Document:

Document

Exhibit 10.1

08/20/2020
NOVAN INC
Attn: John Gay, Paula Stafford
This letter describes amendments made by PNC to your Paycheck Protection Program loan documents as a result of the Paycheck Protection Program Flexibility Act of 2020, which was signed into law on June 5, 2020
Key terms used in this letter include:
◦PPP    the SBA's Paycheck Protection Program 
◦Facility    your PPP loan
◦Note    the note, as extended, amended, or modified, that evidences your PPP loan
◦PNC    PNC Bank, National Association
Dear Valued Customer
Thank you for banking with PNC. As always, we appreciate your business and the opportunity to serve you.
We are modifying the terms of the Note for your Facility because of recent changes to the laws governing the PPP. The Paycheck Protection Program Flexibility Act of 2020 significantly modifies the loan forgiveness process and provides other benefits to you as a PPP loan recipient. Your modified Note reflects some of these modifications and benefits.
Summary of Note Amendments: 
Below is a summary of the amendments that we are making to your Note. You should read the actual text of the amendments on the next page of this letter for a complete understanding of the new terms and conditions of your Note. Any capitalized terms that we use in this letter but don't otherwise define have the meanings given to those terms in the Note.
Changes have been made to the amount of time your loan may be deferred. If you apply for forgiveness, the Act changes the deferral period (the period of time when you do not have to pay principal, interest, and fees) from six months to the date that PNC receives your approved loan forgiveness funds from the SBA. If you don't apply for forgiveness, your payments could be deferred for up to 16 months to the date that is 10 months following the earlier of 24 weeks after your loan was funded, or December 31, 2020. As a result, your Deferral Period, Deferral Expiration Date and First Payment Date are being amended to comply with the Act, and the time you have to repay any unforgiven amount prior to your maturity date may be shorter.
More non-payroll costs might be eligible for forgiveness. The Act now allows your total forgiven amount to include up to 40% of non-payroll costs (this was originally capped at 25%). In light of this change to the Act, we are amending your Note to remove language requiring you to use at least 75% of the loan proceeds be used for eligible payroll costs.

Text of Note Amendments: 
Effective as of June 5, 2020, Sections 2 and 3 of the Note were amended and restated to read as follows:
“2. Structure; Payment Terms. During the Deferral Period, interest on the outstanding principal balance will accrue at the Fixed Rate, but neither principal nor interest shall be due and payable. On the Deferral Expiration Date, the Conversion Balance shall convert to an amortizing term loan payable as set forth below.

On the First Payment Date, all accrued interest that is not forgiven under the Program shall be due and payable. Additionally, on the First Payment Date, and continuing on the 15th day of each month thereafter until the Maturity Date, equal monthly installments of principal shall be due and payable in an amount sufficient to fully amortize the Conversion Balance over the remaining term of the Facility. Interest shall be payable at the same times as the monthly principal payments. Any outstanding principal and accrued interest shall be due and payable in full on the Maturity Date.

If any payment under this Note shall become due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in computing interest in connection with such payment. The Borrower hereby authorizes the Bank to charge the Borrower's deposit account at the Bank for any payment when due. Payments received will be applied to charges, fees and expenses (including attorneys' fees), accrued interest and principal in any order the Bank may choose, in its sole discretion.

The following terms shall have the meanings set forth below:

“Business Day” shall mean any day other than a Saturday or Sunday or a legal holiday on which commercial banks are authorized or required by law to be closed for business in the State of Delaware.

“Conversion Balance” shall mean the outstanding principal of the Facility, less any forgiven amounts, as determined on the Deferral Expiration Date.

“Deferral Expiration Date” shall mean either (a) the date any forgiven amount of the Facility is remitted to the Bank, or (b) the date that a final determination is made that no portion of the Facility will be forgiven; provided, however, if the Borrower fails to apply for forgiveness by the Latest Forgiveness Application Date, the Deferral Expiration Date shall mean the Latest Forgiveness Application Date. In no event shall the Deferral Expiration Date be later than the Maturity Date.

“Deferral Period” shall mean the period beginning on the date of this Note and ending on the Deferral Expiration Date.

“First Payment Date” shall mean the 15th day of the month following the month in which the Deferral Expiration Date occurs.

“Latest Forgiveness Application Date” shall mean the date that is 10 months after the earlier to occur of (a) the date that is 24 weeks after the date the Facility is funded; and (b) December 31, 2020.

“Maturity Date” shall mean the 2nd anniversary of the date of this Note.

3. Forgiveness of the Facility. All or a portion of this Facility may be forgiven in accordance with the Program requirements. The amount of forgiveness shall be calculated (and may be reduced) in accordance with the requirements of the Program.”

Except as described above, the Note and other Loan Documents remain unchanged and in full force and effect as written.

We're committed to you and look forward to continuing to support your business. Please refer to PNC.com for more information on the Paycheck Protection Program Flexibility Act.

Sincerely,

PNC BANK, NATIONAL ASSOCIATIONDocument

Exhibit 10.5

LEASE TERMINATION AGREEMENT 

    THIS LEASE TERMINATION AGREEMENT (this “Termination Agreement”) is made and entered into as of the 16th day of July, 2020, by and between DURHAM HOPSON, LLC, a Delaware limited liability company, (as successor-in-interest to Durham Hopson Road, LLC) hereinafter called “Landlord”; and NOVAN, INC., a Delaware corporation, hereinafter called “Tenant”.   

STATEMENT OF PURPOSE

A.WHEREAS, Landlord and Tenant entered into that certain Lease dated August 17, 2015, as amended by that First Amendment to Lease dated January 6, 2016, and as amended by that Second Amendment to Lease dated September 12, 2016 (collectively, the “Lease”), covering approximately 51,350 rentable square feet (the “Premises”) in that certain office building located at 4105 Hopson Road, Durham, North Carolina (the “Building”).
B.WHEREAS, Kriya Therapeutics, Inc., a Delaware corporation (“Kriya”) and Landlord are entering into a lease (the “Kriya Lease”) for the Premises in the Building whereby such lease shall be effective upon the date Landlord delivers the Premises to Kriya.
C.WHEREAS, Tenant and Kriya are entering into a sublease agreement (and Landlord is consenting to such sublease) (the “Kriya Sublease”) effective upon the effectiveness of this Termination Agreement where Tenant subleases a portion of the Building from Kriya.    
    WHEREAS, Landlord and Tenant now desire to terminate the Lease in accordance with the terms hereinafter provided.

    NOW, THEREFORE, in consideration of the statement of purpose, the mutual covenants contained herein and other valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows:

1.Termination of Lease.  Landlord and Tenant hereby agree that in exchange for a fee payable by Tenant to Landlord of Six Hundred Thousand and No/100 Dollars ($600,000.00) (the “Termination Fee”) which shall be due when Tenant returns this Termination Agreement to Landlord, and for Tenant’s agreement to vacate the Premises (except as otherwise set forth in the Kriya Sublease) on the “Commencement Date” of the Kriya Lease (the “Termination Date”), the Lease shall be terminated effective as of such Termination Date and thereafter, Tenant shall have (x) no further right to occupy or possess the Premises under the Lease and (y) no further obligation under the Lease with respect to the Premises. The Termination Fee shall be paid as set forth in Section 6 of this Termination Agreement with the balance of such Termination Fee ($60,828.00) being paid in cash upon Tenant’s delivery of an executed copy of this Termination Agreement to Landlord.  Landlord and Tenant each expressly acknowledges and agrees that the Lease and all of the parties’ right, title and interest thereunder and any estate created thereby shall be deemed terminated effective on the Termination Date so long as the parties comply with this Termination Agreement.  Until the Termination Date, Landlord and Tenant shall each continue to perform their respective duties and obligations under the Lease.  On or before the 

Termination Date and except as otherwise set forth in the Kriya Sublease, Tenant shall decommission the Premises, comply with the requirements under Sections 15.1, 15.2, and 15.3 of the Lease, and deliver to Landlord all keys to the Premises and any other means of access.  In accordance with Section 3.1 of the Lease, the parties hereby acknowledge and agree that if the Termination Date occurs on a date that is not the first day of a month then any Rent paid for the fractional portion of such month after the Termination Date shall be promptly refunded to Tenant based on a daily rate for such month.

2.    Condition Precedent.  This Termination Agreement and all obligations of Tenant and Landlord hereunder are contingent upon the mutual execution and delivery of (a) the Kriya Lease, (b) the Kriya Sublease, and both such agreements are also contingent upon the mutual execution and delivery of this Termination Agreement.

3.    Release.  So long as Tenant complies with its obligations set forth in the Lease (except as otherwise set forth in this Termination Agreement) prior to and until the Termination Date and as set forth in this Termination Agreement, (a) Landlord, for itself and its successors and assigns, does hereby release and discharge Tenant, its employees, agents and officers from all claims, costs, actions and causes of action arising out of or related to the Lease and/or Tenant’s use of the Premises prior to the Termination Date, but Landlord does not release Tenant from any potential liability that may arise during Tenant’s occupancy of a portion of the Premises after the Termination Date pursuant to the Kriya Sublease and (b) Tenant shall not have any further monetary liability or obligations (i) under the Lease and/or (ii) except as otherwise set forth in the Kriya Sublease, in respect of the Premises, all from and after the Termination Date except as otherwise stated herein.  Notwithstanding anything else contained in this Termination Agreement, Tenant shall be responsible for any payment due to Landlord as the result of a reconciliation of common area maintenance expenses, taxes and insurance costs related to the Building under the Lease at the end of calendar year in which the Termination Date occurs.  For clarity, any balance in Tenant’s favor held by Landlord at the end of calendar year in which the Termination Date occurs shall be reimbursed to Tenant within sixty (60) days after Landlord conducts a reconciliation of such calendar year.  Following the Termination Date, Tenant, for itself and its successors and assigns, does hereby release and discharge Landlord, its employees, agents, officers and successors and assigns from all claims, costs, actions and causes of action arising out of or related to the Lease and/or the Premises from and after the Termination Date. Notwithstanding anything contained herein, in no event shall this Termination Agreement limit Tenant’s liability under Applicable Law regarding Tenant’s use of Hazardous Materials at the Building at any time before or after the Termination Date.    

4.    Representations and Warranties of Tenant.  Tenant has a valid leasehold interest in the Premises granted by the Lease and has not assigned or encumbered its leasehold interest, subleased the Premises nor granted a security interest in its leasehold interest that is the subject of the Lease; and Tenant certifies that there are no tenants or other persons or entities having a right to possession of the Premises or any portion thereof under the Lease after Tenant vacates the Premises (except as otherwise set forth in the Kriya Sublease).

5.    Expenses.  In the event that Tenant defaults under any of its obligations set forth above and fails to remedy such default within ten (10) business days after receipt of written 
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notice thereof, Landlord shall be entitled to employ all rights and remedies available to it for enforcement of such obligations, and Tenant shall be responsible for paying all reasonable documented out-of-pocket costs and expenses of the Landlord, including reasonable attorneys’ fees in enforcing the obligations of Tenant hereunder.

6.    Security Deposit.  Landlord represents and warrants that the L/C Security (as defined in the Lease) is in the amount of Five Hundred Thirty Nine Thousand One Hundred Seventy Two and No/100 Dollars ($539,172.00) (the “Security Deposit”).  Landlord and Tenant hereby agree that Tenant shall forfeit the entirety of the Security Deposit as Tenant’s partial payment of the Termination Fee under Section 1 of this Termination Agreement, provided, however, applying the Security Deposit toward the Termination Fee in no event releases Tenant from any applicable obligation under the Lease.     

7.    Benefits and Binding Effect.  This Termination Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.

8.    Counterparts/Signatures.  This Termination Agreement may be executed in counterparts.  All executed counterparts shall constitute one agreement, and each counterpart shall be deemed an original.  The parties hereby acknowledge and agree that electronic signatures, facsimile signatures or signatures transmitted by electronic mail in so-called “pdf” format shall be legal and binding and shall have the same full force and effect as if an original of this Termination Agreement had been delivered.  Landlord and Tenant (i) intend to be bound by the signatures (whether original, faxed or electronic) on any document sent by facsimile or electronic mail, (ii) are aware that the other party will rely on such signatures, and (iii) hereby waive any defenses to the enforcement of the terms of this Termination Agreement based on the foregoing forms of signature.

9.    Miscellaneous.  This Termination Agreement shall become effective only upon full execution and delivery of this Termination Agreement by Landlord and Tenant and the satisfaction of the conditions precedent under Section 2 of this Termination Agreement.  This Termination Agreement contains the parties’ entire agreement regarding the subject matter covered by this Termination Agreement, and supersedes all prior correspondence, negotiations, and agreements, if any, whether oral or written, between the parties concerning such subject matter.  There are no contemporaneous oral agreements, and there are no representations or warranties between the parties as to the subject matter covered by this Termination Agreement that are not contained in this Termination Agreement. 
[Signatures to follow]    
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IN WITNESS WHEREOF, the parties hereto have caused this Termination Agreement to be duly executed pursuant to authority duly given as of the day and year first above written.    
						
	LANDLORD:
	 
	DURHAM HOPSON, LLC
	a Delaware limited liability company
		
	By:	/s/ Adam B. Sichol
	Name:	ADAM SICHOL
	Title:	Authorized Signatory
		
	TENANT:
	
	NOVAN, INC.
	a Delaware corporation
		
	By:	/s/ Paula Brown Stafford
	Name:	Paula Brown Stafford
	Title:	President and CEO

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