date.

 

c.
Holdover. If Tenant (or anyone claiming under Tenant) remains in possession of the Premises beyond the expiration of the
Term or fails to timely complete the work required to leave the Premises in the condition required by this Lease, then Tenant
will be deemed to be holding over. In such event, and without relieving Tenant of liability for breach for having held over, Tenant’s
possession of the Premises will continue on a month to month basis on the terms and conditions of this Lease except the
monthly Base Rent will equal 150% of the monthly Base Rent in effect immediately before the expiration of the Term.

 

23.
Casualty.

 

a.
For the purpose hereof, “Casualty” means damage or destruction by fire, flood or other cause.

 

b.
If there is Casualty resulting in damage to (i) less than 25% of the Usable Area of the Premises or (ii) any portion of
the Building other than the Premises that materially interrupts the utility systems serving the Premises or Tenant’s access
to the Premises, and the Premises or the Building (as the case may be) can, in Landlord’s opinion reasonably exercised,
be repaired within 3 months from the date of the Casualty, then this Lease will continue in full force and effect. In such event,
the Base Rent will be equitably abated (to the extent of applicable rent insurance received by Landlord) as of the date of the
Casualty until the restoration is substantially completed. Landlord’s opinion will be delivered to Tenant within 10 days
following the date of the Casualty. Landlord’s opinion will be made in good faith and will consider and include as part
of the evaluation the period of time necessary to obtain the required approvals of the insurer and any mortgagee, to order and
obtain materials, and to engage contractors. If the Casualty does not result in the termination of this Lease, Landlord shall
make a good faith effort to cause the Managing Operator under the POA to restore the Premises under Section 9.6 of the POA. Landlord
will in no event be obligated to expend for restoration any amount in excess of the net insurance proceeds (excluding rental interruption
insurance) paid to Landlord with respect to the Casualty. During the restoration period, Tenant may temporarily relocate its furniture,
fixtures and equipment to other premises (it being understood that such premises may not be at the Building or the Project without
the mutual agreement of Landlord and Tenant).

 

c.
If a Casualty does not meet the conditions set forth in the first sentence of subparagraph (b), then either party may terminate
the Lease by notice to the other within 20 days from the date of the Casualty or on which Landlord’s opinion is delivered
to Tenant, whichever is applicable. On termination, Base Rent will be equitably abated as of the date of the Casualty.

 

24.
Condemnation. If all or any portion of the Premises is taken under the power of eminent domain, or sold under the threat
of the exercise of said power (together, “Condemnation”), this Lease will continue in full force and effect and the
Rent will not be abated. In such event, Tenant may assert a claim against the condemning authority for the damage suffered by
Tenant as a result of the Condemnation. Notwithstanding the foregoing, if (i) 25% or more of the Usable Area of the Premises is
taken in a Condemnation; or (ii) the Condemnation of any portion of the Building other than the Premises materially interrupts
the utility systems serving the Premises or Tenant’s access to the Premises and such interruption is not remedied by Landlord
within 30 days following the Condemnation; then the Rent will be equitably abated and Tenant will have the right to terminate
this Lease by providing notice to Landlord within 45 days following the date on which the condemning authority took possession
of the Premises or Building. If Tenant timely delivers such notice, this Lease will terminate 30 days after the date of the notice.

 

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25.
Notices. Any notice must be in writing and will be deemed to have been given when mailed by registered or certified mail,
electronic mail, or personally delivered with receipt of acceptance, and addressed to Landlord at:

 

Campus
Research Corporation

c/o
The University of Arizona Science and Technology Park

9070
South Rita Road, Suite 1750

Tucson,
Arizona 85747

Attn.:
Ken Marcus, Executive Vice President & Chief Financial Officer

E-mail:
kmarcus@uatechpark.org

 

with
a copy to:

 

Miller,
Pitt, Feldman & McAnally, P.C.

One
South Church Avenue, Suite 1000

Tucson,
Arizona 85701-1620

Attn.:
T. Patrick Griffin

E-mail:
pgriffin@mpfmlaw.com

 

and
addressed to Tenant at:

 

Applied
Energetics, Inc.

9070
South Rita Road, Suite 1500

Tucson,
Arizona 85747

Attn:
Gregory J. Quarles, CEO and President

E-mail:
gquarles@aergs.com

 

with
a copy to:

 

Masur
Griffitts Avidor, LLP

65
Reade Street, Suite 3A

New
York, NY 10007

Attn.:
Mary P. O’Hara

E-mail:
mohara@masur.com

 

or
at such other address as either party may from time to time designate in writing to the other in accordance with this paragraph.

 

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26.
Estoppel Certificates. Tenant shall, within 5 business days of Landlord’s written request, execute, acknowledge and
deliver to Landlord a written certification stating (i) that this Lease is unmodified and in full force and effect, or, if modified,
stating the nature of the modification, (ii) the date to which the rent is paid in advance, and (iii) that there are not, to Tenant’s
knowledge, any uncured defaults on the part of Landlord under this Lease, or specifying such defaults if any are claimed. Tenant’s
failure to timely deliver such certificate will be conclusive on Tenant (i) that this Lease is in full force and effect, without
modification, as may be represented by Landlord, (ii) that there are no uncured defaults in Landlord’s performance, and (iii)
that not more than one month’s rent has been paid in advance. In addition, if requested by Landlord or ABOR, Tenant shall
execute an estoppel certificate acknowledging the right of ABOR to enforce directly this Lease on written notification from ABOR
that Landlord is in default under the ABOR-CRC Lease. Until such notification is rescinded, Tenant shall pay to ABOR all Rent
and Additional Rent payable by Tenant to Landlord under this Lease.

 

27.
Landlord’s Financing. At Landlord’s option, this Lease may be subordinated to the interest of the holder under
any ground lease, mortgage, deed of trust, or any other hypothecation for security placed on the Premises, and to any and all
advances made on the security thereof and to all renewals, refundings, modifications, consolidations, replacements and extensions
thereof. Tenant agrees to execute any documents required to effectuate such subordination in commercially reasonable form, and
if Tenant fails to do so within 10 days after written demand, Tenant irrevocably appoints Landlord as Tenant’s attorney-in-fact
and in Tenant’s name, place and stead to do so. Tenant agrees to attorn to any person, firm or corporation purchasing or
otherwise acquiring the Premises and/or any interest in this Lease, or any portion thereof, as if such person, firm or corporation
had been named as Landlord herein.

 

28.
Brokers. Landlord and Tenant each warrant to the other that neither has dealt with or engaged any brokers. Landlord and
Tenant each agree to hold the other harmless against any claim or liability, as well as court costs and legal fees, arising out
of facts or circumstances contrary to the foregoing warranties.

 

29.
Landlord’s Consent and Approval. With respect to all provisions of this Lease where Landlord’s consent or approval
is required, such consent must be in writing, and unless otherwise provided, will not be unreasonably withheld by Landlord. In
the event Tenant believes that Landlord’s withholding of any required consent or approval is unreasonable, Tenant may submit
any issue regarding the reasonableness of Landlord’s withholding consent or approval (but not of Landlord’s good faith
in so withholding such consent or approval) to arbitration in accordance with the pertinent provisions of this Lease. In the event
that any withholding of consent or approval by Landlord is determined to be unreasonable, the fact that Landlord withheld its
consent will in no event be deemed or considered to be or have been a breach of this Lease or interference with Tenant’s
right of quiet enjoyment of the Premises.

 

30.
Confidentiality. Tenant shall keep confidential and may not disclose the terms of this Lease without Landlord’s prior
written consent, which Landlord may withhold in its sole discretion; provided, however, that Tenant may, on prior written notice
to Landlord, disclose the terms of this Lease to Tenant’s attorneys and auditors and as otherwise required by law.

 

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31.
Arbitration; Waiver of Jury Trial. Any controversy or claim arising out of or relating to this Agreement must be resolved
by binding arbitration in Tucson, Arizona before a single arbitrator under the Commercial Arbitration Rules promulgated by the
American Arbitration Association from time to time and the expedited procedures thereunder (the “Rules”), except that
the arbitration will not administered by the American Arbitration Association. A party desiring arbitration shall demand arbitration
in a written notice to the other party specifying all matters to be submitted to arbitration as well as the name and address of
a person selected by it as an arbitrator. In the event the parties are unable to agree on an arbitrator within 10 days of a party’s
demand to the other to submit to arbitration, the parties shall request that the Presiding Civil Judge of the Pima County Superior
Court select the arbitrator. Any award rendered will include an award in favor of the prevailing party to pay all reasonable costs
and attorneys’ fees incurred by the prevailing party as well as the cost of the arbitration. Judgment on the award rendered
by the arbitrator may be entered in any court of competent jurisdiction. LANDLORD AND TENANT EACH WAIVES TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BROUGHT BY EITHER PARTY AGAINST THE OTHER REGARDING ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED
WITH THIS LEASE AND TENANT’S OCCUPANCY OR USE OF THE PREMISES.

 

32.
Additional Provisions.

 

a.
Authority. Each party represents to the other that the person signing this Lease on its behalf is properly authorized to
do so.

 

b.
Amendment. None of the covenants, terms or conditions of this Lease may in any manner be altered, waived, modified, changed
or abandoned, except by written instrument duly signed and acknowledged by the parties.

 

c.
Arizona Law. This Lease is made under and will be interpreted according to Arizona law, without regard to conflict of laws
principles.

 

d.
Cumulative Remedies. The various rights, powers, options, recourse, and remedies of Landlord and Tenant in this Lease will
be construed as cumulative and no one of them is exclusive of the other, or is exclusive of any remedies allowed by law.

 

e.
No Consequential, Speculative or Punitive Damages. Landlord and Tenant waive any claim for consequential, speculative or
punitive damages.

 

f.
Attorneys’ Fees. If either party brings an action or arbitration to enforce the provisions hereof or to declare rights
under this Lease, the prevailing party will be entitled to recover from the other party its reasonable attorneys’ fees and
costs, as fixed by the court or arbitrator, in accordance with Arizona Revised Statutes Section 12-341.01.

 

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g.
Time. Time is of the essence of this Lease and of each obligation to be performed under this Lease. In the event that the
day on which either party is required to take any action under this Lease is not a business day, such action may be taken on the
next succeeding business day.

 

h.
Force Majeure. The time for performance by Landlord or Tenant of their obligations under this Lease will be extended by
the period of delay caused by force majeure. For the purposes hereof, “force majeure” means war, natural disaster,
strikes, walkouts or other labor industrial disturbance, order of any government, public health authority, court or regulatory
body having jurisdiction, shortages of materials, blockade, riot, civil disorder, or any similar cause beyond the reasonable control
of the party obligated to render performance (but excluding financial inability to perform, however caused).

 

i.
No Waiver. No delay of Landlord or Tenant in enforcing any right, remedy, privilege or recourse accorded to Landlord or
Tenant, either by the express terms of this Lease or by law, affect, diminish, suspend or exhaust any of such rights, remedies,
privileges or recourses. No act, omission, waiver, acquiescence or forgiveness by Landlord as to any failure of performance by
Tenant of any provision of this Lease will be deemed or construed to be a waiver by Landlord of the right at all times in the
future to insist on the timely, full and complete performance by Tenant of each provision of this Lease.

 

j.
No Recording. Neither party may record this Lease.

 

k.
Successors and Assigns. Each and all of the covenants, agreements, obligations, conditions and provisions of this Lease
inure to the benefit of and bind the parties and their respective successors and permitted assigns.

 

l.
Further Assurances. The parties shall execute such other documents, agreements or instruments as either party may reasonably
request to implement the purpose of this Lease.

 

m.
Severability. The invalidity of any provision of this Lease, as determined by a court of competent jurisdiction, will in
no way affect the validity of any other provision hereof except to the extent such invalidity renders any such other provision
unnecessary or unreasonable to enforce or unreasonably preclude the use and occupancy of the Premises by Tenant for its intended
purposes. If any provision of this Lease is capable of two constructions, one of which would render the provision void, and the
other of which would render the provision valid, then the provision will have the meaning which renders it valid.

 

n.
Integration. This Lease contains the entire integrated agreement between the parties as to the Premises, and supersedes
any oral statements or representations or prior written matter not contained in this instrument.

 

o.
Construction of Lease. The provisions of this Lease will not be construed in favor of or against either party, but will
be construed as if both parties prepared this Lease.

 

p.
Captions. The captions used herein are for convenience only and are not a part of this Lease and do not in any way limit
or amplify the terms and provisions hereof.

 

q.
Counterparts. This Lease may be executed in counterparts, and will not be effective until each party has executed and delivered
a counterpart hereof to the other party.

 

[Signature
blocks on next page.]

 

    Lease for Applied Energetics, Inc. (Tenant)
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IN
WITNESS WHEREOF, the parties executed this Lease effective the day and year first written above.

 

	CAMPUS RESEARCH CORPORATION,
 an Arizona nonprofit corporation	 	APPLIED ENERGETICS, INC.,

 a Delaware corporation
	 	 	 	 	 
	By:	/s/ Thomas w.
    warne	 	By:	/s/ Gregory J. Quarles
	Name: 	Thomas w. warne	 	Name: 	Gregory J. Quarles
	Its:	chairman  	 	Its:	Chief Executive Officer and President

 

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EXHIBIT
A

 

Premises
in Suite 1500 at 9070 S. Rita Road

 

     

     

    

 

 

     

     

    

 

EXHIBIT
B

 

Internet
Connectivity

 

University
of Arizona Science and Technology Park High-Speed Internet.

 

Campus
Research Corporation offers a shared T1 internet, secured by firewall, for each user of your network, complete with an external
IP address and tenant manageable router. The tenant managed router component provides your IT department/person with the ability
to publish external resources, such as a web or e-mail server, unique to your requirements at a cost of $_________ per month,
per port. Additional specialized bandwidth or configuration assistance and support is also available on request at additional
costs.

 

Tenant
shall initial the appropriate space indicating whether it accepts or rejects Landlord’s internet service.

 

Tenant
accepts Landlord’s internet service: ________

 

Tenant
rejects Landlord’s internet service: ________

 

     

     

    

 

EXHIBIT
C

 

Map
of Tenant Non-Exclusive Parking Area

 

     

     

    

 

 

     

     

    

 

EXHIBIT
D

 

Disbursement
Request

 

TO:
Campus Research Corporation

 

FROM:_________________________

 

DATE:_________________________

 

	1.	Tenant Improvement Allowance	$	___________	 	 	 
	 	 	 	 	 	 	 
	2.	Previous Disbursements	$	 ___________	 	 	 
	 	 	 	 	 	 	 
	3.	Request for Disbursement	$	___________	 	 	 

 

 

SUBMITTED
BY:

 

_______________________________________
[Tenant]

 

By:
___________________________________

 

Name:
_________________________________

 

Its:

 

[All
contractor invoices supporting this Disbursement Request must be attached to this Request].

 

     

     

    

 

Exhibit
E-1

 

CONTRACTOR’S
RELEASE, WAIVER OF LIENS AND INDEMNIFICATION

 

To:
______________________________

 

Project:
_______________________________

 

The
undersigned, in consideration of payments made to it:

 

1.
Waives and releases all actions, debts, claims and demands against ____________________________ on account of all work, services,
equipment and materials performed or furnished by it, in connection with the construction of tenant improvements or facilities
on __________________________’s leased property referred to above; and

 

2.
Waives and releases any mechanics’, materialmen’s security or like liens on account of such work, services, equipment
and materials, and all rights to file any such lien in the future against the real property and any personal property located
thereon;

 

3.
Agrees to promptly pay and release of record all mechanics’, materialmen’s, security and like liens filed by others in connection
with such work, services, equipment and materials, which may now or in the future affect said real property and any personal property
thereon, and to indemnify and save ________________________ and its employees, representatives and agents harmless from and defend
them against any action, claim or demand, and reimburse them for all expenses (including attorneys’ and witnesses’
fees and court costs) incurred because of any such actions, claims, demands or lien or the enforcement thereof.

 

Dated:
___________

 

	 	 
	 	By:	 
	 	Name:	 
	 	Title:	 

 

STATE
OF ______________ )

                                                 ) ss:

COUNTY
OF ____________ )

 

The
foregoing instrument was acknowledged before me this _____ day of ___________, 20____, by ______________________________, the
_________________________________ of _____________________________________, on behalf of the ________________________.

 

	 	 	 
	 	 	Notary Public
	My commission expires:	 	 
	 	 	 

 

     

     

    

 

Exhibit
E-2

 

CONTRACTOR’S
PARTIAL RELEASE,

WAIVER
OF LIENS AND INDEMNIFICATION

 

To:
______________________________

 

Project:
_______________________________

 

The
undersigned, in consideration of payments made to it:

 

1.
Waives and releases all actions, debts, claims and demands against ____________________________ on account of all work, services,
equipment and materials performed or furnished by it, in connection with the construction of tenant improvements or facilities
on __________________________’s leased property referred to above before the date of this release, except only for the sum
of $____________ that remains unpaid; and

 

2.
Waives and releases any mechanics’, materialmen’s security or like liens on account of such work, services, equipment
and materials, and all rights to file any such lien in the future against the real property and any personal property located
thereon to the extent of such payment received by it; and

 

3.
Agrees to promptly pay and release of record all mechanics’, materialmen’s, security and like liens filed by others
in connection with such work, services, equipment and materials, which may now or in the future affect said real property and
any personal property thereon, and to indemnify and save ____________ and its employees, representatives and agents harmless from
and defend them against any action, claim or demand, and reimburse them for all expenses (including attorneys’ and witnesses’
fees and court costs) incurred because of any such actions, claims, demands or liens or the enforcement thereof. The undersigned
represents that the total of all sums now due it and its subcontractors, materialmen, suppliers and others working for the undersigned
on this Project does not exceed $ _______________.

 

Dated:
__________________.

 

	 	 
	 	By:	 
	 	Name:	 
	 	Title:	 

 

STATE
OF ______________ )

                                                 ) ss:

COUNTY
OF ____________ )

 

The
foregoing instrument was acknowledged before me this _____ day of ___________, 20____, by ______________________________, the
_________________________________ of _____________________________________, on behalf of the ________________________.

 

	 	 	 
	 	 	Notary Public
	My commission expires:	 	 
	 	 	 

 

     

     

    

 

EXHIBIT
F

 

Landlord’s
Work

 

Replace
sink with necessary cabinetary.

 

[OR
DELETE EXHIBIT F IF NO LANDLORD’S WORK]vrca-ex1021_65.htm

Exhibit 10.21

 

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED

 

FIRST Amendment

to 

Loan and security agreement

 

This First Amendment to Loan and Security Agreement (this “Amendment”) is entered into this 26th day of October, 2020, by and between SILICON VALLEY BANK (“Bank”) and VERRICA PHARMACEUTICALS INC., a Delaware corporation (“Borrower”), whose address is 10 North High Street, Suite 200, West Chester, Pennsylvania 19380.

Recitals

A.Bank and Borrower have entered into that certain Loan and Security Agreement dated as of March 10, 2020 (as the same may from time to time be amended, modified, supplemented or restated, the “Loan Agreement”).  

B.Bank has extended credit to Borrower for the purposes permitted in the Loan Agreement.  

C.Borrower has requested that Bank amend the Loan Agreement to (i) modify the financial covenant and (ii) make certain other revisions to the Loan Agreement as more fully set forth herein.

D.Bank has agreed to so amend certain provisions of the Loan Agreement, but only to the extent, in accordance with the terms, subject to the conditions and in reliance upon the representations and warranties set forth below.

Agreement

Now, Therefore, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:

1.Definitions.  Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Loan Agreement.

2.Amendments to Loan Agreement.

2.1Section 6.2 (Financial Statements, Reports, Certificates). Sections 6.2(a) and 6.2(b) are amended by inserting the following to appear at the beginning of each such Section:

“at all times following the occurrence of the FDA Event,” 

 

 

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED

 

2.2Section 6.9 (Financial Covenant – Trailing Six (6) Month Net Revenue).  Section 6.9 is deleted in its entirety and replaced with the following:

“6.9Financial Covenant – Trailing Six (6) Month Net Revenue.  During a Testing Period, Borrower shall achieve (calculated with respect to Borrower only and not on a consolidated basis) for the most recent calendar quarter then-ended and each calendar quarter thereafter if such Testing Period is still in effect, minimum net revenue, generated from the sale of Borrower’s products (excluding revenue generated with respect to licensing arrangements), determined in accordance with GAAP, measured on a trailing six (6) month basis, of at least

 

	
Trailing Six (6) Month Period Ending 
	
Minimum Revenue 

 

	
[***]
	
[***]

	
[***]
	
[***]

	
[***]

 

[***]
	
[***]

 

[***]

 

With respect to the period ending [***] and each calendar quarter thereafter, the levels of minimum revenue shall be mutually agreed upon between Borrower and Bank, based upon, among other factors, Borrower’s Board-approved operating plan and financial projections, which shall be acceptable to Bank, and Bank’s then current credit underwriting. With respect thereto, Borrower’s failure to agree in writing (which agreement shall be set forth in a written amendment to this Agreement) on or before [***], to any net revenue covenant levels proposed by Bank with respect to any period from [***] through and including [***], shall result in an immediate Event of Default for which there shall be no grace or cure period.”

 

2.3Section 8.11 (Mezzanine Loan Agreement). Section 8.11 is deleted in its entirety and replaced with the following:

“8.11Mezzanine Loan Agreement. The occurrence of an Event of Default (as defined in the Mezzanine Loan Agreement) under the Mezzanine Loan Agreement (other than Event of Default (as defined in the Mezzanine Loan Agreement) solely under 6.7(b) of the Mezzanine Loan Agreement).”

 

2.4Section 13 (Definitions).  The following term and its definition set forth in Section 13.1 of the Loan Agreement is deleted in its entirety and replaced with the following: 

““Testing Period” is, at all times, commencing as of [***], when unrestricted and unencumbered cash (other than Liens in favor of Bank under this Agreement) held in accounts in the name of Borrower maintained with Bank is less than [***] the aggregate principal amount outstanding under the Term B Loan Advances (as defined in the Mezzanine Loan Agreement).”

 

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED

 

2.5Section 13 (Definitions).  The Loan Agreement is amended by inserting the following new terms and their respective definitions to appear alphabetically in Section 13.1 thereof:

““FDA” means the United Stated Food and Drug Administration, and any successor thereto.”

 

““FDA Event” means the date on which Borrower has provided Bank with evidence, in Bank’s sole but reasonable discretion, that Borrower has received FDA approval of VP-102 for the treatment of Molluscum Contagiosum.”

 

““First Amendment Effective Date” is October 26, 2020.”

 

2.6Exhibit B (Compliance Certificate).  The Compliance Certificate appearing as Exhibit B to the Loan Agreement is deleted in its entirety and replaced with the Compliance Certificate attached as Schedule 1 attached hereto.

3.Limitation of Amendments.

3.1The amendments set forth in Section 2, above, are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document, or (b) otherwise prejudice any right or remedy which Bank may now have or may have in the future under or in connection with any Loan Document.

3.2This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect.

4.Representations and Warranties.  To induce Bank to enter into this Amendment, Borrower hereby represents and warrants to Bank as follows:

4.1Immediately after giving effect to this Amendment (a) the representations and warranties contained in the Loan Documents are true, accurate and complete in all material respects as of the date hereof (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct in all material respects as of such date), and (b) no Event of Default has occurred and is continuing;

4.2Borrower has the power and authority to execute and deliver this Amendment and to perform its obligations under the Loan Agreement, as amended by this Amendment;

4.3The organizational documents of Borrower delivered to Bank on the Effective Date remain true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect;

 

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED

 

4.4The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, have been duly authorized; 

4.5The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not and will not contravene (a) any law or regulation binding on or affecting Borrower, (b) any contractual restriction with a Person binding on Borrower, (c) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on Borrower, or (d) the organizational documents of Borrower; 

4.6The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on Borrower, except as already has been obtained or made; and

4.7This Amendment has been duly executed and delivered by Borrower and is the binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors’ rights.

5.Post-Closing Deliverable.  Borrower shall deliver to Bank within forty-five (45) days after the First Amendment Effective Date, a duly executed bailee’s waiver in favor of Bank, in form and substance acceptable to Bank, for the following location where Borrower maintains property with a third party: [***]. 

6.Updated Perfection Certificate.  Borrower has delivered an updated Perfection Certificate in connection with this Amendment dated as of the date hereof (the “Updated Perfection Certificate” ) which Updated Perfection Certificate shall supersede in all respects that certain Perfection Certificate dated as of March 10, 2020. Borrower hereby acknowledges and agrees that all references in the Loan Agreement to “Perfection Certificate” shall hereinafter be deemed to be references to the Updated Perfection Certificate, as defined herein. 

7.Release by Borrower:

A.FOR GOOD AND VALUABLE CONSIDERATION, Borrower hereby forever relieves, releases, and discharges Bank and its present or former employees, officers, directors, agents, representatives, attorneys, and each of them, from any and all claims, debts, liabilities, demands, obligations, promises, acts, agreements, costs and expenses, actions and causes of action, of every type, kind, nature, description or character whatsoever, whether known or unknown, suspected or unsuspected, absolute or contingent, arising out of or in any manner whatsoever connected with or related to facts, circumstances, issues, controversies or claims existing or arising from the beginning of 

 

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED

 

time through and including the date of execution of this Amendment (collectively “Released Claims”).  Without limiting the foregoing, the Released Claims shall include any and all liabilities or claims arising out of or in any manner whatsoever connected with or related to the Loan Documents, the recitals hereto, any instruments, agreements or documents executed in connection with any of the foregoing or the origination, negotiation, administration, servicing and/or enforcement of any of the foregoing.

B.In furtherance of this release, Borrower expressly acknowledges and waives any and all rights under Section 1542 of the California Civil Code, which provides 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.” (Emphasis added.) 

C.By entering into this release, Borrower recognizes that no facts or representations are ever absolutely certain and it may hereafter discover facts in addition to or different from those which it presently knows or believes to be true, but that it is the intention of Borrower hereby to fully, finally and forever settle and release all matters, disputes and differences, known or unknown, suspected or unsuspected; accordingly, if Borrower should subsequently discover that any fact that it relied upon in entering into this release was untrue, or that any understanding of the facts was incorrect, Borrower shall not be entitled to set aside this release by reason thereof, regardless of any claim of mistake of fact or law or any other circumstances whatsoever.  Borrower acknowledges that it is not relying upon and has not relied upon any representation or statement made by Bank with respect to the facts underlying this release or with regard to any of such party’s rights or asserted rights.

D.This release may be pleaded as a full and complete defense and/or as a cross-complaint or counterclaim against any action, suit, or other proceeding that may be instituted, prosecuted or attempted in breach of this release.  Borrower acknowledges that the release contained herein constitutes a material inducement to Bank to enter into this Amendment, and that Bank would not have done so but for Bank’s expectation that such release is valid and enforceable in all events.

E.Borrower hereby represents and warrants to Bank, and Bank is relying thereon, as follows:

1Except as expressly stated in this Amendment, neither Bank nor any agent, employee or representative of Bank has made any statement or representation to Borrower regarding any fact relied upon by Borrower in entering into this Amendment.

2Borrower has made such investigation of the facts pertaining to this Amendment and all of the matters appertaining thereto, as it deems necessary.

 

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED

 

3The terms of this Amendment are contractual and not a mere recital. 

4This Amendment has been carefully read by Borrower, the contents hereof are known and understood by Borrower, and this Amendment is signed freely, and without duress, by Borrower. 

5Borrower represents and warrants that it is the sole and lawful owner of all right, title and interest in and to every claim and every other matter which it releases herein, and that it has not heretofore assigned or transferred, or purported to assign or transfer, to any person, firm or entity any claims or other matters herein released.  Borrower shall indemnify Bank, defend and hold it harmless from and against all claims based upon or arising in connection with prior assignments or purported assignments or transfers of any claims or matters released herein. 

8.Integration.  This Amendment and the Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements.  All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Amendment and the Loan Documents merge into this Amendment and the Loan Documents.

9.Counterparts.  This Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

10.Effectiveness.  This Amendment shall be deemed effective upon (a) the due execution and delivery to Bank of this Amendment by each party hereto, and (b) Borrower’s payment to Bank of Bank’s legal fees and expenses incurred in connection with this Amendment.

11.Governing Law.  The provisions of Section 11 of the Loan Agreement shall apply to this Amendment as if set forth herein, mutatis mutandis. 

 

[Signature page follows.]

 

 

 

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED

 

In Witness Whereof, the parties hereto have caused this Amendment to be duly executed and delivered as of the date first written above.

 

	
BANK
	
 
	
BORROWER

	
 
	
 
	
 
	
 
	
 

	
SILICON VALLEY BANK
	
 
	
VERRICA PHARMACEUTICALS INC.

	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 

	
By:
	
/s/ Tom Gordon
	
 
	
By:
	
/s/ A. Brian Davis

	
Name:
	
Tom Gordon
	
 
	
Name:
	
A. Brian Davis

	
Title:
	
Managing Director
	
 
	
Title:
	
Chief Financial Officer

 

 

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED

 

Schedule 1

EXHIBIT B

COMPLIANCE CERTIFICATE

 

	
TO:
	
SILICON VALLEY BANK
	
 
	
Date:
	
 

	
FROM:
	
VERRICA PHARMACEUTICALS INC.
	
 
	
 
	
 

 

The undersigned authorized officer of VERRICA PHARMACEUTICALS INC. (“Borrower”) certifies that under the terms and conditions of the Loan and Security Agreement between Borrower and Bank (the “Agreement”), (1) Borrower is in complete compliance for the period ending _______________ with all required covenants except as noted below, (2) there are no Events of Default, (3) all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, (4) Borrower, and each of its Subsidiaries, has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower except as otherwise permitted pursuant to the terms of Section 5.9 of the Agreement, and (5) no Liens have been levied or claims made against Borrower or any of its Subsidiaries, if any, relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Bank.  Attached are the required documents supporting the certification.  The undersigned certifies that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes.  The undersigned acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered.  Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement. 

 

	
Please indicate compliance status by circling Yes/No under “Complies” column.

	
 

	
Reporting Covenants
	
Required
	
Complies

	
 
	
 
	
 

	
Monthly revenue, net profit and cash balance statements with Compliance Certificate
	
Monthly within 30 days
	
Yes   No

	
Quarterly financial statements with Compliance Certificate
	
Within 45 days of quarter end (within 90 days of quarter end for Q4)
	
Yes   No

	
Annual financial statement with Compliance Certificate (CPA Audited)
	
FYE within 180 days
	
Yes   No

	
10-Q Report
	
Within 45 days of quarter end for 10-Q (within 90 days of quarter end for Q4) 
	
Yes   No

 

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED

 

	
Filed 10-Q, 10-K and 8-K
	
Within 5 days after filing with SEC
	
Yes   No

	
A/R Agings, A/P Agings & Inventory Reports 
	
At all times following the occurrence of the FDA Event, monthly within 30 days when an Advance is outstanding or has been requested 
	
Yes   No

	
Borrowing Base Reports 
	
At all times following the occurrence of the FDA Event, with each Advance request and monthly within 30 days when an Advance is outstanding 
	
Yes   No

	
Board approved projections
	
30 days of FYE and as amended/updated 
	
Yes   No

 

	
Financial Covenants
	
Required
	
Actual
	
Complies

	
 
	
 
	
 
	
 

	
Minimum Revenue*
	
$
	
*
	
$
	
Yes   No

* as set forth in Section 6.9

 

The following financial covenant analyses and information set forth in Schedule 1 attached hereto are true and accurate as of the date of this Certificate.

 

The following are the exceptions with respect to the certification above: (If no exceptions exist, state “No exceptions to note.”)

 

	
 

	
 
	
 

 

	
VERRICA PHARMACEUTICALS INC.
	
 
	
BANK USE ONLY

	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
Received by:
	
 

	
By:
	
 
	
 
	
 
	
authorized signer

	
Name:
	
 
	
 
	
Date:
	
 

	
Title:
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
Verified:
	
 

	
 
	
 
	
 
	
 
	
authorized signer

	
 
	
 
	
 
	
Date:
	
 

	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
Compliance Status:
	
Yes     No

 

 

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED

 

Schedule 1 to Compliance Certificate

 

Financial Covenants of Borrower

 

In the event of a conflict between this Schedule and the Agreement, the terms of the Agreement shall govern.

 

Dated:    ____________________

 

I.Minimum Revenue (Section 6.9)

Required: During a Testing Period, Borrower shall achieve (calculated with respect to Borrower only and not on a consolidated basis) for the most recent calendar quarter then-ended and each calendar quarter thereafter if such Testing Period is still in effect, minimum net revenue, generated from the sale of Borrower’s products (excluding revenue generated with respect to licensing arrangements), determined in accordance with GAAP, measured on a trailing six (6) month basis, of at least:  

 

	
Trailing Six (6) Month Period Ending 
	
Minimum Revenue 

 

	
[***]
	
[***]

	
[***]
	
[***]

	
[***]

 

[***]
	
[***]

 

[***]

 

Actual:

 

	
A.
	
Minimum Revenue 
	
$
	
 

 

Is line A equal to or greater than ________*?

* As set forth above.

 

	
 
	
No, not in compliance
	
 
	
Yes, in compliance

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