(10) Other Agreements

     On May 16, 2011 the Company and its litigation counsel Rader, Fishman & Grauer PLLC (“Rader”) signed a Release and Settlement Agreement. Pursuant to such letter, Rader will no longer act as counsel to the Company, except as to matters arising specifically from the Company’s recently concluded patent infringement litigation and sale of patents. The parties have also agreed to mutual releases of claims against each other with regard to certain matters. A final reconciliation of the escrow account has been completed. The Company has received approximately $1,760,000 from the escrow account which relates to; (1) the funds remaining from an original contribution to pay litigation expenses; (2) the receipt of settlement funds net of legal expenses; and (3) fees related to the sale of hydrogel patch technology to Endo Pharmaceuticals Inc. This amount does not include the $2.0 million proceeds from the sale of hydrogel patch technology to Endo Pharmaceuticals Inc. These estimates also do not reflect any income tax affects.

     Rader has received $2.2 million in aggregate fees related to the Company’s settlement of its patent infringement claims against Chattem Inc. and POP and the Company’s sale of patents relating to its hydrogel patch technology to Endo Pharmaceuticals Inc.

     On May 31, 2011 LecTec entered into a Merger Agreement with Nerve Merger Sub Corp., a wholly owned subsidiary of LecTec (“Merger Sub”), and AxoGen Corporation (“AxoGen”). AxoGen is a privately held company that develops and markets surgical products for the repair and protection of peripheral nerves. Pursuant to the terms of the Merger Agreement, Merger Sub will merge with and into AxoGen and AxoGen will be the surviving corporation and a wholly owned subsidiary of LecTec.

     Pursuant to the terms of the Merger Agreement, and assuming $11,450,000 of Net Cash, each share of AxoGen’s common stock that is issued and outstanding will be converted into 0.03663996 shares of LecTec’s common stock, subject to final adjustment based upon LecTec’s actual Net Cash at Merger closing. It is expected that 6,106,201 shares of LecTec’s common stock will be issued in exchange for the stock of AxoGen assuming the conversion of all outstanding AxoGen convertible securities and 557,941 shares of LecTec’s common stock will be reserved for issuance upon exercise of AxoGen outstanding stock options that will be converted into LecTec’s stock options, subject to adjustment based upon LecTec’s Net Cash at Merger closing. It is also expected that all outstanding AxoGen warrants will be forfeited. In addition, current security holders of AxoGen have agreed to purchase, immediately following the Merger, an additional 416,509 shares of LecTec common stock at a price per share of $2.40. Upon consummation of these transactions, current Axogen security holders will own approximately 60% of LecTec’s common stock on a fully diluted basis.