Exhibit 10.20





Exhibit 10.20




Patent License Agreement




This Patent License Agreement (the “Agreement”) is made and effective as of January 1, 2010 (the
“Effective Date”) between Nocopi Technologies, Inc., 9-C Portland Road, West Conshohocken,
Pennsylvania 19428 (the “Licensor”) and Elmer’s Products, Inc., c/o 3630 Plaza Drive, #6, Ann
Arbor, Michigan 48108 (the “Licensee”). For avoidance of doubt, this Agreement shall only apply to
products sold through Licensee’s Giddy Up/Color Loco division, and not to products sold under the
Elmer’s brand which are governed by separate agreements between Licensor and Licensee.



1. Background.




Licensor is the owner of the patent rights set forth in Exhibit A hereto, including all
continuations, divisionals, continuations-in-part, reissues, and any other related U.S. or foreign
patents (collectively “the Licensed Patents”), pertaining to Licensor’s Rub-It & Color ink
technology (the “Patented Ink Technology”).



Licensee wishes to renew the license from Licensor to enable Licensee to print, have printed,
market, distribute, and sell (1) children’s soft-cover books, activity/art kits, stationery,
stickers, sticker books, and related items of merchandise set forth in Exhibit B hereto, each of
which having a suggested retail price in excess of $2.50 per item (collectively, the “Over $2.50
Books & Kits,”), (2) children’s soft-cover books, activity/art kits, stationery, sticker books and
related items of merchandise having a suggested retail price below $2.50 per item (collectively,
the “Under $2.50 Books & Kits,”), and (3) Activating Marker Kits. “Activating Marker Kits” are
defined as children’s merchandise such as soft cover books, activity/art kits, stationery,
stickers, and sticker books, whether or not the suggested retail price is in excess of or below
$2.50 per item, utilizing Licensor’s Patented Ink Technology that is marketed to be activated
solely by use of an activating marker, pen or other writing device (collectively, a “Marker”), and
not by scratching or rubbing. If an item of merchandise includes a Marker and is marketed to
permit or enable the Patented Ink Technology to be activated (i) solely by
scratching or rubbing, or (ii) both by scratching or rubbing and by use of a Marker, it shall not
be considered an Activating Marker Kit hereunder.



For ease of reference, the Over $2.50 Books & Kits, the Under $2.50 Books & Kits and the Activating
Marker Kits are referred to collectively in this Agreement as the “Licensed Merchandise.”



Placemats sold on a stand-alone basis (i.e., without being part of a book or kit) (collectively,
the “Excluded Products”) are not Licensed Merchandise (regardless of their suggested retail price),
and are expressly excluded from, and outside the scope of, this Agreement. Licensee shall have no
rights with respect to any Excluded Products except with Licensor’s prior written consent which may
be granted or withheld by Licensor in its sole discretion.


 


 









 





Licensor and Licensee (collectively, the “Parties”, each sometimes a “Party”) wish to enter into
this Agreement for the purpose of memorializing their understandings and agreements related to the
Patented Ink Technology.



2. License Grant




Licensor grants to Licensee, on a personal and non-transferable basis, the right and license (the
“License”) to use the Patented Ink Technology solely to print, have printed market, distribute, and
sell the Licensed Merchandise to retailers, wholesalers and distributors located throughout the
world; provided, however, that Licensee shall not print or cause the Licensed Merchandise to be
printed at facilities located within any portion of the territory described on Exhibit C hereto
(the “No-print Territory”).



Licensee’s license within North America and South America (the “Exclusive Territory”) shall be an
exclusive license. Unless and until this Agreement is terminated, Licensor shall not, and shall
not license any third party to, print, have printed, market, distribute or sell Licensed
Merchandise containing the Patented Ink Technology within the Exclusive Territory. Subject to
Section 5, nothing in this Agreement, however, shall limit Licensor’s rights to, and to license any
third party to, use, manufacture and sell the Patented Ink Technology in connection with or with
respect to any markets, product lines or territories in which Licensee does not then hold exclusive
rights hereunder.



Without prejudice to any other limitations set forth elsewhere in this Agreement, Licensee agrees
that (1) Licensee shall have no right to print or have printed Licensed Merchandise containing the
Patented Ink Technology at facilities located within the No-print Territory, (2) Licensee shall not
sublicense, assign or otherwise transfer the License to any third party, (3) Licensee will cause
Licensed Merchandise containing the Patented Ink Technology to be printed only by third party
printers who have been previously approved in writing by Licensor (collectively, “Approved
Printers,” each an “Approved Printer”), and (4) Licensee will not cause or permit Licensed
Merchandise containing the Patented Ink Technology to be printed by any third party other than an
Approved Printer. Licensor hereby approves those printers identified in Exhibit D hereto as
Approved Printers and agrees that it will not unreasonably delay or withhold its approval to other
parties proposed by Licensee as Approved Printers. Licensor reserves the right to withdraw any
previously-granted approval to an Approved Printer, including, without limitation, any printer
identified in Exhibit D, if (i) information comes to Licensor’s attention that, in Licensor’s
reasonable opinion, places in jeopardy such Approved Printer’s capability or intention to fulfill
its obligations under this Agreement or any related Confidentiality and Non-Disclosure Agreement,
or (ii) such Approved Printer suffers a material adverse change in its financial position or
trading reputation which, in Licensor’s reasonable opinion, affects its capability or intention to
fulfill its obligations under this Agreement, and (iii) in either such event, Licensee fails,
within fifteen (15) business days after written notice from Licensor, which notice shall include
the information known or reasonably believed by Licensor, to provide written assurances related
thereto that are satisfactory to Licensor.


 


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No rights or licenses are hereby granted or implied under this Agreement to any patents of Licensor
other than the Licensed Patents for the Licensed Merchandise. The rights and licenses herein
granted convey no rights to Licensee to use or register any trademarks or trade names of Licensor
or to use the name of Licensor or Licensor’s “Rub-It & Color” trademark in any manner whatsoever in
connection with the Licensed Merchandise.



Notwithstanding the immediately preceding subparagraph, Licensor and Licensee agree that all
Licensed Merchandise containing the Patented Ink Technology marketed, distributed, or sold by
Licensee shall be marked with the appropriate patent notices and numbers identifying Licensor as
the patent owner as reasonably specified by Licensor in writing.



3. Annual Royalties Based on Shipments of Licensed Merchandise.




In consideration of the rights and license granted to it with respect to the Licensed Merchandise,
Licensee shall pay to Licensor an annual royalty (the “Annual Royalty”). The Annual Royalty will
be payable in quarterly installments (each, a “Quarterly Royalty”), based upon the invoice price
less returns, allowances, trade discounts, retail co-op fees, markdowns and commissions, which
will, in the aggregate, not exceed ten percent (10%) of the invoice price, of all Licensed
Merchandise containing the Patented Ink Technology billed and shipped by Licensee during the
preceding quarter (“Quarterly Shipments”). The quarters upon which the Quarterly Royalties and
Shipments are based shall be: April 1 through June 30; July 1 through September 30; October 1
through December 31; and January 1 through March 31 (each a “Quarter”).



For Over $2.50 Books & Kits and Under $2.50 Books & Kits incorporating the Patented Ink Technology
that are sold within the Exclusive Territory, the royalty rate payable by Licensee to Licensor
under this Agreement will be five percent (5%) of the Quarterly Shipments. For Activating Marker
Kits incorporating the Patented Ink Technology that are sold within the Exclusive Territory, the
royalty rate payable by Licensee to Licensor under this Agreement will be three percent (3%) of the
Quarterly Shipments. For any Licensed Merchandise incorporating the Patented Ink Technology that
Licensee sells to distributors, wholesalers and retailers for resale to consumers located outside
the Exclusive Territory, the royalty rate payable by Licensee to Licensor under this Agreement will
be two percent (2%) of the Quarterly Shipments.



Each Quarterly Royalty shall be due on or before the last day of the calendar month following the
Quarter during which the applicable Licensed Merchandise has been billed and shipped. The amounts
payable for each Quarterly Royalty will be subject to credits for prepayments as provided in
Section 4. Time is of the essence as to all royalty payments due hereunder. Royalties unpaid for
more than ten (10) business days after due date shall bear interest at the prime rate (as reported
by The Wall Street Journal) plus 2%, or, if less, at the maximum allowable legal rate.


 


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The Quarterly Royalty for each Quarter shall be calculated at the net invoice price of all Licensed
Merchandise containing the Patented Ink Technology billed and shipped during
that Quarter, from which net invoice price there shall be no credits, allowances or deductions in
excess of the amount expressly authorized in this subparagraph on account of any Licensed
Merchandise returns, and regardless of (i) the basis of compensation, if any, to Licensee, (ii)
whether sold to affiliated or independent third parties, and (iii) whether the Licensed Merchandise
is sold on a stand-alone basis or as a component or constituent of other products. In computing
the Quarterly Royalty, the Licensee may deduct actual and good faith returns accepted from, and
actual and good faith allowances granted to, Licensee’s retail customers or distributors for
cooperative advertising, placement fees, pallet programs and the like up to, but not exceeding ten
percent (10%) in the aggregate of the total amount invoiced to the customer or distributor.



With the Quarterly Royalty for each Quarter hereunder, Licensee shall provide Licensor with a
written report (each, a “Report”) stating the number of shipments, net invoice price per shipment
of all Licensed Merchandise containing the Patented Ink Technology that were made during that
Quarter, separately reported as to sales of Over $2.50 Books & Kits, Under $2.50 Books & Kits, and
Activating Marker Kits both within and outside the Exclusive Territory, and, if requested by
Licensor, other supporting documentation in sufficient detail so as to enable Licensor to verify
the amount of the Quarterly Royalty due for that Quarter, including documentation as to any
deductions made for returns or allowances for such invoices. Licensee further agrees to keep and
preserve true and accurate records and books showing all shipments and net invoice prices of
Licensed Merchandise containing the Patented Ink Technology for at least two (2) years, and to
permit such books and records to be examined, audited and photocopied from time to time (but not
more frequently than once in any consecutive twelve month period) by an accountant chosen by
Licensor, during Licensee’s normal business hours and to the extent necessary to verify the
validity of such Reports and Quarterly Royalties hereunder. If, upon any such inspection, a
discrepancy of greater than five percent (5%) is found between the Quarterly Royalties paid by
Licensee and the actual Quarterly Royalties due for such Quarter, then Licensee shall, without
prejudice to Licensor’s other rights hereunder, reimburse Licensor for all reasonable costs
incurred in conducting such inspection including travel, hotel, subsistence and fees.



Notwithstanding the foregoing, the Annual Royalties payable by Licensee to Licensor with respect to
Licensed Merchandise hereunder may be subject to credits and adjustments, but only to the extent
expressly set forth in the remaining subparagraphs of this section 3.



For the customers of Licensed Merchandise within the Exclusive Territory now or hereafter
identified on Exhibit F hereto (the “Special Rate Customers”), Licensor shall, upon Licensee’s
submission of satisfactory supporting documentation, allow Licensee to pay royalties calculated at
the rate of two percent (2%) of Quarterly Shipments instead of the royalty rate that would
otherwise be due, as set forth in the preceding paragraphs. This special rate will be authorized
by Licensor if made necessary because of Licensee’s demonstrated reduced margins on Licensed
Merchandise sales to the Special Rate Customers initially listed in Exhibit F. The Licensee may
from time to time propose to the Licensor additional customers to be added to Exhibit F as Special
Rate Customers
and, in so doing, shall submit satisfactory supporting documentation of the reduced margins on
Licensed Merchandise sales to such customers. No additional customers will be added to Exhibit F
as Special Rate Customers unless agreed to by Licensor in writing, which agreement will not be
unreasonably withheld or delayed.



 


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Any reductions to or discounts from contractually-stated royalty rates that are granted by Licensor
under the preceding subparagraph of this section 3 will not diminish or decrease Licensee’s Minimum
Annual Royalties set forth in section 4 below. Licensor’s granting of a royalty discount to a
customer listed on Exhibit F in one instance shall not constitute a waiver or estoppel precluding
Licensor from refusing to grant a similar or any other discount in any other instance that does not
warrant a discount in Licensor’s reasonable judgment based upon the circumstances presented by
Licensee’s supporting documentation.



The names of Licensee’s customers set forth on Exhibit F may be modified or supplemented from time
to time with the Parties’ mutual written consent; provided, however, that at no time may more than
ten percent (10%) of Licensee’s then active retail customers (i.e., retail customers to whom
Licensee has made bona fide shipments of Licensed Merchandise within the previous 6 months) be
listed on Exhibit F.



4. Minimum Annual Royalties Based on Shipments of Licensed Merchandise.




Each twelve (12) month period from January 1 through December 31 shall be referred to as an “Annual
Period.” Licensee shall actively promote the sale of Licensed Merchandise while this Agreement
remains in effect, and shall consult with Licensor from time to time and keep Licensor apprised
regarding to extent and focus of such promotional efforts.



With respect to Licensee’s sales of Licensed Merchandise within the Exclusive Territory, Licensee
guarantees to pay Licensor a minimum royalty of at least Two Hundred Thousand Dollars ($200,000.00)
during each Annual Period (the “Minimum Annual Royalty”).



Any Quarterly Royalties paid by Licensee to Licensor on account of actual shipments of Licensed
Merchandise during an Annual Period shall be credited against the applicable Minimum Annual Royalty
due hereunder for that Annual Period. Licensee shall be entitled to a credit against the Minimum
Annual Royalty due for subsequent Annual Periods to the extent Licensee’s actual Annual Royalties
earned during the preceding Annual Period(s) exceeded its Minimum Annual Royalty for such Annual
Period(s).



Without prejudice to Licensor’s other rights and remedies under this Agreement, if Licensee fails
to generate an amount at least equal to the Minimum Annual Royalty in any Annual Period from (i)
sales of Licensed Merchandise within the Exclusive Territory, and (ii) any credits from prior
Annual Period(s) for exceeding its Minimum Annual Royalty for such Annual Period(s), Licensee shall
at the time of submission of the Report and the Quarterly Royalty for the last Quarter of that
Annual Period pay
Licensor an aggregate amount sufficient to satisfy the unpaid portion of the Minimum Annual Royalty
(the “Royalty Shortfall Payment”).


 


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The Royalty Shortfall Payments that the Licensee is required to pay for any Annual Period, since
not based on actual sales of the Licensed Merchandise, will be recorded as prepayments (the
“Prepaid Royalties”) that will thereafter be applied as a credit against the Quarterly Royalties
next payable with respect to actual sales of Licensed Merchandise. But in determining whether the
Annual Royalty for an Annual Period meets the Minimum Annual Royalty, any Quarterly Royalties
payable for actual sales of Licensed Merchandise during the current Annual Period that were
satisfied by means of a credit of Prepaid Royalties from a prior Annual Period will not be included
in the count of the Annual Royalty for the current Annual Period.



If the Annual Royalty payable on the basis of Licensee’s actual sales of Licensed Merchandise
within the Exclusive Territory for any Annual Period in the aggregate is less than $200,000.00,
then, without prejudice to its other rights, and upon written notice delivered to Licensee within
sixty (60) days after the end of that Annual Period, Licensor shall be authorized and permitted at
its sole option either (i) to terminate this Agreement pursuant to Section 13 effective ninety (90)
days after the date of delivery of that notice, or (ii) to license the Patented Ink Technology to
other third parties within the Exclusive Territory for their use with children’s merchandise
comparable to the Licensed Merchandise during the remainder of the Term, in which event Licensee’s
rights and license within the formerly Exclusive Territory shall become non-exclusive, without
affecting any of the Parties’ other rights and obligations hereunder, except that Licensee shall
not be required to pay any Minimum Annual Royalties with respect to any billings and shipments that
take place after its former Exclusive Territory has become non-exclusive.



5. Licensee’s Right of First Offer




If Licensor at any time develops and wishes to introduce into the marketplace new inks, patents or
inventions for children’s books and activity games/kits having a suggested retail price in excess
of $2.50 per item (“New Developments”), Licensor shall first offer, in writing, to license the New
Developments to Licensee, at Licensee’s option, upon terms and conditions that are set forth in
writing from Licensor to Licensee. Licensee shall have the right and option, exercisable within
thirty (30) days after receipt of such offer, to send written notice to Licensor that Licensee
intends to accept such offer. If Licensee accepts the offer, the Parties shall promptly negotiate
the terms and conditions of the written license agreement and the signing of such license agreement
must occur within sixty (60) days from the date of notice of Licensee’s approval, otherwise the
first offer rights of Licensee hereunder shall expire.



If Licensee does not elect to accept such offer within the 30-day timeframe, or if the parties are
unable, despite good faith efforts, to execute a written license agreement within thirty (30) days
after the Licensee has delivered to the Licensor its written acceptance of the offer, then Licensor
may license the New Developments to a bona fide
third party; provided that (1) an agreement is reached within one hundred twenty (120) days after
the expiration of, or rejection by, Licensee of the offer, and (2) the third party’s license is at
a royalty and upon other terms and conditions are the same as or more favorable to the Licensor
than those offered in writing to Licensee.


 


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Failure by Licensee on any occasion to exercise the right of first offer afforded herein shall not
constitute a waiver of Licensee’s right to exercise such right of first offer on any later
occasion. If any sale to the third party does not take place within the timeframe set forth above,
then Licensee’s right of first offer will apply to each and every subsequent proposed license of
New Developments.



If Licensee elects to accept Licensor’s offer to license the New Developments, the license
agreement offered by Licensor to Licensee shall include similar assurances, undertakings,
representations, warranties and commitments by the Licensee to those set forth in this Agreement,
including without limitation annual royalties, minimum annual royalties and shortfall payments that
are established based upon the reasonable expectations of the Licensor and the Licensee as to the
commercial prospects for the New Development.



6. Licensor’s Sales of Ink to Licensee’s Approved Printers




The parties contemplate that Licensee will cause the Licensed Merchandise to be printed by one or
more Approved Printers. Licensor shall have no legal obligation to authorize a third party to
serve as an Approved Printer hereunder unless such third party agrees (1) to purchase all required
Rub-It & Color ink (the “Ink”) from Licensor under and pursuant to the General Terms and Conditions
of Sale attached hereto as Exhibit G, (2) to meet and satisfy all written and reasonable
specifications issued by Licensor with respect to the handling, storage and use of the Ink, (3) to
provide access to its printing facilities from time to time sufficient to enable Licensor to assess
compliance with Licensor’s written specifications and quality control procedures, (4) to execute,
together with Licensee, and abide by the Confidentiality and Non-Disclosure Agreement (the “NDA”)
attached hereto as Exhibit H, and (5) not to print any Licensed Merchandise containing the Ink at a
facility located within the No-print Territory.



Notwithstanding anything to the contrary set forth in the General Terms and Conditions of Sale, all
Ink sold by Licensor hereunder shall be paid for by the Approved Printer (or by Licensee, if the
Approved Printer fails to remit any amount in a timely manner) as follows: One half (50%) upon the
date of delivery to the port of entry or airport then servicing the facilities of the Approved
Printer, and one half (50%) within thirty (30) days after the date of such delivery. Licensor
shall use commercially reasonable efforts, and in any event efforts that are at least comparable to
those it uses to protect its own confidential information, not to disclose, or permit the
disclosure of, the identities of Licensee’s Approved Printer(s) to any of Licensee’s known
competitors.



To the extent that there are any inconsistencies between the provisions in the General Terms and
Conditions of Sale and the provisions of this Agreement, the provisions of this Agreement will
prevail.


 


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Within a reasonable time period after the license of any New Developments to Licensee, Licensor
agrees to have independent laboratories perform a reasonable number of testings and to provide
written certifications to Licensee and any Approved Printer that then-current samples of the Ink
and the then-current Ink’s chemical formulations for such New Developments satisfy (i) the
requirements of not being toxic or a skin/eye irritant as defined in 16 CFR §1500.3(b)(5) and (8),
(ii) the requirements of ASTM Standard F-963 for heavy metals content and lead content pursuant to
16 CFR §1303, (iii) ASTM Standard D-4236, (iv) Toxological Risk Assessment (Acute Eye/Skin/Oral
Toxicity Evaluation), (v) USP 51 Preservative Effectiveness, (vi) USP 61 Microbial Cleanliness and
(iv) any other children’s safety standards to which Licensor submits the Ink for testing. If
Licensee desires Licensor to obtain additional testings and/or certifications beyond those that are
customarily provided by Licensor or that, in Licensor’s reasonable opinion, are excessive in
comparison to the royalties being generated under this Agreement, Licensor reserves the right to
require Licensee to share equally in the costs of such additional testings and certifications.



After (i) execution of the NDA and this Agreement, and (ii) Licensor’s approval of any Approved
Printer, Licensor shall provide samples of the Ink to Licensee’s Approved Printer, and shall also
make a technical representative available at a mutually convenient time to provide reasonable
introductory technological assistance to Licensee’s Approved Printer with regard to use of the Ink.
Licensee shall reimburse Licensor for one half (50%) of such representative’s actual travel,
lodging and subsistence expenses, plus his other reasonable out-of-pocket expenses thereby
incurred.



Licensor agrees to sell its Ink to Licensee’s Approved Printers at the initial rate of between
$12.50 to $18.50 (USD) per pound, depending on Ink color and quantity and packaging requirements.
Licensor shall not increase the price for the Ink during the initial twelve (12) months in which
this Agreement remains in effect and, thereafter, by written notice delivered to the Approved
Printer and the Licensee at least sixty (60) days prior to the date that the price increase is
effective, may increase the price for the Ink on an annual basis subject to the limitation that the
increase may not by more than the greater of (i) ten percent (10%) of the price applicable for the
prior per year or (ii) the actual increases in the costs of raw materials to produce the Ink on a
dollar-for-dollar basis in accordance with appropriate supporting documentation. Licensor agrees
to use commercially reasonable efforts to limit the increases in the costs of raw materials
required to produce the Ink.



Notwithstanding the foregoing, if at any time Licensor is unable to manufacture or deliver to
Licensee’s Approved Printers the Ink meeting the parties’ agreed-upon written specifications and in
sufficient quantities to meet Licensee’s needs for its use, then, after giving Licensor written
notice and at least thirty (30) calendar days in which to remedy the unavailability or
non-compliance with such specifications, Licensee shall be permitted to purchase non-infringing
replacement ink from a third party manufacturer, until such time as Licensor can manufacture (i)
enough of the Ink to meet Licensee’s needs or (ii) Inks that meets Licensee’s specifications.


 


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7. Insurance and Indemnification




Licensee shall maintain throughout the Term of this Agreement and for two (2) years thereafter
insurance policies with reputable insurers with an AM Best rating of ‘A’ who are satisfactory to
Licensor, including Comprehensive General Liability, and Product Liability, with a minimum limit of
$5,000,000.00. To the extent not paid by the Approved Printer or its insurance carriers, Licensee,
to the best of its financial capabilities, will indemnify, defend and hold Licensor harmless from
and against any liabilities, claims and damages of any kind, and all costs, including reasonable
attorney’s fees, arising from or relating to an Approved Printer’s improper disclosure,
dissemination or use of the Ink or the Patented Ink Technology in violation of this Agreement, any
NDA entered into by Licensee or the Approved Printer, or applicable patent and other intellectual
property laws.



Licensee’s liability to Licensor under this Agreement shall not be limited to Licensee’s insurance
coverage. Licensee shall provide Licensor with a certificate of insurance evidencing the required
coverage, and showing Licensor as a named additional insured, and will provide at least thirty (30)
days prior written notice of policy cancellation or modification. Licensee shall also provide
Licensor with updated certificates of insurance on the renewal anniversary of any policies required
under this Agreement.



8. Representations, Limited Warranty and Damage Limitations




Licensor warrants that it is the owner and/or patent holder of the Licensed Patents, and that
Licensee’s use of the Patented Ink Technology as authorized by this Agreement will not violate or
infringe upon the patents issued by any country in North America, and Licensor represents to the
best of its current actual knowledge but without specific investigation Licensee’s use of the
Patented Ink Technology as authorized by this Agreement will not violate or infringe upon the
patents issued by any other country in the Exclusive Territory or any proprietary rights of any
third parties. Licensor warrants that each of the Licensed Patents is as of the date of this
Agreement in full force and effect and that the Licensor will during the continuance of the term of
this Agreement take all actions that are necessary or appropriate to maintain those Licensed
Patents in full force and effect. Licensor shall defend at its own expense, with counsel of its
choosing, any third-party action, suit, claim or proceeding (“Claim”) brought against Licensee
alleging that the Licensee’s use of the Patented Ink Technology as authorized by this Agreement
infringes upon or misappropriates any such third-party’s rights under any patent issued by any
country in North America, any patent issued by any other country in the Exclusive Territory which
by written proof is shown to have been known by Licensor as of the Effective Date, or other
proprietary rights. Licensee may elect at its sole expense to participate in such defense through
its legal counsel. Licensor shall pay, to the best of its financial capabilities, any damages
finally awarded against Licensee in connection with such Claim or constituting a settlement of such
Claim. Licensor shall not be required to pay any settlement that it has not approved. If
infringement is held to exist, Licensor shall, at its own expense and its sole option, either
supply to



 


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 Licensee suitable replacements for the infringing material, or Licensor may terminate this Agreement. In either
instance, to the best of its financial capabilities, Licensor shall be liable to the Licensee for
the damages and expenses incurred by the Licensee solely as a result of such infringement,
including, without limitation, any damages that result from the option elected by the Licensor
pursuant to the preceding sentence. Without limiting the generality of the foregoing, the
obligations of Licensor under this subparagraph shall be inapplicable to any Claim that alleges, in
whole or in part, that Licensee printed or caused any Licensed Merchandise to be printed at
facilities located within the No-print Territory, and shall be contingent upon Licensee promptly
notifying Licensor in writing of such Claim, providing all necessary information and fully
cooperating as reasonably required by the Licensor, at Licensee’s expense, in the defense of such
Claim.



Licensee shall notify Licensor of any activities by third parties that may constitute a potential
infringement or be in violation of Licensor’s Patented Ink Technology and which may from time to
time come to the attention of Licensee. If such third party is a customer of Licensee, Licensee
shall notify the third party customer of the existence of Licensor’s Patented Ink Technology and
Licensee’s role as exclusive licensee for the manufacture of Licensed Merchandise containing the
Patented Ink Technology in the Exclusive Territory. If the third party customer promptly agrees in
writing to refrain from using the Patented Ink Technology except in Licensed Merchandise purchased
from Licensee, Licensor will take no further action against the third party customer.



If other third parties’ activities may constitute a potential infringement of the Patented Ink
Technology, Licensor shall be responsible for taking the steps it deems appropriate to address such
infringement, including at Licensor’s sole discretion the institution of legal proceedings against
such third party. Such litigation shall be under the sole control of the Licensor. Licensor may
consult with the Licensee on the conduct of such litigation and the Licensee agrees to reasonably
cooperate with the Licensor in connection with such litigation, for example, by providing at its
own expense any information within its possession reasonably required for use in such litigation.
Any award or settlement of damages as a result of such litigation shall belong to the Licensor.
This provision shall not preclude the Licensee from separately seeking recovery from the third
party of damages incurred by the Licensee as a result of such infringement; provided, however, that
Licensee shall not institute any action seeking such a separate recovery from a third party without
reasonable prior written notice to Licensor.



If any material portion of the Patented Ink Technology is found to be invalid or unenforceable by
an appellate court of competent jurisdiction, or by a lower court of competent jurisdiction whose
decision Licensor elects not to appeal in a timely manner, or if a settlement of such litigation
occurs which in effect eliminates the patent protection on the Patented Ink Technology, then either
Party may elect to terminate this Agreement by written notice to the other Party. Any award or
settlement of damages as a result of third party litigation challenging the patent protection of
the Patented Ink Technology which results in payment to such third party shall be the
responsibility of Licensor unless it can be shown that the infringement was caused by Licensee
using the Patented Ink Technology in a manner inconsistent with the intended uses set forth in this
Agreement.


 


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Licensor makes the following limited warranty (“Limited Warranty”) to Licensee with respect to the
Patented Ink Technology and the Ink: (1) for press-ready one-part Ink (i.e., Ink that requires no
combining of parts or additives prior to printing) for a period ending upon the first to occur of
either (a) ninety (90) days after the date of manufacture, or (b) thirty (30) days after being
opened, and (2) for non press-ready two-part Ink (i.e., Ink which is supplied in parts and requires
combining or additional additives prior to printing) for a period ending upon the first to occur of
either (a) one hundred eighty (180) days after the date of manufacture, or (b) thirty (30) days
after being opened (either, the “Warranty Period”), the Inks will print on standard flexographic
presses in substantial conformance with (a) any written specifications for such Inks previously
agreed to in writing by the parties, and (b) any Ink samples previously furnished by Licensor to
Licensee, if applied to similar substrates and handled, stored and used in compliance with
Licensor’s written specifications. Insignificant printing non-conformances that do not materially
adversely affect the marketability of the Licensed Merchandise are expressly excluded from this
Limited Warranty, as are non-conformances that cannot be verified and reproduced by Licensor.



Licensor shall not be responsible for any failure of the Inks to perform as warranted if such
failure is caused by Licensee’s or its Approved Printer’s misuse or improper use of the Ink, by
problems with third party products not provided by Licensor, by the Inks being applied to
substrates not authorized by Licensor, or by the Inks not being handled or stored in compliance
with Licensor’s directions and specifications. Subject to the provisions below for indemnity from
third-party claims, Licensor’s sole obligation and Licensee’s sole and exclusive remedy for any
breach of the foregoing Limited Warranty will be, upon Licensee’s return of the non-conforming Ink
to Licensor during the Warranty Period and Licensor’s verifying the non-conformance, for Licensor
to furnish replacement Ink at no additional cost to Licensee. Any replacement Ink will be
warranted for the Warranty Period set forth above.



Notwithstanding Licensor’s right to undertake quality control inspections, Licensee understands
that Licensor shall be under no obligation to conduct any such inspections or to advise Licensor if
its Approved Printer is not performing in accordance with Licensor’s written specifications.
Licensee acknowledges that Licensee is solely responsible for determining the compliance by its
Approved Printer with such written specifications. Licensee acknowledges that its investments in
implementing this Agreement are made at Licensee’s own risk and are the result of Licensee’s
independent evaluation of the Ink, this Agreement, and the business opportunities presented hereby.


 


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Subject to the provisions below for indemnity from third-party claims, neither Licensor nor any of
its affiliates, agents or representatives will have any responsibility or liability for any claims,
demands, losses, injuries or damages of any kind, including but not limited to punitive or
consequential damages (such as, without limitation, the cost to reprint books or replace
merchandise, lost profits, lost revenues, lost savings or other economic losses), caused to or
suffered in any manner by Licensee resulting from (i) breach of the foregoing Limited Warranty,
(ii) Licensee’s marketing, distribution and sale
of Licensed Merchandise containing the Patented Ink Technology, or (iii) Licensee’s or any third
party’s use of the Licensed Merchandise containing the Patented Ink Technology, whether or not
Licensor has been advised of the possibility of such damages, and whether based on breach of
contract, warranty or statutory duty, negligence, strict liability or other tort, principles of
indemnity, contribution or otherwise. As an exception, but only to the extent actually paid by any
insurance coverage under policies then held by Licensor, the Licensor will indemnify, defend
(through counsel selected by Licensor or its insurer) and will hold the Licensee harmless from and
against loss, liability, damage or expense (including, without limitation, attorney fees [if no
defense is provided] and related expenses) suffered or incurred by the Licensee as a result of
claims made by third parties against the Licensee that are solely the result of a breach by the
Licensor of its Limited Warranty. Without limiting the generality of the foregoing, the Licensor’s
obligations in the preceding sentence shall be inapplicable to any claims that allege, in whole or
in part, that Licensee printed or caused any Licensed Merchandise to be printed at facilities
located within the No-print Territory.



Except for the Limited Warranty set forth above and except for Licensor’s warranty regarding
patents of third parties set forth above, neither Licensor nor any of its affiliates, agents or
representatives makes or gives any warranty, express or implied with respect to the Patented Ink
Technology or the Ink, including but not limited to implied warranties of merchantability and
fitness for a particular purpose, and Licensee hereby indemnifies Licensor and its affiliates,
agents and representatives and shall save them and hold them harmless against any claims, demands,
losses or damages of whatsoever kind caused to or suffered by them as a result of Licensee’s
marketing, distribution and sale of Licensed Merchandise containing the Patented Ink Technology.



9. No Sublicensing by Licensee




This Agreement is personal to Licensee and may not be assigned or otherwise transferred by
Licensee, except (i) to an entity wholly owned and controlled by Licensee, or (ii) to an entity in
which the Licensee is merged or (iii) to an entity to which the Licensee sells or otherwise
transfers substantially all of its assets and its good will, and (iv) in any such event, prompt
written notice and contemporaneous payment of a $75,000.00 transfer fee (the “Transfer Fee”) to
Licensor; provided, however, Licensor shall have the option in its sole and unfettered discretion
to reject the proposed assignment or transfer by written notice to Licensee within thirty (30) days
after receipt of Licensee’s written notice and the Transfer Fee, in which event, Licensor shall
promptly return the Transfer Fee and this Agreement shall terminate.




 


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10. Assignment of Patents 




Subject to Licensor’s right in its sole and unfettered discretion to sell or otherwise transfer its
Licensed Patents to an entity into which Licensor is merged or an entity that acquires all or
substantially all of Licensor’s common stock or assets, the Licensor reserves the right in other
circumstances to sell or otherwise assign one or more of the
Licensed Patents and all or any rights under one or more of the Licensed Patents (an “Assignment”)
subject to the following:


If during the term of this Agreement the Licensor receives an offer for an Assignment containing
terms acceptable to the Licensor (an “Offer”), then before acceptance, the Licensor shall deliver a
copy of that Offer to the Licensee and identify to the Licensee the proposed assignee (the
“Assignee”) and, in such event, the Licensee shall have the right (the “Refusal Right”),
exercisable by written notice delivered to the Licensor within thirty (30) days following the date
of the Licensee’s receipt of the Offer (an “Acceptance”), to acquire the Patent(s) or the rights
under the Patent(s) that are described in the Offer at the price and on the terms and conditions
stated in that Offer. If the Licensee delivers the Acceptance within the period specified above,
then the Licensor and Licensee shall proceed with the closing of the Assignment on the later of the
date specified in the Offer or sixtieth (60th) business day after the date that the
Licensee received the Offer. If the Licensee does not deliver the Acceptance within the period
specified above, then the Licensor may proceed with the closing of the Assignment to the Assignee
on the date specified in the Offer.



If Licensee does not exercise the Refusal Right to an Assignment as provided above and the Licensor
proceeds with the Assignment to the Assignee, the rights of the Assignee with respect to the
Patent(s) and rights under Patent(s) that are the subject of that Assignment shall be subject to
the rights of the Licensee under this Agreement. Without limiting the generality of the preceding
sentence, if the Assignment includes any rights with respect to the Ink, the Assignee, as a
condition to the Assignment, shall assume in writing and shall thereafter be obligated to supply
the Ink to the Licensee and its Approved Printers as provided in this Agreement. No Assignment
shall relieve the Licensor of its obligations to the Licensee under this Agreement unless otherwise
agreed in writing by the Licensor.



11. Notices




Any notice or other communication required or permitted under this Agreement must be in writing,
including via facsimile, and must be sent to the Party at the address first noted above for that
Party, or at such other address as that Party may have designated in the manner prescribed herein.
Unless a time period is expressly defined by business days, any other reference to “day” or “days”
in this Agreement means calendar days.



12. Confidentiality and Non-Disclosure




Licensee hereby acknowledges and affirms all terms and conditions set forth in the Non-Disclosure
Agreement previously executed on behalf of Licensor. In addition, as a condition to this
Agreement, Licensee shall execute, together with any Approved Printer, an additional
Confidentiality & Non-Disclosure Agreement with Licensor containing terms and conditions
satisfactory to Licensor.


 


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13. Term of Agreement



This Agreement shall commence on January 1, 2010, and shall remain in effect until December 31,
2012 (the “Initial Term”) unless the Agreement is extended (i) by the Parties’ mutual written
agreement or (ii) by Licensee under the circumstances set forth in this Section 13, or unless the
Agreement is terminated before the end of the Initial Term for a reason expressly set forth in this
Section 13 or elsewhere contained in the Agreement.



Upon written notice to Licensor received not later than five (5) business days after the end of the
Initial Term or any Renewal Term, Licensee shall have the automatic right to renew this Agreement
for additional period of three (3) years (each, a “Renewal Term”) if during the Annual Period
ending December 31, 2012 (the “2012 Annual Period”) or during the last Annual Period of each
Renewal Term, Licensee generates Annual Royalties through actual shipments of the Licensed
Merchandise within the Exclusive Territory at least equal to Two Hundred Fifty Thousand Dollars
($250,000.00). During each Annual Period of any Renewal Term, Licensee shall be required to
generate Minimum Annual Royalties from sales of Licensed Merchandise within the Exclusive Territory
that in the aggregate equal or exceed Two Hundred Fifty Thousand Dollars ($250,000.00) per year.
The Initial Term and any Renewal Terms are sometimes referred to as the “Term.”



This Agreement shall automatically terminate in the event of Licensee’s liquidation, dissolution,
bankruptcy, winding up, assignment for the benefit of creditors, or any similar procedure.



The Licensee shall have the option to terminate this Agreement in the event of Licensor’s
liquidation, dissolution, bankruptcy, winding up, assignment for the benefit of creditors, or any
similar procedure, but if the Licensee does not elect to terminate, then this Agreement, and the
rights and obligations of the Licensee hereunder, shall remain in full force and effect, binding
upon and inuring to the benefit of the Licensee and the party succeeding to the Licensor’s rights
and obligations hereunder.



This Agreement shall also terminate if, subsequent to its effective date, Licensee asserts the
invalidity of any aspect of the Patented Ink Technology, coupled with or followed by either
Licensee’s withholding or notice of its intention to withhold, or denial of any obligation to pay
any sums due hereunder, or by Licensee’s initiation or participation in any suit, action or
proceeding challenging or denying the validity of any aspect of Licensor’s Patented Ink Technology.



Finally, in the event of any breach by either Party of its obligations under this Agreement or the
breach by the Licensor of its obligations to supply Ink to the Licensee’s Approved Printers and, in
any such event, the breach is not cured to the reasonable satisfaction of the non-breaching Party
within ten (10) calendar days after written notice from the non-breaching Party if the breach
relates to the non-payment of money, or within thirty (30) calendar days after such written notice
for any other type of breach, the non-breaching Party, at its election may affirm this Agreement
and seek and secure specific performance
by the breaching Party of its obligations under this Agreement or may terminate this Agreement and,
in either instance, may seek and secure reimbursement for damages incurred as a result of such
breach.



 


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Termination of this Agreement for any reason shall not affect obligations accruing before the
effective date of such termination, or any obligation which is stated in the Agreement to survive
termination. In the event of termination of this Agreement on account of Licensee’s uncured
default, then, in addition to any other remedies at law or equity, Licensee shall forthwith pay to
Licensor the remainder of the Annual Minimum Royalties due for the balance of the Term. In the
event of termination of this Agreement on account of Licensor’s uncured default, the Licensee shall
have such rights and remedies at law or equity as are permitted under applicable law.



14. Force Majeure




Each Party shall be excused from delays in performing or from its failure to perform hereunder to
the extent that such delays or failures result from causes beyond the reasonable control of such
Party. Performance times shall be considered extended for a period of time equivalent to the time
lost because of such delay. This Section shall be inapplicable to any failure to make a payment of
money due under the Agreement.



15. Dispute Resolution




In the event of any dispute between the Parties relating to money damages under this Agreement, the
Parties shall submit such dispute to non-binding mediation conducted by a mediator appointed by the
American Arbitration Association’s Philadelphia, Pennsylvania office, and the mediation shall take
place in Philadelphia, Pennsylvania. The expenses of the mediator shall be equally shared unless
the mediator determines otherwise. If non-binding mediation is unsuccessful in resolving the
dispute within ninety (90) calendar days after the mediator’s appointment, the Parties shall submit
such dispute to binding arbitration conducted by a single arbitrator appointed by the AAA’s
Philadelphia, Pennsylvania office, and the arbitration shall take place in Philadelphia,
Pennsylvania. The expenses of the arbitrator shall be shared equally unless the arbitrator
determines otherwise. The arbitrator shall award the prevailing Party recovery of its reasonable
attorney’s fees, but each Party shall otherwise bear its own expenses incurred in connection with
the mediation or arbitration. The arbitrator’s award may be enforced by any court having
jurisdiction over the Parties.


 


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16. Other Provisions




If, in the event of Licensor’s liquidation, dissolution, bankruptcy, winding up, assignment for the
benefit of creditors, or any similar procedure or the breach by the Licensor of any obligation
under this Agreement or the breach by the Licensor of its obligations to supply Ink to the
Licensee’s Approved Printers and the failure of the Licensor to remedy that breach within the
period permitted under Section 13, the Licensee does not elect to terminate this Agreement and
instead affirms and continues this Agreement, and if the
Licensor thereafter does not or cannot supply to the Licensee or its Approved Printers the Ink
required in order to produce the Licensed Merchandise, then the Licensor shall provide to the
Licensee all technical and other information required by the Licensee in order to continue
manufacturing the Licensed Merchandise, including but not limited to, all formulations for the Ink
(including percentage of each ingredient, CAS numbers for each ingredient and MSDS sheets for each
ingredient) and for manufacturing the Ink (including sources of ink ingredients, sources for ink
manufacturing, ingredient storage requirements, mixing methods, ocean and air shipping
specifications and any other specialized processing that may be required).



The sections of this Agreement relating to Representations, Limited Warranty and Damage Limitations
and to Confidentiality and Non-Disclosure shall continue in full force and effect and shall survive
the termination of this Agreement for any reason. Notwithstanding termination of the Agreement,
Licensee may use any Ink then on hand which has been fully paid for; otherwise, such Ink shall be
promptly returned to Licensor or destroyed.



The Parties are contractors independent of each other, and this Agreement does not create a joint
venture or partnership. Neither Party has the authority to bind the other Party to any third
party.



This Agreement shall be governed and construed in accordance with the laws of the Commonwealth of
Pennsylvania without regard to the conflicts of laws or principles thereof. Any action or suit
seeking equitable or injunctive relief related to this Agreement shall be brought only in the state
or federal courts covering Montgomery County, Pennsylvania.



If either Party prevails in any action hereunder, it shall, in addition, be entitled to recover its
reasonable attorney’s fees.



This Agreement sets forth the entire agreement and understanding between the Parties as to its
subject matter and supersedes all prior discussions between the Parties. Neither Party shall be
bound by any terms or conditions with respect to such subject matters other than as expressly
provided herein, or in a further written instrument executed by both Parties on or after the date
of this Agreement. No modification of this Agreement shall be effective unless in writing and
signed by both Parties. A waiver of a breach under this Agreement shall not be a waiver of any
subsequent breach hereunder. Failure of either Party to enforce compliance with any term or
condition of this Agreement shall not constitute a waiver of such term or condition. If any
provision of this Agreement is found to be invalid or unenforceable, such provision is to that
extent to be deemed omitted, and the remaining provisions shall not be affected in any way.



Section headings are for reference purposes only and shall not affect the meaning or construction
of the paragraphs to which they relate.


 


16









 





In witness whereof, the Parties have executed this Agreement as of the date first set forth above,
intending to be legally bound.



	 	 	 	 	 	 	 
	Nocopi Technologies, Inc.

	 	 	 	Elmer’s Products, Inc.	 	 
	 
	 	 	 	 	 	 
	/s/ Michael Feinstein, MD
 

Signature

	 	 	 	/s/ Raymond J. Baran
 

Signature
	 	 
	 
	 	 	 	 	 	 
	Michael Feinstein, MD
 

Printed Name

	 	 	 	Raymond J. Baran
 

Printed Name
	 	 
	 
	 	 	 	 	 	 
	CEO
 

Title

	 	 	 	Authorized Representative
 

Title
	 	 
	 
	 	 	 	 	 	 
	12-17-09
 

Date

	 	 	 	12/19/09
 

Date
	 	 







 


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