Document:

<PAGE>
                                                                    EXHIBIT 10.1

                               AMENDMENT NO. 5 TO
                              THE CREDIT AGREEMENT

                  AMENDMENT NO. 5 TO THE CREDIT AGREEMENT (this "Amendment")
dated as of July 17, 2002 is entered into by and among AdvancePCS, f/k/a Advance
Paradigm, Inc., a Delaware corporation (the "Borrower"), the Subsidiary
Guarantors party hereto, the Lenders party hereto, Bank One, N.A. ("Bank One"),
as Documentation Agent, Bank of America, N.A. ("Bank of America"), as Collateral
Agent and as Administrative Agent for the Lender Parties, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, as Book-Runner, Lead Arranger and Syndication
Agent, and Banc of America Securities LLC, as Joint Book-Runner and Joint Lead
Arranger. Capitalized terms not otherwise defined in this Amendment have the
same meanings as specified in the Credit Agreement (as defined below).

                  PRELIMINARY STATEMENTS:

                  WHEREAS, the Borrower, the Subsidiary Guarantors, the Lenders
and the Agents have entered into a Credit Agreement dated as of October 2, 2000,
as amended by Amendment No. 1 to the Credit Agreement dated as of November 3,
2000, Amendment No. 2 to the Credit Agreement dated as of June 22, 2001,
Amendment No. 3 to the Credit Agreement dated as of August 24, 2001 and
Amendment No. 4 to the Credit Agreement dated as of May 29, 2002 (as so amended
and as otherwise amended, restated and modified from time to time, the "Credit
Agreement"); and

                  WHEREAS, the Borrower and its subsidiaries have requested that
the Required Lenders approve certain amendments to the Credit Agreement as
described herein; and

                  WHEREAS, the Borrower and each Subsidiary Guarantor that has
its chief executive office at the same location as the Borrower (as indicated on
Schedule IV to the Security Agreement) have each relocated their chief executive
office from the address for each such party set forth in Schedule IV to the
Security Agreement (the "North O'Connor Blvd Address") to the following address:
750 West John Carpenter Freeway, Suite 1200, Irving, TX 75039 (the "WJC Freeway
Address"); provided, however, ADVP Consolidation, L.L.C. is located at the
following address: 103 Foulk Road, Wilmington, DE 19803; and

                  WHEREAS, in connection with such relocation, the Borrower and
each Subsidiary Guarantor located at the same address as the Borrower have each
likewise relocated any Equipment and Inventory previously maintained by each
such party at the North O'Connor Blvd Address to the WJC Freeway Address; and

                  WHEREAS, the Borrower and its subsidiaries have requested that
the Required Lenders agree to waive compliance by the Borrower and each
applicable Subsidiary Guarantor with the requirement to give (i) thirty (30)
days notice of such headquarters relocation as required by Section 13(a) of the
Security Agreement, and (ii) fifteen (15) days notice of such Equipment and
Inventory relocation as required by Section 11(a) of the Security Agreement.

<PAGE>

                  NOW, THEREFORE, in consideration of the mutual promises and
obligations contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Borrower, the
Subsidiary Guarantors and the Required Lenders have agreed to amend the Credit
Agreement as hereinafter set forth.

                  SECTION 1. Amendment. The Credit Agreement is, effective as of
the Amendment No. 5 Effective Date (as defined herein), hereby amended as
follows:

         (a) Section 5.02(g)(ix)(II) of the Credit Agreement is hereby amended
by deleting such section in its entirety and replacing it with the following:

                  "(II) if any of the requirements set forth in the immediately
         preceding clause (I) is not satisfied, the amount of any payment to
         make such repurchase shall not (x) when aggregated with all other such
         payments made during the same Fiscal Year, exceed $200,000,000 and (y)
         when aggregated with all other such payments made during the term of
         this Agreement, exceed $300,000,000."

         (b) Section 9.02 if the Credit Agreement is amended by deleting the
notice address for the Borrower set forth in the first sentence thereof and
replacing it with the following: 750 West John Carpenter Freeway, Suite 1200,
Irving, TX 75039, Attn: Chief Executive Officer.

                  SECTION 2. Waiver Relating to Relocation of Corporate
Headquarters. The Required Lenders hereby waive compliance by the Borrower and
each Subsidiary Guarantor located at the same address as the Borrower with (i)
the requirement to give thirty (30) days notice of the relocation of its
corporate headquarters as required by Section 13(a) of the Security Agreement,
and (ii) the requirement to give fifteen (15) days notice of the relocation of
any Equipment and Inventory held at such location as required by Section 11(a)
of the Security Agreement. The foregoing waivers shall not operate as a consent
to any action or inaction by the Borrower or any other Loan Party and the
waivers set forth in this Section 2 are one-time waivers and shall not be
construed to be (i) waivers as to future compliance with any provision of the
Credit Agreement or any other Loan Document, (ii) waivers of any other Default
or Event of Default that may exist under any Loan Document or (iii) an amendment
of or modification to the Credit Agreement or any other Loan Document. The
Administrative Agent and the Lenders hereby reserve all of their rights, powers
and remedies under the Credit Agreement, after giving effect to this Amendment
and applicable law.

                  SECTION 3. Conditions of Effectiveness. This Amendment shall
become effective as of the date first above written (the "Amendment No. 5
Effective Date") when, and only when each of the following conditions shall have
been satisfied (it being understood that the satisfaction of one or more of the
following conditions may occur concurrently with the effectiveness of this
Amendment):

                      (a) the Administrative Agent shall have received
         counterparts of this Amendment executed by the Borrower, the Subsidiary
         Guarantors and the Required Lenders or, as to any of the Required
         Lenders, advice satisfactory to the Administrative Agent that such
         Required Lender has executed this Amendment;

                                       2
<PAGE>

                      (b) the Borrower shall have paid any and all out-of-pocket
         costs (to the extent invoiced) incurred by the Administrative Agent
         (including the reasonable fees and expenses of the Administrative
         Agent's legal counsel), and fees and other amounts payable to the
         Administrative Agent, in each case in connection with the arrangement,
         negotiation, preparation, execution and delivery of this Amendment; and

                      (c) the Administrative Agent shall have received (i) a
         certified copy of the resolutions of the Board of Directors of the
         Borrower and each other Loan Party evidencing its approval of this
         Amendment and the other matters contemplated hereby, and a certified
         copy of all documents evidencing other necessary corporate action and
         governmental approvals, if any, with respect to this Amendment and the
         other matters contemplated hereby; (ii) a certificate from a
         Responsible Officer of the Borrower to the effect that, as of the date
         hereof, (A) all representations and warranties made by the Borrower and
         each other Loan Party in this Amendment and each other Loan Document
         are true and correct in all material respects as if made as of the date
         hereof, other than any such representations or warranties that, by
         their terms, refer to a specific date other than the date hereof, in
         which case as of such specific date, and (B) after giving effect to
         this Amendment, no Default or Event of Default has occurred and is
         continuing;

                  SECTION 4. Authority of Administrative Agent. The Required
Lenders hereby acknowledge and agree that pursuant to the authority granted to
the Administrative Agent under Article VIII of the Credit Agreement, the
Administrative Agent has the power to execute and deliver all documents and to
take all such further action on behalf of the Lender Parties as it may deem to
be reasonably necessary to effectuate this Amendment.

                  SECTION 5. Representations and Warranties. Each of the Loan
Parties represents and warrants as follows:

                      (a) the representations and warranties contained in each
         Loan Document are correct in all material respects on and as of the
         date hereof, before and after giving effect to this Amendment, as
         though made on and as of the date hereof, other than any such
         representations or warranties that by their terms, refer to a specific
         date, in which case, as of such specific date;

                      (b) no Default or Event of Default has occurred and is
         continuing under the Credit Agreement, as amended hereby, or would
         result from this Amendment;

                      (c) it has taken all necessary action to authorize
         the execution, delivery and performance of this Amendment;

                      (d) this Amendment has been duly executed and delivered by
         such Loan Party and constitutes such Loan Party's legal, valid and
         binding obligation, enforceable in accordance with its terms, except as
         such enforceability may be limited (x) by general principles of equity
         and conflicts of laws or (y) by bankruptcy, reorganization,

                                       3
<PAGE>

         insolvency, moratorium or other laws of general application relating to
         or affecting the enforcement, of creditors' rights;

                      (e) no consent, approval, authorization or order of, or
         filing, registration or qualification with, any court or governmental
         authority or third party is required in connection with the execution,
         delivery or performance by such Loan Party of this Amendment where not
         completed such action would reasonably be expected to have a Material
         Adverse Effect; and

                      (f) the execution and delivery of this Amendment does not
         diminish or reduce its obligations under the Loan Documents (including,
         without limitation, in the case of each Subsidiary Guarantor, such
         Subsidiary Guarantor's guaranty pursuant to Section 7 of the Credit
         Agreement) in any manner, except as specifically set forth herein.

                      (g) (i) the relocation by the Borrower of its corporate
         headquarters and the Equipment and Inventory located at such location
         does not and will not affect the rights of the Administrative Agent or
         any Lender under any Collateral Document, nor does it affect the
         validity, perfection and/or priority of any security interest granted
         by any Loan Party thereunder, and (ii) in accordance with Sections 10,
         11 and 13 of the Security Agreement, the Borrower and each other Loan
         Party has taken any and all necessary actions to protect any pledge or
         security interest granted thereunder.

                  SECTION 6. Reference to and Effect on the Loan Documents. (a)
On and after the effectiveness of this Amendment, each reference in the Credit
Agreement to "this Agreement", "hereunder", "hereof" or words of like import
referring to the Credit Agreement, and each reference in the Notes and each of
the other Loan Documents to "the Credit Agreement", "thereunder", "thereof" or
words of like import referring to the Credit Agreement, shall mean and be a
reference to the Credit Agreement as amended by this Amendment.

                      (b) The Credit Agreement, the Notes and each of the other
         Loan Documents, as specifically amended by this Amendment, are and
         shall continue to be in full force and effect and are hereby in all
         respects ratified and confirmed.

                      (c) Except as expressly provided herein, the execution,
         delivery and effectiveness of this Amendment shall not operate as a
         waiver of any right, power or remedy of any Lender or the
         Administrative Agent under any of the Loan Documents, nor constitute a
         waiver of any provision of any of the Loan Documents.

                      (d) This Amendment shall constitute a Loan Document and,
         as such, can only be amended in accordance with the provisions of
         Section 9.01 of the Credit Agreement.

                  SECTION 7. Costs, Expenses. The Borrower agrees to pay on
demand all reasonable costs and expenses of the Administrative Agent in
connection with the preparation, execution, delivery and administration of this
Amendment (including, without limitation, the reasonable fees and expenses of
counsel for the Administrative Agent) in accordance with the terms of Section
9.04 of the Credit Agreement.

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<PAGE>

                  SECTION 8. Execution in Counterparts. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute but one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Amendment by telecopier shall be effective as delivery of a manually executed
counterpart of this Amendment.

                  SECTION 9. Governing Law. This Amendment shall be governed by,
and construed in accordance with, the laws of the State of New York.

              [The rest of this page is intentionally left blank.]

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<PAGE>
         IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.

                               BORROWER:

                                        ADVANCEPCS

                                        By:
                                             -----------------------------------
                                        Name:  David D. Halbert
                                        Title:    CEO

                               SUBSIDIARY GUARANTORS:

                                        ADVANCEPCS HOLDING CORPORATION

                                        By:
                                             -----------------------------------
                                        Name:  David D. Halbert
                                        Title: CEO

                                        ADVANCEPCS HEALTH SYSTEMS, LLC

                                        By:
                                             -----------------------------------
                                        Name:  David D. Halbert
                                        Title: CEO

                                        ADVANCEPCS HEALTH, L.P.

                                        By ADVANCEPCS HEALTH SYSTEMS, LLC, its
                                        General Partner

                                        By:
                                             -----------------------------------
                                        Name:  David D. Halbert
                                        Title: CEO

                                        ADVANCEPCS RESEARCH, L.L.C.

                                        By:
                                             -----------------------------------
                                        Name:  David D. Halbert
                                        Title: CEO

<PAGE>
                                        ADVANCERX.COM, L.P.

                                        By ADVANCEPCS HEALTH SYSTEMS, LLC, its
                                        General Partner

                                        By:
                                             -----------------------------------
                                        Name:  David D. Halbert
                                        Title: CEO

                                        ADVP CONSOLIDATION, L.L.C.

                                        By:
                                             -----------------------------------
                                        Name:  Susan de Mars
                                        Title:    General Counsel and Secretary

                                        ADVP MANAGEMENT, L.P.,

                                        By ADVANCEPCS HEALTH SYSTEMS, LLC, its
                                        General Partner

                                        By:
                                             -----------------------------------
                                        Name:  David D. Halbert
                                        Title: CEO

                                        AMBULATORY CARE REVIEW SERVICES, INC.

                                        By:
                                             -----------------------------------
                                        Name:  David D. Halbert
                                        Title: CEO

                                        BAUMEL-EISNER NEUROMEDICAL INSTITUTE,
                                        INC.

                                        By:
                                             -----------------------------------
                                        Name:  David D. Halbert
                                        Title: CEO

                                        FFI RX MANAGED CARE, INC.

                                        By:
                                             -----------------------------------
                                        Name:  David D. Halbert
                                        Title: CEO

<PAGE>

                                        FIRST FLORIDA INTERNATIONAL HOLDINGS,
                                        INC.

                                        By:
                                             -----------------------------------
                                        Name:  David D. Halbert
                                        Title: CEO

                                        HMN HEALTH SERVICES, INC.

                                        By:
                                             -----------------------------------
                                        Name:  David D. Halbert
                                        Title: CEO

                                        ADVANCEPCS MAIL SERVICES OF BIRMINGHAM,
                                        INC.

                                        By:
                                             -----------------------------------
                                        Name:  David D. Halbert
                                        Title: CEO

                                        ADVANCEPCS PUERTO RICO, INC.

                                        By:
                                             -----------------------------------
                                        Name:  David D. Halbert
                                        Title: CEO

                                        ADVANCEPCS SPECIALTYRX, LLC
                                        By:
                                             -----------------------------------
                                        Name:  David D. Halbert
                                        Title: CEO

                                        AFC RECEIVABLES HOLDING CORPORATION

                                        By:
                                             -----------------------------------
                                        Name:  David D. Halbert
                                        Title: CEO

                                        DRESING-LIERMAN, INC.
                                        By:
                                             -----------------------------------
                                        Name:  David D. Halbert
                                        Title: CEO

                                        THERACOM, INC.

                                        By:
                                             -----------------------------------
                                        Name:  David D. Halbert
                                        Title: CEO

<PAGE>

                                        CONSUMER HEALTH INTERACTIVE, INC.

                                        By:
                                             -----------------------------------
                                        Name:  David D. Halbert
                                        Title: CEO

<PAGE>
LENDERS (AND OTHER AGENTS)

BANK OF AMERICA, N.A.,
as Initial Lender and Initial Issuing Bank and Lender Party

By:
     ------------------------------------
Title:

BANK ONE, N.A., as Documentation Agent and Lender Party

By:
     ------------------------------------
Title:

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,
as Syndication Agent and Lender Party

By:
     ------------------------------------
Title:

------------------------------------------------
[LENDER]

By:
     -------------------------------------------
Title:
      -------------------------------------<PAGE>
                                                                    EXHIBIT 10.1

                   SUPPLY AND NON-EXCLUSIVE LICENSE AGREEMENT

         THIS SUPPLY and NON-EXCLUSIVE LICENSE AGREEMENT ("Agreement") dated as
of May 8, 2002 (the "Effective Date"), is between Novartis Consumer Health,
Inc., 200 Kimball Drive, Parsippany, NJ 07054 ("Novartis"), a Delaware
corporation, and LecTec Corporation, a Minnesota corporation, 10701 Red Circle
Dr., Minnetonka, MN 55343 ("LecTec").

                                   Background

         A. LecTec is a manufacturer of medical and health-related consumer
products, including a line of proprietary patch products for the
over-the-counter market which emit vapors which, when inhaled, provide relief of
cough and cold symptoms (the "Vapor Patches"). LecTec manufactures and sells
such patch products under its own trade names and also manufactures and sells
certain of such patch products to third parties.

         B. Novartis is a manufacturer and reseller of health-related consumer
products.

         C. Novartis desires to obtain a supply of certain LecTec patch
products, and LecTec desires to supply same, all upon the terms and conditions
set forth below and in the attached exhibits.

         D. LecTec and Novartis are parties to a certain Supply Agreement dated
as of May 15, 2000 (the "Supply Agreement") which provides for the supply by
LecTec to Novartis of Novartis's requirements for certain products as defined in
the Supply Agreement. All capitalized terms not otherwise defined herein have
the meanings ascribed to them in the Supply Agreement.

         E. LecTec has advised Novartis that LecTec has liquidity problems that
may interfere with its continued performance of its obligations under the Supply
Agreement. Novartis has agreed to assist LecTec in resolving its liquidity
problems by making advance payments for Products upon the terms set forth in
this Agreement and the parties have agreed to amend the Supply Agreement in
order to provide for such advance payment and to afford to Novartis increased
assurance that its requirements for Products will be satisfied.

         NOW, THEREFORE, the parties do hereby amend and restate the Supply
Agreement as follows, intending that this Agreement shall supercede and replace
the Supply Agreement:

     1.       GENERAL SCOPE OF AGREEMENT

         1.1 Manufacturing. LecTec has developed and shall manufacture, sell and
cause to be delivered to Novartis the products set forth in Exhibit A hereto
(the "Products") in quantities sufficient to meet the total requirements,
consistent with the forecasting and purchase

                                       1
<PAGE>
order mechanism set forth in Article 3 of this Agreement, of Novartis for use in
the pediatric field of use (the "Field of Use") and in the countries set forth
in Exhibit D hereto (the "Territory") of such Products. LecTec shall manufacture
and sell the Products exclusively to Novartis, provided, however, "exclusivity"
in the foregoing sentence shall mean that LecTec may not manufacture and sell
the Products or any other Vapor Patches (collectively, "Comparable Products") in
the Field of Use and in the Territory to any other customer. Notwithstanding
such exclusivity, LecTec may continue to manufacture and sell Comparable
Products directly to retailers under its "TheraPatch" trade name, or under any
Other LecTec Trade Name (as defined below) even if such Comparable Products may
compete directly with the Products in the Field of Use and in the Territory. The
term "Other LecTec Trade Names" shall mean any LecTec trade names in existence
at the Effective Date or as developed by LecTec during the term of this
Agreement, but not including any third party's trade names which LecTec acquires
or to which LecTec otherwise gains rights during the term of this Agreement.

         1.2   *

         1.2.1 *

         1.3 Fulfillment of Requirements. Novartis shall purchase all of
Novartis' requirements of the Products for use in the Territory and the Field of
Use exclusively from LecTec, in accordance with and subject to the terms and
conditions of this Agreement. This requirements obligation is limited to
Novartis' requirements of Products which meet the Specifications (as defined
below).

         1.4 Minimum Requirements. During the period commencing on the Effective
Date of the Supply Agreement (May 15, 2000) and ending on December 31, 2001 (the
"Initial Period"), and during each calendar year thereafter (the Initial Period
and each calendar year thereafter each being a "Period"), Novartis shall
purchase at least the minimum requirements of Products set forth in Exhibit C
hereto (the "Minimum Requirements").

                  1.4.1 In calculating whether Novartis has in fact purchased
the Minimum Requirements, the parties shall count all variations of the Products
purchased by Novartis from LecTec in the Period in one cumulative total. Any
Products returned to LecTec by Novartis hereunder shall not be counted in such
total (but replacements of such returned Products shall be included in such
counting as if such replacements had been purchased at the time of the Products
being replaced).

* 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.

                                       2
<PAGE>

                  1.4.2 Beginning on January 1, 2002 and in each January
thereafter, if Novartis failed to purchase at least the Minimum Requirements of
Products during the preceding Period, then, by February 28 of the applicable
calendar year, Novartis shall either (a) place firm purchase orders for the
shortfall ("Shortfall") and such Shortfall amount of Products shall be deemed
added, on a one-time basis, to the Minimum Requirements for the Period in which
such purchase order is placed; or (b) pay to LecTec an amount equal to forty
percent (40%) of the difference between (i) the amount Novartis would have paid
if it had actually purchased the Minimum Requirements of Products for such
period and (ii) the amount actually paid for Products purchased during such
period ("Compensatory Payment"). If Novartis elects not to place such orders for
the Shortfall amount by such date, and elects not to make the Compensatory
Payment by such date, then LecTec shall no longer be obligated to sell Products
to Novartis on an exclusive basis within the Field of Use and the Territory and
may thereafter sell Comparable Products to third parties within the Field of Use
and the Territory. Upon such termination of Novartis' exclusivity, Novartis
shall cease to have any requirements to purchase the Minimum Requirements of the
Products. The provisions of this Section 1.4.2 shall not apply in the event that
Novartis' failure to purchase the Minimum Requirements is due to the actions or
omissions of LecTec.

         1.5 Regulatory Compliance. As set forth below, LecTec shall be
responsible for regulatory compliance in the manufacture of the Products and
supply of same to Novartis. Novartis shall be responsible for regulatory
compliance in the proper labeling, promotion, and advertising of the Products
and the sale of same to end users according to existing OTC monograph
requirements, directly or indirectly, which shall be under the exclusive control
of Novartis. The parties shall cooperate in good faith to achieve such
regulatory compliance.

         1.6 Production Standards. All Products sold and delivered to Novartis
hereunder shall (a) conform in all material respects with the specifications set
forth in the Quality Assurance Agreement, attached hereto as Exhibit B (the "QA
Agreement"), and with such further specifications as shall be agreed to by all
parties in writing (the "Specifications"); (b) be manufactured, packaged and
sold to Novartis without any material deviation from or breach of (i) the QA
Agreement, and (ii) any applicable laws, regulations, and requirements of any
government or governmental agency; and (c) be subject to the warranties set
forth in Article 9 of this Agreement.

         1.7 Brand Name. Novartis intends to market the Products under the
proprietary names "Vapor Patch" or "VaporPatch" (as selected by Novartis in its
own discretion). LecTec hereby acknowledges that it has no objection to Novartis
seeking to register such names at its own expense and risk with the United
States Trademark Office, or with other authorities, and shall file its consent
thereto, as requested in writing by Novartis, but LecTec does not warrant or
imply that such marks are otherwise available or will be granted. LecTec shall
give commercially reasonable cooperation to Novartis to manufacture and label
the Products with such name or names or other names as Novartis, in its sole
discretion, may designate from time to time during the term of this Agreement.
However, subject to the foregoing, nothing herein

                                       3
<PAGE>

shall be deemed to authorize the use of any LecTec trade name or trademark or
any other mark that would dilute or reasonably tend to dilute any such LecTec
trade name or trademark.

2.       PAYMENT

         2.1 Prices. In consideration of the satisfactory manufacture and
delivery to Novartis of the ordered quantities of Products, and subject to
adjustment in accordance with this Agreement, Novartis shall pay LecTec for the
Products in accordance with the prices set forth in Exhibit C hereto. Except as
provided in Section 2.10, Novartis shall make such payments within thirty (30)
days of the date of each LecTec invoice issued upon shipment of the Products.
Such payments shall be without prejudice to the inspection and credit rights of
Novartis under Article 4 of this Agreement.

         2.2 Taxes. Novartis shall bear the cost of taxes of any kind, nature or
description whatsoever applicable to the sale of any Products by LecTec to
Novartis (other than taxes based upon the income of LecTec or LecTec's
employees), unless Novartis is exempt therefrom and provides to LecTec, at the
time of the submission of any Purchase Order, tax exemption certificates or
permits acceptable to the appropriate taxing authorities.

         2.3 *

         2.4 *

         2.5 *

             2.5.1    *

             2.5.2    *

             2.5.3    *

         2.6 *

* 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.

                                       4
<PAGE>

         2.7 Raw Material Vendors. Novartis may at any time identify to LecTec
lower cost and comparable quality sources from which LecTec may obtain any of
the Raw Materials. In such an event, except to the extent that such other source
is unable to reasonably satisfy LecTec's quality, service or delivery standards,
or any of LecTec's other standard vendor qualification requirements, LecTec
shall utilize the sources identified by Novartis as soon as commercially
feasible, and the prices charged to Novartis for Products shall be reduced by
the amount of any resulting reductions in Raw Material costs. Novartis shall
reimburse LecTec for any costs LecTec shall reasonably incur in implementing any
such change in sources.

         2.8 *

         2.9 *

         2.10 Advance Payment.

                  2.10.1 In order to provide LecTec with working capital funds
necessary to enable it to manufacture and deliver Products to Novartis against
purchase orders to be issued by Novartis following the Effective Date, Novartis
shall advance funds (each such advance, an "Advance Payment" and, collectively,
the "Advance Payments") to LecTec for use by LecTec (a) to pay current accounts
payable and expenses not exceeding $250,000 in the aggregate and thereafter (b)
exclusively for the manufacture and delivery of Products. Subject to the full
and timely performance by LecTec of the Product shipment requirements set forth
in Exhibit E attached hereto and made a part hereof and all other obligations of
LecTec under this Agreement, Novartis shall disburse the Advance Payments to
LecTec in installments in accordance with the schedule designated as "LecTec
Payments" in Exhibit E

         Novartis shall have no obligation to disburse any Advance Payment (x)
if LecTec shall fail to make any delivery of Products to Novartis in strict
compliance with the provisions of Section 2.10.3, time being of the essence or
(y) if such Advance Payment would cause the unpaid principal balance of the
Advance Payment Note, as defined in Section 2.10.2, to exceed $600,000. In the
event that Novartis shall withhold any Advance Payment by reason of clause (y)
in the preceding sentence, Novartis shall thereafter disburse the withheld
Advance Payment, in whole or in part, from time to time at the request of LecTec
at such time or times as the making of such disbursement will not cause the
unpaid principal balance of the Advance Payment Note to exceed $600,000,
provided that Novartis shall have no obligation to disburse such withheld
Advance Payment unless LecTec shall be in compliance with its obligations under
this Agreement at the time of its request therefore.

* 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.

                                       5
<PAGE>

                  2.10.2 The Advance Payments disbursed to LecTec as provided in
Section 2.10.1 shall be deemed to be a loan from Novartis to LecTec. On the
Effective Date, LecTec shall execute and deliver to Novartis (a) a promissory
note in the principal amount of $1,200,000 in the form attached hereto as
Exhibit F-1 (the "Advance Payment Note"), (b) a security agreement in the form
attached hereto as Exhibit G ("Security Agreement"), and (c) such other
documents as shall reasonably be deemed necessary by Novartis to perfect its
security interests in the assets of LecTec as provided in the Security
Agreement.

                  2.10.3 Unless otherwise prepaid in accordance with the terms
of the Advance Payment Note, LecTec shall repay the principal amount of the
Advance Payment Note (or so much thereof as shall actually have been disbursed
to it in accordance with the provisions of Section 2.10.1) in monthly
installments equal to the aggregate purchase price of all Products delivered by
LecTec to Novartis during such calendar month pursuant to purchase orders issued
by Novartis. Novartis shall credit the aggregate purchase price of Products
delivered, determined as provided in this Agreement, against the principal
payment obligations of LecTec under the Advance Payment Note and such credits
shall constitute full payment by Novartis of the purchase price of such Products
until such time as all of LecTec's obligations under the Advance Payment Note
shall have been paid in full.

                  Notwithstanding any provision in Section 3 of this Agreement
to the contrary, LecTec shall produce and deliver Products to Novartis, and
Novartis shall issue purchase orders calling for deliveries of Products, having
aggregate purchase prices each month following the Effective Date in accordance
with the schedule of Lots Required having the aggregate purchase prices
designated as "NCH Cost" on Exhibit E.

                  Notwithstanding the provisions of Section 11.3 of this
Agreement, LecTec shall be deemed to be in default of its obligations under this
Section 2.10.3: (a) if, in the period from the Effective Date to December 31,
2002, two consecutive Batches, as defined in Section 7.2.1, or any three
Batches, as so defined, are rejected by Novartis based upon a commercially
reasonable determination by Novartis, made without regard to the procedures set
forth in Section 4 of this Agreement, that such Batches, as so defined, fail to
comply with the Product quality provisions of Section 9.1 of this Agreement, or
(b) if LecTec shall fail to deliver any Batch, as so defined, by the later of
(i) the thirty (30) day period commencing upon Novartis' QA release or rejection
and (ii) thirty (30) days following the date specified for delivery in the
applicable purchase order, unless such failure to make timely delivery is
attributable exclusively to changes ordered by Novartis in Product
specifications or Product packaging specifications.

                  2.10.4 In addition to its obligation to repay the Advance
Payments, LecTec is currently indebted to Novartis in the amount of $220,000 for
certain Product recall costs incurred by Novartis (the "Recall Debt"). On the
Effective Date, LecTec shall execute and deliver to Novartis a promissory note
in the principal amount of $220,000 in the form of Exhibit F-2 hereof (the
"Recall Debt Note"). LecTec shall pay the principal amount of the Recall Debt
Note together with interest thereon either by way of delivery of Products from
time to time during the year 2003 or otherwise as designated in writing by
Novartis, but in any event the Recall Debt

                                       6
<PAGE>
shall be repaid in full, together with interest thereon, not later than December
31, 2003. The Recall Debt Note will be secured pursuant to the Security
Agreement.

                  2.10.5 Upon payment in full of all of LecTec's obligations
under the Advance Payment Note and the Recall Debt Note and upon the request of
LecTec, Novartis shall deliver both notes to LecTec for cancellation together
with the Security Agreement and such other documents as may be necessary to
effect a release of Novartis's security interests under the Security Agreement.

3.       FORECASTS AND ORDERS

         3.1 Rolling Forecasts. In order to assist LecTec in planning
production, Novartis shall provide LecTec with a twelve (12) month rolling
forecast of the quantities of Products and delivery dates required by Novartis,
by month, for the following twelve (12) months. It is understood that such
forecasts are intended to be estimates only and shall not be binding upon
Novartis. Notwithstanding the foregoing, Novartis shall be bound to purchase
from LecTec one hundred percent (100%) of those quantities of Products set forth
in each such forecast as being Novartis' requirements of Products for the first
three (3) months of each twelve (12) month period and, accordingly, shall issue
purchase orders therefor pursuant to Section 3.2. LecTec shall, no later than
ten (10) business days after receipt of each such forecast, notify Novartis in
writing of any prospective problems of which it is then aware that might prevent
it from meeting Novartis' forecasted order quantities or estimated delivery
dates. Unless LecTec so informs Novartis that it would have problems in meeting
Novartis' forecasted requirements, LecTec shall be obligated to deliver during
any calendar year, pursuant to purchase orders provided under Section 3.2 of
this Agreement, up to one hundred twenty percent (120%) of Novartis' estimated
purchases for that calendar year (but in no single month more than one hundred
fifty percent (150%) of those quantities of Products set forth in the most
recent forecast as being Novartis' requirements of Products for the first month
of the forecasted twelve (12) month period). LecTec shall further use its
commercially reasonable efforts to comply with purchase orders for Products in
excess of such one hundred twenty percent (120%) and one hundred fifty percent
(150%) amounts.

         3.2 Purchase Orders. Subject to Section 3.1 and for the period from the
Effective Date through December 31, 2002, at least 120 days prior to the date on
which Novartis desires to have a shipment of Products delivered (as defined in
Section 2.4), Novartis shall furnish to LecTec a binding purchase order for such
shipment, stating (a) the desired quantity of Products, and (b) the desired
delivery date. After December 31, 2002, the parties shall negotiate in good
faith the date that Novartis shall furnish a purchase order to LecTec, which
date shall be at least sixty (60) days prior to the desired delivery date, but
no more than 120 days prior to the desired delivery date. Each such Novartis
purchase order shall be subject to acceptance by LecTec. If LecTec has not
indicated in writing its rejection of such a purchase order within five (5)
business days from receipt of same, such purchase order shall be deemed
accepted. If LecTec cannot accept a specific purchase order, it shall, within
such 5-day period, inform Novartis in writing of the circumstances and of
LecTec's proposed alternative delivery proposal. In such event, Novartis shall
have no firm commitment to purchase, and LecTec shall have no firm

                                       7
<PAGE>
commitment to supply, unless Novartis furnishes LecTec with a new purchase order
incorporating such alternative proposal and LecTec has accepted same.

         3.3 Amendment of Purchase Orders. LecTec shall use its commercially
reasonable efforts to accommodate any Novartis requests for delivery of Products
in excess of the quantities described in any previously-submitted and accepted
purchase order, or for delivery of Products sooner than that allowed pursuant to
this Article 3. If Novartis' business conditions necessitate reduction or delay
in purchase order requirements, then LecTec shall use its commercially
reasonable efforts to implement such requested changes. Notwithstanding the
foregoing, LecTec shall not take any action in response to any such requests
which would result in charges to Novartis in addition to those set forth in the
respective purchase order without Novartis' prior written consent. Any proposed
amendment by Novartis (including, without limitation, any increase in order
quantities or change in delivery dates or change in artwork) of an accepted
purchase order under Section 3.2 shall follow the same procedure and have the
same rejection and acceptance periods set forth therein for an original purchase
order.

4.       INSPECTIONS AND ACCEPTANCE

         4.1 Inspection; Right of Rejection. Novartis shall accept any delivery
of Products hereunder if, in Novartis' sole and reasonable discretion, Novartis
determines that the delivery complies fully with the relevant purchase order,
the Specifications and the requirements of this Agreement. Novartis shall have
the right to inspect all Products delivered hereunder within thirty (30) days of
its receipt of the Products and all required documentation. Novartis shall
provide LecTec with written notice of its acceptance or rejection of the
shipment within sixty (60) days of receipt of the Products and all required
documentation. Any notice of rejection shall specify the reason(s) therefor.
Except in the event of any investigation, corrective action or retesting of a
shipment, if Novartis fails to provide LecTec with written notice of its
acceptance or rejection of the shipment within sixty (60) days of receipt of the
Products and all required documentation, then the shipment shall be deemed to
have been accepted by Novartis. Novartis' prior payment of any invoice for a
shipment which is timely rejected under this Section 4.1 shall not prejudice
Novartis' right under Section 4.2 to seek replacement Products or a credit or
refund, as Novartis may deem appropriate, with respect to any such rejected
Products.

         4.2 Replacements. If Novartis notifies LecTec that any Products, or any
part thereof, are rejected pursuant to Section 4.1, then, at Novartis' option,
(a) LecTec shall, at no additional charge, deliver replacement Products to
Novartis as soon as reasonably practicable thereafter (but, in any event, within
ninety (90) days after the initial notification by Novartis); or (b) the
purchase order at issue shall be deemed terminated, and Novartis shall not be
obligated to make any payments to LecTec with respect to such purchase order or
the rejected shipment (or, if payment has already been made for such Products,
then Novartis shall be entitled to a credit in such amount). Novartis shall give
commercially reasonable cooperation to LecTec to determine the nature and extent
of any problem giving rise to a rejection of Products, including, without
limitation, prompt samples of any allegedly non-conforming Products.

         4.3 Returns. Novartis shall not return any rejected Products to LecTec
except upon a return material authorization ("RMA") from LecTec. LecTec shall
pay the freight to deliver

                                       8
<PAGE>

replacement Products to Novartis for rightfully rejected Products, and LecTec
shall pay the freight to return to LecTec or its designee rejected Products for
which LecTec has provided to Novartis an RMA.

5.       DOCUMENTATION AND INFORMATION

         5.1 Confirmation. LecTec shall submit to Novartis the batch
manufacturing and testing documents relating to any Products ordered hereunder,
within ten (10) days of the completion of the manufacturing process with respect
to any particular batch of Products. LecTec shall provide such documentation as
reasonably requested by Novartis solely (a) to assist Novartis in determining
whether any manufactured or delivered Products comply fully with the
Specifications and the requirements of this Agreement; (b) to assist Novartis in
obtaining any and all regulatory approvals necessary to market the Products in
the Territory; or (c) to enable Novartis to comply with any statutory or
regulatory requirements or with a request by any governmental or regulatory
authority in the Territory. Such records and reports shall be subject to the
confidentiality provisions of Article 8 of this Agreement, shall be deemed
LecTec's Confidential Information, and shall be subject to the requirements of
Section 1.3 of the QA Agreement.

         5.2 Certificate of Analysis. Every shipment of the Products to Novartis
shall be accompanied by a Certificate of Analysis from LecTec to certify the
active ingredients therein. LecTec shall warrant the accuracy of each such
Certificate of Analysis to a reasonable degree of scientific certainty.

         5.3 Books and Records. LecTec shall keep on file all books and records
in connection with the manufacture and testing of the Products, including, but
not limited to, those books and records relating to cross-over cleaning, process
validation, installation qualification, operational qualification and cleaning
validation for a period of seven (7) years, plus the active year, from the time
of generation of such documents.

6.       PRODUCTION PROCEDURES

         6.1 No Reworked Products. LecTec shall not rework or reprocess any
non-conforming Products without the prior written approval of Novartis.

         6.2 Product Packaging. The Products shall be delivered to Novartis
packaged in accordance with the Specifications. Notwithstanding the foregoing,
Novartis shall have the right to require any special or varied packing that it
believes is reasonably necessary to meet customs or regulatory requirements in
the Territory. Reasonable incremental costs which result directly from any
packing changes required by Novartis will be borne by Novartis.

         6.3 Production Procedures. At an agreed upon time prior to its first
production run of the Products for Novartis, and at some mutually agreeable time
prior to the production of qualification batches, LecTec either shall provide to
a designated Novartis employee, or shall permit such designated Novartis
employee to review at LecTec's facility, for Novartis' review and approval,
LecTec's production procedures for the Products ("Production Procedures"). Such

                                       9
<PAGE>

Production Procedures shall include the manufacturing site, manufacturing
equipment, manufacturing process, manufacturing conditions and testing
procedures for the manufacture of the Products. After such initial Novartis
approval, if LecTec wishes to make any material change in any of the Production
Procedures so documented and approved, LecTec shall provide notice thereof to
the designated Novartis employee, and shall permit such designated Novartis
employee to review such proposed changes at LecTec's facility, at least thirty
(30) days prior to its first production run under such revised Production
Procedures. All such changes to the Production Procedures must be approved in
writing by Novartis prior to being implemented, which approval shall not
unreasonably be withheld.

         6.4 Waste Disposal. LecTec represents and warrants, to the best of its
knowledge, and shall take all commercially reasonable actions necessary to
ensure, that all facilities, equipment and practices used to perform LecTec's
responsibilities under this Agreement by or on behalf of LecTec, or by any of
LecTec's contractors of any rank (including, without limitation, environmental
or safety and health consultants or waste management or disposal firms) (each a
"LecTec Contractor") will be during the term of this Agreement, in full
compliance with all health, safety and environmental laws, statutes, ordinances,
regulations, rules, permits and pronouncements. LecTec assumes responsibility
for disposing of any and all waste generated during the performance of its
responsibilities under this Agreement (including, without limitation, during any
manufacturing, storage and transportation activities) in accordance with all
legal and professional standards.

                  6.4.1 LecTec shall Dispose or arrange for the Disposal of
Waste and at an Approved Disposal Facility. Novartis shall have the right to
unilaterally modify any designation of any Approved Disposal Facility at any
time based upon audit and inspection results. LecTec shall only transport Waste
to an Approved Disposal Facility by means of a transporter lawfully permitted to
transport the particular types of Waste at issue. LecTec shall be solely
responsible for the proper Disposal of Waste. For purposes of this Section
6.4.1,

                  6.4.1.1 "Dispose" or "Disposal" shall mean any discharge,
deposit, injection, dumping, spilling, leaking, or placing of any Waste into or
on any land or water and the arrangement of any of the foregoing, and shall
include any storage, pretreatment, treatment (including incineration), any other
actual disposal, use, sale, sampling or other transfer or application of Waste
of any kind or nature whatsoever;

                  6.4.1.2 "Waste" shall mean, for purposes of this Agreement
only, all materials that are produced or generated in connection with the
manufacture of any chemical compounds pursuant to this Agreement and for which
Disposal is required, including but not limited to materials that are Hazardous
Waste, co-product, by-product, chemical compounds that fail to conform to the
requirements of this Agreement, wastewaters, residues, wastes, bottoms and other
remainders and materials, packaging of, or components of the chemical compounds,
and components of any chemical compounds that are not used in the manufacture of
the chemical compounds;

                  6.4.1.3 "Hazardous Waste" shall mean (a) any material or
substance defined as or containing materials defined as a "hazardous substance"
pursuant to any applicable

                                       10
<PAGE>
laws or regulations, including the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, the Resource Conservation and
Recovery Act, as amended, and any similar successor or supplementary
legislation, and the regulations promulgated thereunder, or (b) any material or
substance that is radioactive; and

                  6.4.1.4 "Approved Disposal Facility" shall mean a disposal
facility approved by Novartis, which approval shall not be unreasonably
withheld.

         6.4.2 Notwithstanding anything to the contrary herein, (i) if LecTec
and/or any LecTec Contractor fails to comply with the obligations set forth in
this Section 6.4, then LecTec shall be responsible for any claims, suits, or
liabilities resulting therefrom (including, without limitation, those based on
strict liability and joint and several liability), and LecTec shall indemnify,
defend and save Novartis (including officers, directors, employees and agents of
Novartis) harmless from and against any and all such claims, suits, and
liabilities; and (ii) LecTec shall indemnify, defend and save Novartis
(including officers, directors, employees and agents of Novartis) harmless from
and against any and all claims, suits, and liabilities which arise directly or
indirectly from the storage, release, transportation or disposal of chemicals,
raw materials, product, waste or any other substance by LecTec and/or any LecTec
Contractor.

7.       OWNERSHIP AND LICENSE PROVISIONS

         7.1 Novartis Property. All materials, inventions, know-how, trademarks,
information, data, writings and other property, in any form whatsoever, which is
provided to LecTec by and/or on behalf of Novartis, or which is used by LecTec
with respect to the performance of its obligations hereunder, and which was
owned by Novartis prior to being provided to LecTec, shall remain the property
of Novartis (the "Novartis Property"). LecTec shall have a royalty-free license
to use any Novartis Property supplied to it solely to the extent necessary to
enable LecTec to perform its obligations hereunder. LecTec shall not acquire any
other right, title or interest in the Novartis Property as a result of its
performance hereunder. Without limiting the foregoing, Novartis Property shall
include the copyrights and trademarks used in the packaging of the Products
("Packaging IP Rights").

         7.2 Grant of Non-Exclusive License.

                  7.2.1 As used in this Section 7.2, references to Novartis
shall include any Affiliate of Novartis, which is defined as any entity that
directly or indirectly is in control of Novartis or is under common control of
any entity that, directly or indirectly, is in control of Novartis. In order to
assure Novartis of an uninterrupted supply of Products in accordance with the
supply terms of this Agreement, LecTec hereby grants to Novartis, and Novartis
hereby accepts, an irrevocable (except as provided in Section 7.2.2),
term-limited, non-exclusive license (the "License") to all of the intellectual
property of LecTec used in the production of the Products including, without
limitation, all patents, designs, bills of materials, manufacturing procedures,
and know-how associated with the Products, together with copies of all
documentary materials embodying the know-how used in the design and production
of the Products (collectively, the "Intellectual Property".) For the sake of
clarity, the Intellectual Property shall not include any other LecTec trade
names and shall not extend to the foregoing

                                       11
<PAGE>
materials used in the design and production of Comparable Products (as such term
is defined in Section 1.1 hereof) to the extent that such Intellectual Property
is not also used in the design and production of the Products. The License shall
be subject to the following terms and conditions:

                 (a) Within ten (10) days of the Effective Date or as soon
                     thereafter as is practicable but in no event more than
                     thirty (30) days after the Effective Date, the parties
                     shall select and engage a mutually acceptable independent
                     escrow agent of national standing ("Escrow Agent"). Within
                     ten (10) days of such selection and engagement of the
                     Escrow Agent, Lectec shall deposit correct and complete
                     copies of all documents and materials constituting the
                     Intellectual Property, including, without limitation, the
                     entire Product Control System documentation for the
                     Products. Without removing or copying any of such deposited
                     materials, upon prior notice to Lectec, Novartis may
                     examine such materials at the time of their deposit or ask
                     that the Escrow Agent do so on its behalf to confirm that
                     the proper materials have been so deposited. All materials
                     so deposited shall be subject to the License and shall be
                     released to Novartis in accordance with the escrow
                     agreement by and among the Escrow Agent, Novartis and
                     LecTec upon the effectiveness of a License Activation
                     Notice (as defined below). To facilitate the prompt release
                     of such deposited materials, LecTec shall not exercise any
                     rights that may be granted to it under the form of escrow
                     agreement executed by the parties with the Escrow Agent to
                     (i) provide contrary instructions to bar or delay such
                     release, (ii) invoke any arbitration or other dispute
                     resolution mechanism to bar or delay such release or (iii)
                     provide notice of Lectec's intent to obtain an order from
                     an arbitrator or court to bar or delay any such release.
                     Any breach by LecTec of its undertaking in the preceding
                     sentence will result in irreparable harm to Novartis for
                     which Novartis will have no adequate remedy at law and,
                     accordingly, Novartis may seek and obtain an order of
                     temporary and permanent injunctive relief, an order of
                     specific performance or any other appropriate equitable
                     relief from a court of competent jurisdiction to prevent
                     the commission or continuation of such breach by LecTec,
                     provided, however, that after the release of such escrowed
                     materials, LecTec may seek damages from Novartis if, in its
                     reasonable discretion, Lectec determines that a Material
                     Failure did not occur and that no other event occurred that
                     would have permitted the Escrow Agent to release such
                     escrowed materials. Such damages shall be the difference
                     between the royalty payments due to LecTec during the
                     License Phase and the amount that LecTec would have been
                     due if such sales of Products were made to Novartis under
                     the terms of the Supply Phase, less Lectec's reasonable
                     costs of manufacturing the same. Lectec shall bear the
                     reasonable costs of the Escrow Agent for the establishment
                     and operation of such escrow of the Intellectual Property,
                     provided, (x) the Escrow Agent shall give written notice to
                     Lectec and to Novartis of any non-payment of such costs by
                     Lectec and (y) the Escrow Agent shall give at least ten
                     (10) days written notice to Novartis prior to any release
                     or return of such escrowed materials back to Lectec for any
                     reason, including, without limitation, any non-payment of
                     the costs of the escrow.

                                       12
<PAGE>

                 (b) Novartis may commence to use the License as provided in
                     Section 7.2.3 hereof ten (10) days after providing written
                     notice to LecTec ("License Activation Notice") of LecTec's
                     Material Failure to deliver Products to Novartis in
                     accordance with accepted purchase orders. The License
                     Activation Notice shall include a reasonably detailed
                     specification of the nature, date and extent of such
                     Material Failure. For purposes hereof, a "Material Failure"
                     shall be defined as follows: (i) from the Effective Date to
                     and including December 31, 2002, two (2) consecutive Batch
                     Failures or a total of three (3) Batch Failures within such
                     period; and (ii) after January 1, 2003 to the end of the
                     Supply Phase, hereinafter defined, two (2) consecutive
                     Batch Failures or a total of three (3) Batch Failures in
                     any consecutive twelve (12) month period. For purposes
                     hereof, a "Batch Failure" shall be defined as (a) the
                     rejection of a Batch by Novartis based upon a commercially
                     reasonable determination by it, made without regard to the
                     procedures set forth in Section 4 of this Agreement, that
                     such Batch fails to comply with the Product quality
                     provisions of Section 9.1 of this Agreement or (b) if
                     LecTec shall fail to deliver any Batch, as so defined, by
                     the later of (x) the thirty (30) day period commencing upon
                     Novartis' QA release or rejection and (y) thirty (30) days
                     following the date specified for delivery in the applicable
                     purchase order, unless such failure to make timely delivery
                     is attributable exclusively to changes ordered by Novartis
                     in Product specifications or Product packaging
                     specifications. A "Batch" shall mean * folding cartons of
                     the Products as intended for retail sale. A single purchase
                     order may be for one or more Batches.

                 (c) The period within the term of this Agreement from the
                     Effective Date to the tenth (10th) day after a License
                     Activation Notice shall be known as the "Supply Phase," and
                     the period from the end of the Supply Phase to the end of
                     the term of the Agreement shall be known as the "License
                     Phase." The License shall be legally effective upon the
                     Effective Date but may be used by Novartis only during the
                     License Phase unless otherwise extended by the mutual
                     agreement of the parties, and shall be terminable only as
                     provided in Section 7.2.2 hereof. Once the License Phase
                     has commenced, any other provision of this Agreement to the
                     contrary notwithstanding, Novartis shall have no further
                     obligation to purchase the Products from LecTec under this
                     Agreement, exclusively or otherwise.

* 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.

                                       13
<PAGE>

                 (d) At any time during the first six (6) months of the License
                     Phase, LecTec may provide evidence to Novartis that LecTec
                     has cured the problems that caused its Material Failure and
                     that LecTec could again resume its supply obligations
                     hereunder. Novartis may, in its sole business judgment,
                     determine whether it would temporarily relinquish its use
                     of the License and allow LecTec to resume such supply
                     obligations, but any such decision by Novartis shall be
                     without prejudice to the License for the full term hereof.

                 (e) The License shall include the right of Novartis to grant a
                     limited sublicense to any Novartis Affiliate or any other
                     third party contract manufacturer of the Products,
                     provided, in each such case, (i) such sublicensee shall
                     enter into confidentiality and non-disclosure terms
                     substantially equivalent to those set forth in Section 8
                     hereof; (ii) such sublicensee shall manufacture the
                     Products only for Novartis or a Novartis Affiliate; (iii)
                     Novartis shall give written notice to LecTec of the grant
                     of such sublicense at least ten (10) days prior to the
                     effective date of such sublicense; (iv) such sublicense
                     shall terminate when the License terminates; and (v)
                     Novartis shall give prompt written notice to LecTec if
                     Novartis becomes aware that there has been a material
                     breach of any of the foregoing terms by a sublicensee.

                 (f) In the event of a License Activation Notice, LecTec shall
                     promptly cooperate with Novartis to ensure an orderly
                     transition of manufacturing of the Products from LecTec to
                     Novartis or to Novartis' authorized sublicensed third party
                     contract manufacturer. Without limiting the foregoing,
                     LecTec shall offer to sell at its original cost, and
                     Novartis shall have the right, but no obligation, to buy at
                     such cost, all usable raw materials, all usable work in
                     progress, usable tooling, dies, and any other usable
                     specially designed or Novartis specific ordered assets used
                     by LecTec for manufacture of the Products during the Supply
                     Phase (collectively, "Inventory and Tooling"). LecTec shall
                     give Novartis prompt written notice of the available
                     Inventory and Tooling available for purchase upon such
                     terms, and Novartis shall have the exclusive right for ten
                     (10) days from receipt of such notice to purchase such
                     Inventory and Tooling; thereafter, LecTec may dispose of
                     such Inventory and Tooling in its sole discretion. Novartis
                     shall pay any freight or insurance charges for such
                     purchased Inventory and Tooling. In addition, if requested
                     in writing by Novartis and subject to reasonable
                     scheduling, LecTec shall also furnish to Novartis up to
                     three (3) manufacturing personnel experienced in the
                     manufacture of the Products, subject to Novartis' payment
                     for their services at their normal hourly or daily rates,
                     to assist in such transition efforts, for a maximum period
                     of two (2) weeks per person. Novartis shall also reimburse
                     LecTec for any reasonable and ordinary out-of-pocket
                     transportation, lodging, meal and other travel expenses of
                     such requested personnel.

                 (g) If Novartis desires to continue to use the Intellectual
                     Property after the end of

                                       14
<PAGE>

                     the term of this Agreement, as extended by mutual agreement
                     of the parties, but does not desire LecTec to be the
                     manufacturer of any Products for Novartis, then the parties
                     shall negotiate in good faith for at least ninety (90) days
                     prior to the scheduled termination of this Agreement for
                     mutually acceptable terms and conditions, provided,
                     however, such rights, if granted, shall be on a worldwide,
                     non-exclusive basis at a royalty rate not higher than * of
                     Novartis' net sales of the licensed Products.

                  7.2.2 If, at any time that notwithstanding the fact that (a)
LecTec is willing and able to agree to renew the term or any renewal term of
this Agreement and (b) LecTec is then willing and able to perform the Product
supply obligations contained in this Agreement, this Agreement shall
nevertheless be terminated (x) by reason of the failure of Novartis to consent
to a renewal of the term as provided in Section 11.1, (y) in accordance with the
provisions of Section 11.2, or (z) by reason of an uncured material breach of
this Agreement by Novartis as provided in Section 11.3, then, in the event of
such termination of this Agreement, LecTec may , in its sole discretion, revoke
the License upon thirty (30) days written notice to Novartis. Notwithstanding
such termination of the License, Novartis may sell off such inventory of the
Products as was made in good faith by or for Novartis under the License prior to
the effective date of such termination. Unless the License shall have been
terminated as provided in the preceding sentence, it shall continue in effect
for the maximum duration of time permitted under applicable law.

                  7.2.3 The License shall entitle Novartis to use the
Intellectual Property to manufacture, by itself or through one or more
contractors engaged for such purpose in accordance with Section 7.2.1(e),
Products solely for commercial sale and distribution by Novartis, and for no
other purpose. Except as provided in Section 7.2.5 and except for the limited
purpose described in the preceding sentence, the License shall not permit
Novartis to grant to any other party any rights or interests in any of the
Intellectual Property.

                  7.2.4 In the event that Novartis shall undertake the
manufacture of Products as provided in Section 7.2.3, it shall pay a royalty to
LecTec for the use of the Intellectual Property pursuant to the License in an
amount which shall be * of the net sales of Products by Novartis. The term "net
sales" as used in this Section 7.2.4 shall mean gross revenues from the sale of
Products manufactured by or on behalf of Novartis pursuant to the License less
customer returns, shipping or delivery charges paid by customers, sales taxes
and customs duties. Royalties pursuant to this Section 7.2.4 shall be payable
annually not later than ninety (90) days following the end of Novartis's fiscal
year by certified check or wire transfer payable to LecTec or its assignee.
Novartis shall furnish to LecTec or its assignee, at the time of each such
annual royalty payment, an accounting of its net sales of Products in reasonable
detail.

* 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.

                                       15
<PAGE>

                  7.2.5 The License shall be assignable by Novartis (a) to any
Affiliate or (b) to any entity that is a successor to Novartis by merger or sale
of all or substantially all of the assets of Novartis or the segment of the
business of Novartis engaged in the sale and distribution of Products. Any such
assignment shall be subject to the limitations on duration and scope of the
License set forth in Sections 7.2.2 and 7.2.3.

                  7.2.6 Solely to ensure proper accounting for and payment of
the royalties due to LecTec under Section 7.2.4, LecTec may request, not more
than once per calendar year during the term of the License, reasonable access
during normal business hours and upon at least ten (10) days prior written
notice by LecTec's independent certified accountants, reasonably acceptable to
Novartis ("LecTec Auditor"), to examine and copy the records of Novartis
relating to sales of the Products during the term of the License. The LecTec
Auditor may not disclose any such Novartis records to LecTec but shall report to
LecTec and Novartis only the results of its audit in respect of whether Novartis
has properly accounted for and paid the royalties due to LecTec under Section
7.2.4, which report shall be final and binding upon the parties except in the
case of fraud or manifest error, LecTec shall bear the cost of any such audit by
the LecTec Auditor. If such audit determines that Novartis has underpaid any
royalties, Novartis shall promptly pay the amount underpaid and simple interest
thereon at the rate of five percent (5%) per annum. Any other provision of this
Section 7.2.6 to the contrary notwithstanding, LecTec may not request the audit
of Novartis records for any royalty year more than five (5) years prior to the
date of such request.

         7.3 LecTec Property. Subject to the provisions of Section 7.2, all
materials, inventions, know-how, trademarks, information, data, writings and
other property, in any form whatsoever, which is provided to Novartis by or on
behalf of LecTec, or which is used by LecTec with respect to the performance of
its obligations hereunder, and which was owned by LecTec prior to its
performance or is developed or acquired in the course of such performance
hereunder, shall remain the property of LecTec (the "LecTec Property"). Novartis
shall acquire no right, title or interest in the LecTec Property as a result of
LecTec's performance hereunder. Without limiting the foregoing, as between the
parties hereto, all the intellectual property rights for the Products other than
the Packaging IP Rights shall be deemed to be LecTec Property subject to the
License granted to Novartis under Section 7.2 hereof.

         7.4 Effect of Termination. Subject to the provisions of Section 7.2,
upon the termination of this Agreement, each party shall return to its owner all
Novartis Property or LecTec Property, as applicable, except for one copy which
may be retained in the returning party's confidential files.

8.       TRADE SECRETS, CONFIDENTIALITY AND PUBLICITY

         8.1 Confidential Information. During the period that this Agreement is
in effect and thereafter, LecTec and Novartis shall not disclose to anyone in
any manner whatsoever or use for any purpose other than its performance of this
Agreement (except as authorized in writing by the disclosing party) any
information it receives from the other party ("Confidential Information"),

                                       16
<PAGE>

including, without limitation, intellectual property, inventions, works of
authorship, trade secrets or know-how or other information relating in any way
to the Products, processes, and services of the other party.

         8.2 Limitations. Each party shall limit disclosure of Confidential
Information received hereunder to only those of its employees who are directly
concerned with the performance of any activities with respect to which the
Confidential Information was disclosed. Each party agrees to advise those of its
employees who receive any other party's Confidential Information that such
Confidential Information (a) is proprietary and confidential to such party and
(b) shall not be disclosed to anyone except as authorized by this Agreement or
otherwise authorized by such party in writing. Each party further agrees to take
at least such precautions as it normally takes with its own Confidential
Information to prevent unauthorized disclosure of the other party's Confidential
Information.

         8.3 Injunctive Relief. Each party acknowledges that any unauthorized
disclosure of any portion of the other party's Confidential Information shall
cause irreparable injury to the other party and that no adequate or complete
remedy shall be available at law to such other party to compensate for such
injury. Accordingly, each party hereby also acknowledges that the other party
shall be entitled to injunctive relief in the event of such unauthorized
disclosure by a party or any of its employees in addition to whatever other
remedies it might have at law.

         8.4 Effect of Termination. Upon termination of this Agreement, each
party shall return to the other all copies of the other party's Confidential
Information, and shall make no further use of such Confidential Information,
except for one copy which may be retained in the receiving party's confidential
files.

         8.5 Exceptions. The obligations of this Section 8 shall not apply to
information

                  8.5.1 that is or has been in the possession of the recipient
prior to receipt of the same from the disclosing party as evidenced by
recipient's written records;

                  8.5.2 which the recipient lawfully obtains from any third
party not under an obligation to the disclosing party to hold the same in
confidence;

                  8.5.3 that is published or becomes part of the public domain
without breach of any undertakings discussed hereinabove;

                  8.5.4 that is independently developed by personnel of the
recipient without any use of or reliance upon the disclosing party's
Confidential Information; or

                  8.5.5 that is required to be disclosed pursuant to judicial
process, court order or administrative request, or that is otherwise required
for any regulatory filing, provided that the recipient shall notify the other
party sufficiently prior to disclosing such Confidential Information as to
permit such other party to seek a protective order.

                                       17
<PAGE>

         8.6 Press Releases. LecTec shall not issue any press release or other
public statement disclosing the existence of or relating to this Agreement
without prior written consent of Novartis, which consent shall not be
unreasonably withheld or delayed. The foregoing shall not limit LecTec's rights
to make such disclosures as reasonably required by applicable securities laws or
the rules of any stock exchange where its securities are traded.

9.       QUALITY OF THE PRODUCT; COMPLIANCE WITH LAW

         9.1 Representations and Warranties. LecTec hereby represents and
warrants that:

                  9.1.1 no Products constituting or being a part of any shipment
hereunder shall at the time of any such shipment be (i) adulterated or
misbranded within the meaning of the Federal Food, Drug and Cosmetic Act, as
amended from time to time (the "Act"), or regulations promulgated thereunder, as
such law or regulation is constituted and in effect at the time of any such
shipment, or (ii) an article which may not, under the provisions of Sections
404, 505 or 512 of the Act, be introduced into interstate commerce;

                  9.1.2 all Products furnished to Novartis hereunder shall be in
full compliance with the Specifications, and shall remain in full compliance
with the Specifications for the full period of the expected shelf-life of such
Products, so long as the Products are stored in accordance with the
Specifications;

                  9.1.3 LecTec shall perform its obligations hereunder in
compliance with any materially applicable federal, state and local laws and
regulations, including without limitation the Act, the FDA's then-current Good
Manufacturing Practices ("cGMP"), and any health, safety and environmental laws
and regulations materially applicable to LecTec's manufacture and packaging of
the Products and its other performance hereunder;

                  9.1.4 all Products furnished to Novartis hereunder shall have
been manufactured in accordance with the terms of the QA Agreement;

                  9.1.5 LecTec's manufacturing, laboratory and packaging
facilities shall remain in compliance with CGMP at all times during the term of
this Agreement to the extent applicable to the manufacture and packaging of the
Products; and

                  9.1.6 LecTec owns or has the right to use all necessary
copyright, trademark, patents, trade secrets and other intellectual property
rights which it shall use to perform its obligations hereunder with respect to
the Territory.

         9.2 Disclaimer. EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN THIS
AGREEMENT, LECTEC MAKES NO WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, CONCERNING
THE PRODUCTS, OR THE MERCHANTABILITY OR FITNESS THEREOF FOR ANY PURPOSE.

         9.3 Remedy. In the event that Products are delivered to Novartis by
LecTec which are not in compliance with the warranties made in Section 9.1 then,
at Novartis' option (i)

                                       18
<PAGE>

LecTec shall replace the non-compliant Products at no additional charge (which
replacement Products shall be delivered to Novartis as soon as reasonably
practicable, but in no event more than ninety (90) days after the initial
notification by Novartis); or (ii) LecTec shall credit Novartis' account in the
amount of the price of the non-compliant Products. Novartis shall give
commercially reasonable cooperation to LecTec to determine the nature and extent
of any problem giving rise to a breach of warranties, including, without
limitation, prompt samples of any allegedly non-compliant Products. Returns of
non-compliant Products shall be subject to the provisions of Section 4.3.

         9.4 Quality Assurance Representative. Novartis shall have the right, at
its expense, to place a quality assurance representative in the manufacturing
facilities of LecTec at all times or from time to time during the term of this
Agreement as determined by Novartis. LecTec shall provide complete access to its
manufacturing operations respecting the Products to such representative and
shall permit such representative to conduct such inspections of materials and
processes as such representative shall determine to be appropriate to assure
Novartis that LecTec is at all times in compliance with the representations and
warranties made in Section 9.1.

10.      INDEMNIFICATION AND INSURANCE

         10.1 Novartis Indemnification. Novartis shall defend, indemnify and
hold LecTec harmless against any and all claims, damages, expenses, reasonable
attorneys' fees, settlement costs and judgments arising out of any death,
personal injury, bodily injury or property damage to a third party alleged to
have been caused by the Products, except to the extent that such injury or
damage was the result of any breach of this Agreement by LecTec, including any
warranty contained herein, or the result of any latent defects in the Products
caused by the negligence or willful misconduct of LecTec. LecTec shall promptly
notify Novartis of any such claim or action, shall reasonably cooperate with
Novartis in the defense of such claim or action, and shall permit Novartis to
control the defense and settlement of such claim or action, all at Novartis'
cost and expense. For the sake of clarity, the foregoing indemnification,
subject to its stated exclusions, shall extend during the License Phase to any
Products made by Novartis or any Novartis Affiliate under the License and to any
Products made for Novartis or any Novartis Affiliate by a third party contract
manufacturer under any sublicense of the License.

         10.2 LecTec Indemnification. LecTec shall defend, indemnify and hold
Novartis harmless against any and all claims, damages, expenses, reasonable
attorneys' fees, settlement costs and judgments arising out of any death,
personal injury, bodily injury or property damage to a third party to the extent
that such death, injury or damage is the result of (i) any breach of this
Agreement by LecTec, including any warranty contained herein; (ii) any claim
regarding a work-related death or injury to any LecTec employee; (iii) any claim
regarding latent defects in the Products caused by the negligence or willful
misconduct of LecTec; or (iv) any claim that the Products, or any means used to
manufacture the Products, infringe any third party's patent, trade secret,
trademark, copyright, or other proprietary interest in the Territory. Novartis
shall promptly notify LecTec of any such claim or action, shall reasonably
cooperate with LecTec in the defense of such claim or action, and shall permit
LecTec to control the defense and settlement of such claim or action, all at
LecTec's cost and expense.

                                       19
<PAGE>

         10.3 Product Recalls and Withdrawals. Each party shall promptly notify
the other party of any legal and/or factual circumstances which might, under
applicable laws and regulations, necessitate a field correction, recall or
withdrawal of any Products (collectively, a "Regulatory Recall") and shall
consult with each other regarding the appropriate steps to be taken. Novartis
shall determine whether any Regulatory Recall shall take place. Novartis shall
notify all regulatory authorities of any such Regulatory Recall, and shall take
all steps necessary to effectuate such Regulatory Recall. LecTec shall assist
Novartis in each of these activities to the extent reasonably requested by
Novartis. LecTec shall reimburse Novartis for the costs of any such Regulatory
Recall to the extent such Regulatory Recall was made necessary by the actions or
inaction of LecTec. If LecTec is unable in good faith to obtain the recall
insurance required by Section 10.4.6 for a reasonable premium, then the maximum
amount which LecTec shall be required to reimburse Novartis pursuant to the
preceding sentence shall be $500,000 per Regulatory Recall, not including the
cost of any replacement Products made necessary by the applicable Regulatory
Recall. Novartis shall reimburse LecTec for the costs of any such Regulatory
Recall to the extent such Regulatory Recall was made necessary by the actions or
inaction of Novartis. Any claim for such reimbursement of costs incurred in such
a Regulatory Recall shall be subject to audit by the CPA Firm.

         10.4 LecTec's Insurance Coverage. LecTec shall obtain, at its own
expense, policies of insurance in amounts no less than those specified below and
shall cause its carrier or carriers to name Novartis as an additional insured on
those coverages marked with an (*) below:

                  10.4.1 *general liability insurance with combined limits of
not less than $1,000,000 per occurrence and $1,000,000 per accident for bodily
injury, including death, and property damage;

                  10.4.2 workers' compensation and disability insurance in the
amounts required by the law of the state(s) in which its workers are located,
and employer's liability insurance with limits of not less than $1,000,000 per
occurrence;

                  10.4.3 *automobile liability insurance (in the event that the
use of an automobile by LecTec is required in the performance of this Agreement)
with combined limits of not less than $1,000,000 per occurrence and $1,000,000
per accident for bodily injury, including death, and property damage is
required;

                  10.4.4 *product liability insurance with limits not less than
$5,000,000;

                  10.4.5 property insurance for the replacement value of the
facilities and equipment used to produce the Products;

                  10.4.6 *excess insurance with limits not less than $5,000,000.

         10.5 Documentation of Coverage. Upon request, LecTec shall provide to
Novartis evidence of its insurance or self insurance. LecTec shall provide
Novartis thirty (30) days prior written notice of any cancellation or material
change in coverage.

                                       20
<PAGE>

         10.6 Novartis' Insurance Coverage. Novartis warrants and represents to
LecTec that Novartis maintains a policy or program of insurance or
self-insurance at levels sufficient to support the indemnification obligations
assumed herein. Upon request, Novartis shall provide to LecTec evidence of its
insurance or self-insurance. Novartis shall provide to LecTec thirty (30) days
prior written notice of any cancellation or material change in coverage.

11.      TERM AND TERMINATION

         11.1 Initial Term; Renewal. This Agreement shall commence on the
Effective Date and shall continue in effect until May 15, 2005 ( the "Initial
Term") and, thereafter, shall be renewed for subsequent one (1) year terms upon
the mutual consent of the parties.

         11.2 Termination for Convenience. Notwithstanding Section 11.1,
Novartis may terminate this Agreement for convenience at no cost, at any time,
by giving LecTec at least six (6) months prior written notice thereof.

         11.3 Termination for Cause. If either party materially breaches this
Agreement, the other party shall give such breaching party written notice
thereof with reasonable detail. If the breaching party fails to cure such breach
within forty-five (45) days of its receipt of such notice, then the
non-breaching party may terminate this Agreement at no cost upon written notice
thereof. In addition, either party may terminate this Agreement with immediate
effect upon giving written notice to the other party in the event of insolvency,
assignment for the benefit of creditors, or bankruptcy proceedings by or against
the other party.

         11.4 Survival. Notwithstanding any termination of this Agreement, the
provisions of Sections 1.6, 1.7, 2.1, 2.2, 2.4, 2.5, 2.6, 2.9, 5.3, 6.4.2, 7, 8,
9, 10 and 13 shall remain in effect.

12.      AUDIT AND INSPECTION RIGHTS

         12.1 Audit, Inspection and Observation. During the term of this
Agreement and any renewal thereof, Novartis shall have the right, at its sole
cost and expense, to send Novartis representatives to audit, inspect and observe
the manufacture, storage, disposal and transportation of the Products, and all
other materials reasonably related thereto or used in connection therewith, upon
reasonable prior notice to LecTec and during LecTec's normal business hours.
Such Novartis representatives shall have no responsibility or authority for
supervision of LecTec employees performing such manufacture, storage, disposal
or transportation operations. Such Novartis representatives shall comply with
any reasonable LecTec health, safety or security rules or policies while at
LecTec's premises. The audit, inspection and observations rights set forth in
this Section 12.1 are solely for the purpose of determining LecTec's compliance
with the terms of this Agreement and the QA Agreement.

         12.2 Action Plan. If, as a result of any such audit, inspection or
observation under Section 12.1, Novartis reasonably concludes that LecTec is not
in compliance with any of its obligations hereunder, it shall so notify LecTec
in writing, specifying such areas of non-compliance in reasonable detail. LecTec
shall provide to Novartis within thirty (30) days of

                                       21
<PAGE>

Novartis' request a written action plan with a time line for resolution of the
problems identified within a reasonable, mutually agreed upon time frame.

         12.3 Government Inspections. LecTec shall inform Novartis within
twenty-four (24) hours of any notification to LecTec of any site visits to the
LecTec facility by the FDA, state or federal regulatory agencies or any other
governmental or regulatory agency, relating, directly or indirectly, to the
manufacture of the Products, and shall provide to Novartis all other materials
related thereto or used in connection therewith. Novartis shall have the option
of participating in any site visit by any governmental or regulatory agency
(except to the extent such governmental or regulatory agency visitor objects) if
the site visit relates, directly or indirectly, to the manufacturing, storage,
disposal and transportation of the Products. If Novartis does not participate in
the site visit for any reason, LecTec shall report in writing the results of the
visit to Novartis within seven (7) days of the occurrence thereof. In the event
that any such governmental or regulatory agency finds that the site is deficient
or unsatisfactory in any material respect, LecTec shall cure all such material
deficiencies within the earlier of ninety (90) days or such cure period as
ordered by the government or regulatory agency. If all such deficiencies are not
cured by LecTec within the required time frame, Novartis may deem such condition
to be a material breach of this Agreement without the required 45-day cure
period in Section 11.2 of this Agreement and thus may immediately terminate this
Agreement.

13.      MISCELLANEOUS

         13.1 Waiver. Each party acknowledges and agrees that any failure on the
part of the other party to enforce at any time, or for any period of time, any
of the provisions of this Agreement shall not be deemed or construed to be a
waiver of such provisions or of the right of such other party thereafter to
enforce each an every such provision.

         13.2 Enforcement. If and to the extent that any provision of this
Agreement is determined by any legislature, court or administrative agency to
be, in whole or in part, invalid or unenforceable, such provision or part
thereof shall be deemed to be surplusage and, to the extent not so determined to
be invalid or unenforceable, each provision hereof shall remain in full force
and effect unless the purposes of this Agreement cannot be achieved. In the
event any provisions shall be held invalid, illegal or unenforceable the parties
shall use commercially reasonable efforts to substitute a valid, legal and
enforceable provision which insofar as practical implements the purposes hereof.

         13.3 Choice of Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Minnesota as though made and to be
fully performed in said State.

         13.4 Notices. All notices required or permitted hereunder shall be
given in writing and sent by confirmed facsimile transmission, or mailed postage
prepaid by first-class certified or registered mail, or sent by a nationally
recognized express courier service, or hand-delivered to the following
addressees:

                                       22
<PAGE>

         Novartis:         Novartis Consumer Health, Inc.
                           200 Kimball Drive
                           Parsippany, NJ 07054
                           Attn: General Counsel

         LecTec:           LecTec Corporation
                           10701 Red Circle Dr.
                           Minnetonka, MN 55343
                           Attn: Chief Executive Officer

or to such other address as may be specified in a notice given to the other
party in accordance with this Section 13.4. Any notice, if sent properly
addressed, postage prepaid, shall be deemed made three (3) days after the date
of mailing as indicated on the certified or registered mail receipt, or on the
next business day if sent by express courier service or on the date of delivery
or transmission (if delivered or sent during ordinary business hours, otherwise
on the next business day) if hand-delivered or sent by confirmed facsimile
transmission.

         13.5 Captions. The captions of each section of this Agreement are
inserted only as a matter of convenience and for reference and in no way shall
be deemed to define, limit, enlarge, or describe the scope of this Agreement and
the relationship of the parties hereto, and shall not in any way affect this
Agreement or the construction of any provisions herein.

         13.6 Entire Agreement; Amendment. This Agreement, including all
Exhibits annexed hereto (which are incorporated herein by reference), represents
and incorporates the entire understanding between the parties hereto with
respect to the subject matter of this Agreement and supersedes any prior offers,
proposals, drafts or other communications with respect thereto. Each party
acknowledges that there are no warranties, representations, covenants or
understandings of any kind, nature or description whatsoever made by any party
to any other, except such as are expressly hereinabove set forth. This Agreement
shall not be subject to change or modification except by the execution of a
writing specified to be an explicit amendment to this Agreement duly executed by
all parties hereto.

         13.7 Effect of Forms. The parties recognize that, during the term of
this Agreement, a purchase order, acknowledgment form or similar routine
document (collectively, "Forms") may be used to implement or administer
provisions of this Agreement. Therefore, the parties agree that the terms of
this Agreement shall prevail in the event of any conflict between this Agreement
and the printed provisions of such Forms, or typed provisions of Forms that
appear to add to, vary, modify or conflict with the provisions of this
Agreement.

         13.8 Relationship. Nothing in this Agreement shall create between the
parties a partnership, joint venture or principal-agent relationship and, for
the avoidance of doubt, each of LecTec and Novartis now confirms and accepts
that it is an independent contractor trading for and on its own behalf.

         13.9 Assignment. LecTec may not assign or otherwise transfer this
Agreement or any interest herein or any right hereunder (other than to an
affiliate) without the prior written consent

                                       23
<PAGE>

of Novartis, which consent shall not be unreasonably withheld, except that
LecTec may assign this Agreement in connection with the transfer or sale of all
or substantially all of its assets or business or its merger or consolidation
with another company, so long as (i) such acquiror or successor in interest
agrees in writing to be bound by all the terms and conditions hereof; and (ii)
LecTec shall first give Novartis written notice of any such assignment, and
fifteen (15) days to object thereto. The only grounds upon which Novartis may
object to such an assignment are if such acquiror or successor in interest is
(a) a direct competitor of Novartis; (b) in Novartis' reasonable discretion, is
not a manufacturer which has a proven record of operational quality at least
equal to that of LecTec; or (c) in Novartis' reasonable discretion, does not
have sufficient financial wherewithal. Any purported assignment, transfer, or
attempt to assign or transfer any interest or right hereunder except in
compliance with this Section 13.9 shall be null, void and of no effect.

         13.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original and all of which
together shall constitute a single instrument.

         13.11 Force Majeure. A party shall not be liable for delayed
performance or non-performance of this Agreement (other than payment of money
when due) if such condition is due to events beyond its reasonable control,
including, without limitation, fire, flood, storm, earthquake, any other Act of
God, electrical or computer failures, supply or labor shortages, strikes, riot,
civil disorder, war or government order or decree.

                  13.11.1 A party claiming relief under this Section 13.11 shall
give prompt written notice thereof to the other party, together with its best
estimate of when such condition will end and its full performance may be
resumed.

                  13.11.2 In the event of a Force Majeure, or if for any other
reason LecTec experiences any shortage and is therefore unable to supply
Novartis with the full quantity of Products and with the delivery date as
ordered by Novartis and accepted by LecTec, then Novartis shall be entitled to
the same proportionate quantity of available Vapor Patches as the quantity of
Products purchased by Novartis from LecTec in the twelve (12) months preceding
the shortage bears to all orders for Vapor Patches received by LecTec from all
its customers during such period, including LecTec's sales to Novartis, and
including LecTec's sales of Comparable Products directly to retailers under its
"TheraPatch" trade name, or under any Other LecTec Trade Name.

                  13.11.3 Notwithstanding the foregoing, if such condition
continues without change for more than ninety (90) days, the other party may
then elect to treat such delayed performance or non-performance as a material
breach of this Agreement.

                                       24
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.

LECTEC CORPORATION                        NOVARTIS CONSUMER HEALTH, INC.

By: /s/ Douglas J. Nesbit                 By: /s/ Mark Smedley

Name: Douglas J. Nesbit                   Name: Mark Smedley

Title: CFO and Corp. Secretary            Title: V.P. Supply and Logistics

Date: 5/9/02                              Date:  5/14/02

                                       25
<PAGE>

                                    EXHIBIT A

                                    Products

                          1.  Packages of six (6) menthol-scented hydrogel
                              patches containing menthol, camphor, eucalyptus
                              oil, and fragrance used for the topical
                              application of vapor active ingredients for relief
                              of symptoms due to coughs and colds. U.S and
                              Canadian formulations.

                          2.  Packages of six (6) mentholated cherry-scented
                              hydrogel patches containing menthol, camphor,
                              eucalyptus oil, and fragrance used for the topical
                              application of vapor active ingredients for relief
                              of symptoms due to coughs and colds. U.S and
                              Canadian formulations.

                                       26
<PAGE>

                                    EXHIBIT C

                Product Pricing and Minimum Purchase Requirements

Pricing

US Finished Product: Price per patch        *
Canadian Price:                             *

Annual Minimum Purchase Requirements for US Pediatric Exclusivity
*

Annual Minimum Purchase Requirements for Canadian Pediatric Exclusivity
*

* 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.

                                       27
<PAGE>

                                    EXHIBIT D

                                    Territory

United States of America
Canada
Mexico

                                       28
<PAGE>

                                    EXHIBIT E

                     Advance Payments and Delivery Schedule
                              April -December 2002

<TABLE>
<CAPTION>
                 April    May       June      July      August    September October  November  December   Total
<S>              <C>      <C>       <C>       <C>       <C>       <C>       <C>      <C>       <C>        <C>          <C>
LECTEC
PAYMENTS         $500,000 $250,000  $130,000  $370,000  $400,000  $340,000  $298,390       $0        $0   $2,288,390

*
      *                 *        *         *         *         *         *         *        *         0            4
      *                 *        *         *         *         *         *         *        *         0            1
      *                 *        *         *         *         *         *         *        *         0           24
      *                 *        *         *         *         *         *         *        *         0           29

Cartons Required:
      Lot Size
             *                   *         *         *         *         *         *        *         0    1,885,000   $2,288,390.00

Carton Costs:
             *
             *          *        *         *         *         *         *         *        *        $0   $2,288,390

AGGREGATE
CASH ADVANCE     $500,000 $592,180  $643,270  $539,810  $466,350  $332,890  $236,730       $0        $0
</TABLE>

Note:  all prices in U.S. Dollars.

* 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.

                                       29

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