Document:

Exhibit
10.20

     

    SETTLEMENT AGREEMENT AND
MUTUAL RELEASE

     

    This
Settlement Agreement and Mutual Release ("Agreement"), effective as of the date
of the last signature appearing below ("Effective Date"), is by and between
LecTec Corporation, a Minnesota corporation, having a principal place of
business at 1407 South Kings Highway, Texarkana Texas 75501 ("LecTec"), and
Johnson & Johnson Consumer Companies, Inc., a New Jersey corporation with
its principal place of business at 199 Grandview Road, Skillman, New Jersey
08558 ("JJCC").  LecTec and JJCC are sometimes referred to herein
individually as a "Party" and collectively as "Parties."

     

    RECITALS

     

    WHEREAS
LecTec filed suit against JJCC and four other defendants in the United States
District Court for the Eastern District of Texas ("the Court"), Civil Action
Number 5:08-CV-00130-DF (the "Litigation") alleging, among other things, that
the sale of certain Ben Gay®
brand patches constituted infringement of LecTec’s United States Patent Nos.
5,536,263 C-1 and 5,741,510 C-1 ("the '263 patent" and "the '510 patent,"
respectively; collectively, the "Patents-In-Suit");

     

    WHEREAS
LecTec is willing to settle the Litigation against JJCC for an amount that is
less than what LecTec would consider to be a reasonable royalty in exchange for
JJCC willingness to settle the Litigation at a relatively early stage of the
process;

     

    WHEREAS
JJCC is willing to settle the Litigation for more than it believes it would be
obligated to pay to LecTec in order to avoid the anticipated cost of continued
litigation;

    

    
      	
              **

            	
              The appearance of a double
      asterisk denotes confidential information that has been omitted from the exhibit
      and filed separately, accompanied by a confidential treatment request,
      with the Securities and Exchange Commission pursuant to Rule 24b–2 of the
      Securities Exchange Act of
  1934.

            

    

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    
    

     

    WHEREAS
LecTec and JJCC now desire to resolve the Litigation, under the terms and
conditions hereof, without acknowledgement of liability by any Party;
and

    **

    AGREEMENTS

     

    NOW
THEREFORE, in consideration of the mutual promises and covenants contained
herein, and for such other and further consideration, the receipt and
sufficiency of which is hereby acknowledged, the Parties agree as
follows:

     

    1.           Payment
to LecTec.  JJCC shall pay LecTec the sum of $1,200,000 within
three (3) business days of the Effective Date.   The amount shall
be due and owing irrespective of any further developments in the Litigation,
including any possible determination that either of the Patents-In-Suit is
invalid or unenforceable.  JJCC shall make payment under this Section
1 by wire transfer to:

     

    
      
        	
                Receiving
      Bank Name:

              	
                **

              
	 
      	 
      
	
                Receiving
      Bank ABA#

              	
                **

              
	 
      	 
      
	
                Beneficiary
      Account Name:

              	
                **

              
	 
      	 
      
	
                Beneficiary
      Account Number:

              	
                **

              
	 
      	 
      
	
                Swift:

              	
                **

              

      

    

    

    2.           Termination
of the Litigation.  Promptly upon LecTec's receipt of an
original counterpart of this Agreement, LecTec and JJCC shall cause their
representatives to file with the Court an Order of Dismissal to terminate the
Litigation against JJCC with prejudice.  The Parties thereafter shall
cooperate fully to ensure entry by the Court.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    3.           Mutual
General Release.

     

    3.1           LecTec,
on behalf of itself and its officers, directors, employees, investors,
shareholders, administrators, predecessor and successor corporations, attorneys,
affiliates, agents, and assigns, hereby fully and forever releases, acquits and
discharges JJCC, its officers, directors, employees, investors, shareholders,
administrators, attorneys, predecessor and successor corporations, affiliates,
agents, and assigns, of and from any claim, duty, obligation or cause of action
relating to any matters of any kind, whether presently known or unknown,
suspected or unsuspected, arising from the beginning of time to the date of this
Agreement, including but not limited to all claims related to the matters
alleged in the Litigation, and any other matters connected in any way with the
making, using, importing, selling or offering to sell Patch Products, as defined
herein.  For the avoidance of doubt, "Patch Products," as used in this
Agreement shall mean any non-prescription, non-occlusive medicated hydrogel
patch product for application to the body to alleviate pain, sold by JJCC or any
of its subsidiaries or affiliates anywhere in the world.  LecTec
further releases and forever discharges the direct and indirect customers and
distributors of JJCC, and any subsidiaries or affiliates of either of them, of
and from any claim, duty, obligation or cause of action relating to any matters
of any kind, whether presently known or unknown, suspected or unsuspected,
arising from the beginning of time to the date of this Agreement, related to any
matters connected in any way with Patch Products sold by JJCC or any of its
subsidiaries or affiliates anywhere in the world.  The foregoing
release does not extend to any prospective obligations incurred under this
Agreement.  Further, the foregoing release does not extend to any acts
committed by future successor corporations, assigns, subsidiaries or affiliates
of JJCC that were in the business of making or selling Patch Products before
becoming a successor corporation, assignee, subsidiary or affiliate, including
without limitation any of the other defendants in the Litigation.

     

    3.2           JJCC,
on behalf of itself and its officers, directors, employees, investors,
administrators, predecessor and successor corporations, attorneys, agents, and
assigns, hereby fully and forever release, acquit and discharge LecTec, its
officers, directors, employees, investors, shareholders, administrators,
attorneys, predecessor and successor corporations, affiliates, agents, and
assigns, of and from any claim, duty, obligation or cause of action relating to
any matters of any kind, whether presently known or unknown, suspected or
unsuspected, arising from the beginning of time to the date of this Agreement,
including but not limited to all claims related to the matters alleged in the
Litigation and any other matters connected in any way with Patch Products sold
by JJCC.  JJCC further releases and forever discharges the direct and
indirect customers and distributors of LecTec, and any of its subsidiaries or
affiliates, of and from any claim, duty, obligation or cause of action relating
to any matters of any kind, whether presently known or unknown, suspected or
unsuspected, arising from the beginning of time to the date of this Agreement,
related to any matters connected in any way with Patch Products sold
by  LecTec or any of its subsidiaries or affiliates anywhere in the
world.  The foregoing release does not extend to any prospective
obligations incurred under this Agreement.  Further, the foregoing
release does not extend to any acts committed by future successor corporations,
assigns, subsidiaries or affiliates of LecTec that were in the business of
making or selling Patch Products before becoming a successor corporation,
assignee, subsidiary or affiliate of Lectec.

     

    4.           License
Grant by LecTec to JJCC.

     

    4.1           Limited
by the exceptions set forth in 4.1a, LecTec hereby grants to
JJCC, or any of its subsidiaries, affiliates, controlled entities,
subcontractors, manufacturers, importers, direct or indirect customers,
distributors or any third party that is involved in the development or
manufacture of any product on behalf of JJCC, a fully paid-up, world-wide,
non-exclusive and irrevocable license under the (a) the Patents-In-Suit, (b) any
patent that claims priority, directly or indirectly, from the Patents-In-Suit
(the "Family Patents"), including without limitation U.S. Patent Nos. 6,096,333;
6,096,334, and 6,361,790, or (c) any foreign counterparts of the Patents-In-Suit
or any of the Family Patents to make, have made, sell, offer for sale, use,
import, export, or otherwise dispose of any apparatus, method, product,
component, service, product by process or device associated with JJCC or its
subsidiaries, affiliates or other controlled entities, for the past, present and
future until the expiration of the last patent described
above.  Without limiting the foregoing license in any way, the Parties
agree that the foregoing license shall apply to any and all products and
processes now or hereafter sold or used by JJCC or its subsidiaries, affiliates
or other controlled entities.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    4.1a.        The
License Grant set forth in paragraph 4.1 excludes (i) "Vapor Patches,"
over-the-counter patches which emit vapors which, when inhaled, provide relief
of cough and cold, and (ii) prescription, non-occlusive, medicated hydrogel
patch products for application to the body of a human or animal to alleviate
pain and which includes prescription pain medicine in any dosage
form.

     

      4.2         LecTec
further grants to JJCC or any of its subsidiaries, affiliates, controlled
entities, subcontractors, manufacturers, importers, direct or indirect
customers, distributors or any third party that is involved in the development
or manufacture of Patch Products on behalf of JJCC, a fully
paid-up, world-wide, non-exclusive and irrevocable license under any patents
with an effective filing date prior to the date of this Agreement that LecTec
currently owns or has an interest in or obtains ownership or an interest in in
the future to make, have made, sell, offer for sale, use, import, export, or
otherwise dispose of any Patch Product associated with JJCC or its subsidiaries,
affiliates or other controlled entities.

     

    4.3           The
foregoing licenses shall not apply to sales by JJCC customers of products sold
to them by parties other than JJCC, its subsidiaries, affiliates or other
controlled entities. The foregoing license shall not apply to future acquired
subsidiaries, affiliates or other entities controlled by JJCC that were in the
business of making or selling Patch Products  before becoming a
subsidiary, affiliate or other entity controlled by JJCC, including without
limitation any of the other defendants in the Litigation.  The
foregoing license also shall not apply to products sold to non-retail customers
by JJCC that are branded or re-branded for re-sale by the non-retail customer;
the foregoing license shall apply to "private label" products sold by JJCC, its
subsidiaries, affiliates or other controlled entities to direct
retailers.

     

    5.           Agreement
Regarding Transfer of Patents.  LecTec agrees that it will not
assign or otherwise transfer the patents referred to in the License Grant set
forth in Paragraph 4 unless and until the transferee agrees in writing to be
bound by said licenses and such writing is provided to JJCC.

     

    6.           Agreement
Not To Challenge Patents.  JJCC covenants not to challenge or
assist in any way in challenging the validity or enforceability of the
Patents-In-Suit, any Family Patents or any foreign counterparts of the
Patents-In-Suit or any of the Family Patents, so long as none of these patents
is asserted against JJCC or any of their subsidiaries, affiliates, or direct or
indirect customers or distributors.

     

    7.           Costs.  Each
Party shall bear its own costs, expert fees, attorneys' fees and other fees
incurred in connection with the Litigation and this Agreement.

     

    8.           Representations
and Warranties.   Each Party represents and warrants that
(a) it has the full right and power to enter into this Agreement and to grant
the covenants and releases referred to herein, (b) there are no outstanding
agreements, assignments, options, liens or encumbrances inconsistent with the
provisions of this Agreement; and (c) the undersigned has the authority to act
on its behalf and on behalf of all who may claim through it to the terms and
conditions of this Agreement.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    9.           Severability.  In
the event that any provision hereof becomes or is declared by a court of
competent jurisdiction to be illegal, unenforceable or void, this Agreement
shall continue in full force and effect without said provision.

     

    10.           Entire
Understanding.  This Agreement represents the entire agreement
and understanding between the Parties and supersedes and replaces any and all
prior agreements and understandings relating to these matters.

     

    11.           Amendments.  This
Agreement may only be amended by a written agreement signed by both
Parties.

     

    12.           Confidentiality.   The Parties agree
that the terms of this Agreement (**) will be described in a Form 8-K to be
filed by LecTec with the Securities and Exchange Commission (SEC) within four
business days after the Effective Date.  The Parties also agree that
this Agreement (**) will be filed with the SEC in March 2010 as an exhibit to
LecTec’s Form 10-K for the year ended December 31, 2009, and that LecTec will
submit to the SEC at that time a request for confidential treatment of ** which
may or may not ultimately be granted by the SEC.   In connection with that request,
LecTec will submit a redacted version of the Agreement from which reference to
** has been redacted from the Agreement.  If the SEC does not grant
LecTec's request for confidential treatment, LecTec will promptly inform JJCC of
that decision and the Parties will cooperate to petition the SEC for
reconsideration.      This Agreement shall be confidential
between the Parties.  The Parties hereto agree that, except as
provided for in this Section, each will not make, issue or release any public
announcement, press release, statement or acknowledgment of the existence of, or
reveal publicly the terms, conditions and status of, the transactions
contemplated herein, **, without the prior written consent of
the other Party (which shall not be unreasonably withheld) as to the content and
time of release and the media in which such statement or announcement is to be
made; provided, however, that in the case of announcements,
statements, acknowledgments or revelations which either Party is required to
make, issue or release by law or by regulatory requirements or by the
regulations of national stock exchanges, or by bona fide
contractual requirements,
the making, issuing or releasing of any such announcement, statement,
acknowledgment or revelation by the party so required shall not constitute a
breach of this Agreement if (i) the disclosure is no broader than necessary to
achieve compliance; and (ii) the disclosing Party shall have given sufficient
prior notice (but not less than five (5) business days) to the other Party, to
enable the other party to review and comment on the scope and content of the
disclosure, and to intervene to protect the confidentiality of the disclosure in
such other party’s discretion. LecTec shall not use the name of JJCC, its parent
or any of its affiliates, subsidiaries or other controlled entities for
advertising or promotional purposes without the prior written consent of
JJCC.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    13.           Governing
Law and Jurisdiction. This Agreement shall be
governed by and construed in accordance with the laws of the State of Texas,
without giving effect to any choice of law provisions thereof.  In the
event of any dispute arising under this Agreement, LecTec and JJCC agree to
submit themselves to the exclusive jurisdiction of the state or federal courts
located in the Eastern District of Texas, and waive any objection on the grounds
of lack of personal jurisdiction or venue (forum non conveniens or otherwise) to
the exercise of such jurisdiction over either of them by these
courts.  Each party waives the right to a trial by jury.

     

    14.           Binding
Effect. This
Agreement shall be binding upon any party to whom any of the patents subject to
the covenant not to sue set forth in Section 4 may be assigned, licensed, or
otherwise transferred.

     

    15.           No
Assignment or Sublicense by JJCC.  JJCC may not assign or
transfer this Agreement, including the rights and obligations thereunder, to any
third-party, except in connection with a sale to a third-party of substantially
all of  JJCC's assets or the sale of JJCC's Patch Products business,
in which case this Agreement may be assigned to the third-party purchaser, but
the provisions of Paragraph 4 (license grant) shall only apply to Patch Products
offered for sale by JJCC at the time of the said sale of substantially all of
their assets or JJCC's Patch Products business, and not to any other products
sold by the purchaser of JJCC's Patch Product business.  Except as set
forth in Paragraph 4, JJCC may not sublicense the license rights granted under
Paragraph 4 of this Agreement to any third-party.

     

    16.           Counterparts.  This
Agreement shall be executed in two (2) counterparts, whereby LecTec and JJCC
shall each execute a duplicate original thereof, and each counterpart shall have
the same force and effect as an original and shall constitute an effective,
binding agreement on the part of each of the undersigned.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    

    

    IN
WITNESS WHEREOF, LecTec and JJCC have caused this Agreement to be executed by
their duly authorized representatives, whose signatures appear
below.

     

    Johnson & Johnson
Consumer Companies, Inc.

    
      
        	 	 	 	 	 	 
	By: 	
                /s/
      Hugh G. Dineen

              	 	 	
                Date:  December
      18, 2009

              	 
	 	
                Hugh
      G. Dineen

              	 	 	
                 

              	 
	 	
                 

              	 	 	
                 

              	 
	LecTec
      Corporation	 	 	 	 
	 	 	 	 	 	 
	By: 	/s/
      Judd Berlin	 	 	Date:  December
      18, 2009	 
	 	Judd
      Berlin, Chief Executive Officer	 	 	 	 

      

    **

    

    
      
         

      

      
        7Code:

    

    Employment
Agreement

    

    Party A
(Employer): Dalian Rino Environmental

    Engineering
Technology Co., Ltd.

    Party B
(Employee): Li Yu

    

    Formed by
Labor and Social Security Bureau of Dalian City

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    This
Employment Agreement is signed by and between Party A and Party B on the
principles of legality, fairness, equality, voluntariness, negotiation, honesty,
credibility according to the labor law of People’s Republic of China and labor
contract law of People’s Republic of China and relevant laws and
regulations.

    

    
      	
               
      

            	
              1.

            	
              Basic
      details of parties.

            

    

    

    Article
1           Party A
(Employer) Dalian Rino
Environmental Engineering Technology Co., Ltd.

    Legal
Representative, Major Responsible People or Entrusted Agent : Dejun
Zou

    Type of
Unit Enterprise  economic
type: limited
liability

    Organization
code 74439770-9

    Registration
place No.11
Youquan Road, Zhanqian Street,
Jinzhou
District, Dalian
City, Liaoning
Province.

    Actual
Operating Place _________ Road, ________ Street, ______ District, _____ City,
________ Province.

    Contact
info and telephone 0411-87662700

    

    Article
2           Party
B(Employee)  Li
Yu   Sex Female

    Type of
Household Registration  not
Agriculture

    ID number
of Resident 21020419590201306

    Household
Registration: Gan district, Dalian City, Liaoning
Province.

    Place of
residency: Gan
district, Dalian City, Liaoning
Province.

    Contact
info and telephone:

    

    Article
3, Party B should inform Party A timely about every change regarding contact
info and telephone.

    

    
      	
               
      

            	
              2.

            	
              Term
      of the Agreement:

            

    

    Article
4           The term of
the Agreement is agreed upon by the parties according to the first clause of the
following arrangement.

    (1)  Fixed
term: the term of this agreement shall commence on September 11th, 2008 and shall
continue until September 10th, 2013. the
probationary period will start from ______________-until
____________.

    (2) Non
fixed term: the term of this agreement shall commence on ____________. The
probationary period will start from ___________ until
______________.

    (3) Term
based upon mission finished: the term of this agreement shall commence on
_____________ until _____________

    

    
      	
               
      

            	
              3.

            	
              Working
      contents and working place

            

    

    

    Article
5           Party A
agrees to employ Party B as accounting manager
for the management
position, the working place is located in the Company.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

                Party
A and Party B may sign employment terms to lay out detailed working
responsibility and requirements.

    

    Article
6           Party B
should comply with Party A’s working arrangements and requirements, perform
working responsibility diligently, finish working mission timely, comply with
regulations formed by Party A.

    

    
      	
               
      

            	
              4.

            	
              Working
      hours, rest and vacation .

            

    

    

    Article
7           Party B’s
position will follow the first working hour
system.

    
      	
            	
              (1)

            	
              Standard
      working hour system: the normal working hours of the Party B shall be
      eight hours each day, for an average of forty hours per week, the rest
      days for each week shall be Saturday and
      Sunday.

            

    

    
      	
            	
              (2)

            	
              Non
      fixed working hour system: Based upon the assurance of Party B’s health
      and in consideration of Party B’s opinions, Party A shall adopt means such
      as concentrated work, concentrated rest, alternate rest and flexible
      working to ensure Party B’s rights for vacation and the accomplishments of
      production and working.

            

    

    
      	
            	
              (3)

            	
              Calculate
      working hours based upon (year/season/month), average working day and
      average working week do not exceed standard legal working
      time.

            

    

    

    Party A
shall ask for an approval before implementing methods of (2) and
(3)

    

    Article 8
The Employee is entitled to all legal holidays and other paid leaves of absence
in accordance with the laws and regulations of PRC and the company’s work
rules.

    

    Article 9
The Party A may extend working hours due to the requirements of its production
or business after consultation with the trade union and the Party B, but the
overtime working hours for a day shall generally not exceed one hour; if such
overtime work is called for due to special reasons, the extended hours shall not
exceed three hours a day, however, the total extension in a month shall not
exceed thirty-six hours.

    

    
      	
               
      

            	
              5.

            	
              Remuneration
      of Labor

            

    

    

    Article
10         In accordance with production
nature and economic benefit, Party A will set up remuneration system of its own.
With such system, Party B’s salary level will be decided on the basis of labor
skills, labor amount, labor conditions, labor contributions. Same amount of
labor will be compensated equally.

    

    Article
11         The third method of
payment system is adopted.

    
      	
            	
              (1)

            	
              Time-based
      salary: Party B’s salary standard is _____ yuan/month, bonus will
      calculated based upon Party B’s actual labor
  contribution.

            

    

    
      	
            	
              (2)

            	
              Item-based
      salary: Party B’s labor amount is  ______, unit price is
      ______.

            

    

    
      	
            	
              (3)

            	
              According
      to the salary system formed by Party
A.

            

    

    

    In the
probationary period, Party B’s salary standard is ______

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Article
12         Party A shall pay Party
B before 15th day of
each month in the form of legal tender or bank account transfer. In the case of
holiday or vocation, the salary’s payment will be paid in the latest working
day.

    

    Party A
shall record the time, amount, working days, signature of Party B’s salary
payment, Party A will provide salary list to Party B.

    

    Article
13         Party B works in the
extended hours or holidays, legal vacation days Party A shall provide Party B’s
vacation or pay Party B additional salary according to PRC’s relevant
regulations.

    

    Article
14         If Party B performs the
work, Party A shall pay Party B no less than the standard minimum
salary.

    

    Article
15         Party B’s vocational
salary in sick leave will be provided by Party A according to the company’s
regulation, but such salary will be no less than 80% of the minimum
salary.

    

    
      	
               
      

            	
              6.

            	
              Social
      insurance and social welfare

            

    

    

    Article
16         Party A and Party B
shall take part in the social security system according to laws, and pay off
social security timely. Both parties agree social security will be paid
according to the first means. Among them, Party A shall deduct from Party B’s
paycheck of the portion that Party B is responsible for.

    

    (1) take
part in pension insurance, medical insurance, unemployment insurance, working
damage insurance and propagation insurance.

    (2) tack
part in medical insurance, working damage insurance and ___________

    

    Article
17        During the term of this
Agreement, Party B shall be entitled to proper treatment according to law and
regulations in the case of vacation, sickness, damage, professional disease or
working injury, propagation, death as well as duration and treatment in the
period of medicine and pregnancy.

    

    Article
18         Party A will provide
Party B the following supplementary insurance and welfare
treatment.

    

    
      	
               
      

            	
              7.

            	
              Labor
      protection, labor condition and professional damage
      protection.

            

    

    

    Article
19        Party A shall establish and
perfect safety technology operating rules, working regulations and systems of
labor safety health, occupational damage protection. Party A shall provide Party
B necessary training. Party B shall comply with various safety operating rules
and regulations.

    

    Article
20         Party A will provide
Party B necessary labor protection items and labor safety conditions which
comply with corresponding national regulations.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Article
21         For those positions
which may induce occupational disease, Party A shall inform Party B honestly,
and provide labor safety education to Party B. Party A should precaution the
accidents happened in the process of working and reduce occupation
damage.

    

    Article
22        Party B is entitled to
refusing to work, if Party A’s order is in violation of safety regulations and
jeopardizing Party B’s personal safety. For those damaging labor conditions
provide by Party A, Party B is entitled to criticize, disclose and
prosecute.

    

    
      	
               
      

            	
              8.

            	
              Performance
      and modification of labor contract

            

    

    

    Article
23         Both parties of this
Agreement will fully and legally perform their respective duties under this
agreement.

    

    Article
24         The performance of this
agreement will not be affected, if Party A proceeds to modify its name, legal
representative, major managing officer or investors.

    

    Article
25         The mergers and
dissolution of Party A shall not affect the validity of this Agreement, the
successor of Party A’s rights and obligation shall continue to perform this
agreement.

    

    Article
26         The relevant clauses of
this agreement may be modified by the parties through consultation and such
modification will be confirmed by written form.

    

    
      	
               
      

            	
              9.

            	
              Termination
      and discharge of labor contract

            

    

    

    Article
27         This Agreement may be
terminated by the parties through consultation.

    

    Article
28         Party B may terminate
this agreement if Party B gives a 30 days’ written notice in advance. During the
probationary period, Party B may terminate this agreement if Party B gives a
3-day notice in advance.

    

    Article
29         Party B could terminate
this Agreement, if:

    

    (1) Party
A does not provide labor protection and labor condition according to the
agreement.

    (2) Party
A does not provide labor remuneration timely and fully.

    (3) Party
A does not pay  for social insurance fee on behalf of Party
B

    (4) Party
A’s regulation and system is in violation of laws and regulations of PR and harm
Party B’s interests.

    (5) this
Agreement is rendered invalid due to article 26 section 1 of labor contract
law.

    (6) other
conditions provided by laws and regulations that Party B could terminate labor
contract.

    (7) Party
A compels Party B to do the work through means of violence, threat or illegally
confine Party B’s personal freedom, or Party A issues his order without
consideration of relevant regulations thus damaging Party B’s personal safety.
For these conditions, Party B could terminate this agreement immediately,
without informing Party A in advance.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Article
30         Party A may terminate
this agreement, if:

    

    (1) Party
B is proved to be not qualified for the position offered during the probationary
period.

    (2) Party
B seriously violate Party A’s regulations and systems.

    (3) Party
B’s graft or serious dereliction of duty, causing a substantial damage to Party
A.

    (4) Party
B establishes employment relationship with other party which seriously affects
the completion of Party A’s work, or Party A makes request for correction, Party
B unreasonably rejects.

    (5) Party
B uses such means as deception or coercion, or takes advantage of the other
party’s difficulties, to cause the other party to conclude or modify an
employment contract, that is contrary to that party’s true intent.

    (6) Party
B is being charged with criminal offenses.

    

    Article
31         Party A could terminate
this Agreement by giving a 30-day written notification or paying party Yi an
additional one-month salary, if Party B has the following
conditions:

    

    (1) The
Employee is ill or injured (other than due to work) and after completion of the
medical treatment, is not able to perform his previous function or any other
function the Employer assigns to the Employee;

    (2) The
Employee does not show satisfactory performances and after training and
adjusting measures is still not able to perform satisfactorily;

    (3) The
circumstances have materially changed from the date this agreement was signed to
the extent that it is impossible to execute the Agreement;  provided,
however, that the parties cannot reach an agreement to amend the contract to
reflect the changed circumstances.

    

    Article
32         Party A shall lay off
employees according to labor contract law, Party B’s legal interest shall not be
affected.

    

    Article
33         This Agreement should be
terminated, if:

    (1) this
Agreement has expired.

    (2) Party
B is starting to enjoy basic pension insurance treatment.

    (3) Party
B is dead, or Party B is announced to be dead or missing.

    (4) Party
A is legally announced bankruptcy

    (5) Party
A’s business license is cancelled, Party A is ordered to shut down, Party A is
nullified or Party A decides to dissolve in advance.

    (6) other
conditions provided for by laws and regulations.

    

    Article
34         Party A should provide
certification of cancellation or termination of labor contract to Party B when
such conditions happen, and finish the transferring process of personal files
and social security within 15 days. Party B should deal with work transition
according to this agreement. Party A should compensate Party B at the time of
work transition if such economic compensation is necessitated. Party A should
retain the labor contract which is cancelled or terminated for at least 2
years.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	
            	
              10.

            	
              Economic
      compensation and repayment

            

    

    

     Article
35        For the following situations,
Party A should compensate Party B’s economic losses according to Article 46 of
labor contract law: Party A requests the cancellation of contract according to
article 27 of this agreement; the cancellation of contract is based upon
Articles 29, 31 and 32; the Agreement is terminated based upon Article
33.

    

    Article
36         Economic compensation
shall be based upon the working years Party B has finished during her employment
period. For each year accomplished, Party A should pay one month’s salary as
compensation. More than 6 months but less than one year should be accounted as
one year; less than 6 months should be counted as half of one month. The
standard of salary is the average salary for the 12 months preceding the
cancellation or termination of labor contract by Party B.

    

    Article
37        If the monthly wage of Party B is
greater than three times the average monthly wage of employees in the Party A’s
area as published by the People’s Government at the level of municipality
directly under the central government or municipality divided into districts of
the area where Party A is located, the rate for the severance pay paid to him
shall be three times the average monthly wage of employees and shall be for not
more than 12 years of work.

    

    Article
38         If Party A terminates or
ends an employment contract in violation of this

    Law and
the Party B demands continued performance of such contract, Party A shall
continue performing the same. If Party B does not demand continued performance
of the employment contract or if continued performance of the employment
contract has become impossible, Party A shall pay double economic damages to
Party B.

    

    Party B
should responsible for Party A’s losses due to Party B’s illegal cancellation of
labor agreement.

    

    
      	
            	
              11.

            	
              Miscellaneous

            

    

    

    Article
39         Party A will provide
Party B special training fee, and provide occupational training to Party B. A
special agreement will be done and a service term will be
negotiated.

    

    A breach
damaged should paid by Party B, if he violates the term of service.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Article
40         A special Agreement will
be formed regarding the noncompetition clauses if Party B is responsible to
protect business secrets.

                     Party
B will be responsible for the payment of breach damages, if Party B violates the
clauses of noncompetition. If Party A incurs losses, Party B should undertake
the responsibility of compensation.

    

    Article
41 the following protocols will be attached to this Agreement.

    
      	
               
      

            	
              (1)  

            	
              position
      protocol

            

    

    
      	
               
      

            	
              (2)  

            	
              training
      protocol

            

    

    
      	
               
      

            	
              (3)  

            	
              confidentiality
      protocol

            

    

    
      	
               
      

            	
              (4)  

            	
              _________

            

    

    

    Article
42         The other terms agreed
upon by both parties:____________

    

    Article
43         The disputes arising out
of performance of this Agreement may be resolved by consultation. If
consultation fails, both parties may apply for arbitration, litigation according
to law.

    

    Article
44         The terms not indicated
by this Agreement will be implemented according to national and provincial, city
regulations.

    

    Article
45         This Agreement will
become effective upon signature or seal by both parties. This Agreement is in
duplicate, and Party A and Party B will have one cope respectively.

    

    
      
        
          
            	
                    Party
      A (seal)

                  	
                     /s/ Dejun Zou

                  	 
      

          

        

      

    

    Legal
Representative, major managing officer

    Or
entrusted agent (signature)

    

    Year      Month         Day

    

    
      
        
          
            
              
                
                  
                    	
                            Party
      B(signature)

                          	
                            /s/  Li Yu

                          	  
      

                  

                

              

            

          

        

      

    

    

    Year      Month        Day

    

    If both
parties apply voluntarily for certification of labor contract, such application
should be submitted to labor administration department within 30 days of
formation of labor contract.

    

    Certification
Department (seal)

    

    Certification
date:
Year       month           day

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00171-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00171-of-00352.parquet"}]]