-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
 MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
 TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
 N0qvYST40qxklt/dLx3bgGbAFcMmG8pEKVvOpVqTAMhoHdFNZea6jfrKoa5vdEde
 LCyy1EMD2NHYhU2R7tfU9A==

<SEC-DOCUMENT>0000950137-06-007037.txt : 20060620
<SEC-HEADER>0000950137-06-007037.hdr.sgml : 20060620
<ACCEPTANCE-DATETIME>20060620172727
ACCESSION NUMBER:		0000950137-06-007037
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		2
CONFORMED PERIOD OF REPORT:	20060616
ITEM INFORMATION:		Entry into a Material Definitive Agreement
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20060620
DATE AS OF CHANGE:		20060620

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			NANOPHASE TECHNOLOGIES CORPORATION
		CENTRAL INDEX KEY:			0000883107
		STANDARD INDUSTRIAL CLASSIFICATION:	MISCELLANEOUS PRIMARY METAL PRODUCTS [3390]
		IRS NUMBER:				363687863
		STATE OF INCORPORATION:			IL
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-22333
		FILM NUMBER:		06915871

	BUSINESS ADDRESS:	
		STREET 1:		453 COMMERCE ST
		CITY:			BURR RIDGE
		STATE:			IL
		ZIP:			60521
		BUSINESS PHONE:		6303231200

	MAIL ADDRESS:	
		STREET 1:		453 COMMERCE STREET
		CITY:			BURR RIDGE
		STATE:			IL
		ZIP:			60521
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>c06160e8vk.htm
<DESCRIPTION>CURRENT REPORT
<TEXT>
<HTML>
<HEAD>
<TITLE>e8vk</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>






<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>UNITED STATES SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>Washington D.C., 20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>Form&nbsp;8-K</B>
</DIV>


<DIV align="center" style="font-size: 12pt; margin-top: 12pt"><B>Current Report<BR>
Pursuant to Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Date Of Report (Date Of Earliest Event Reported): June&nbsp;16, 2006</B></DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B>NANOPHASE TECHNOLOGIES CORPORATION</B>
</DIV>

<DIV align="center" style="font-size: 10pt">(Exact Name of Registrant as Specified in its Charter)</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Commission File Number: 0-22333</B></DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>Delaware</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>36-3687863</B></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">(State or Other Jurisdiction of<BR>
Incorporation or Organization)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(I.R.S. Employer<BR>
Identification No.)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>1319 Marquette Drive, Romeoville, Illinois 60446</B></DIV>

<DIV align="center" style="font-size: 10pt">(Address of Principal Executive Offices, Including Zip Code)</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>(630)&nbsp;771-6700</B></DIV>

<DIV align="center" style="font-size: 10pt">(Registrant&#146;s Telephone Number, Including Area Code)</DIV>



<DIV align="center" style="font-size: 10pt; margin-top: 12pt">(Former name or former address, if changed since last report)
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Check the appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following provisions:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT face="Wingdings">&#111;</FONT> Written communications pursuant to Rule&nbsp;425 under the Securities Act (17 CFR 230.425)
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT face="Wingdings">&#111;</FONT> Soliciting material pursuant to Rule&nbsp;14a-12 under the Exchange Act(17CFR240.14a-12)
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT face="Wingdings">&#111;</FONT> Pre-commencement communications pursuant to Rule&nbsp;14d-2(b) under the Exchange
Act(17CFR240.14d-2(b))
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT face="Wingdings">&#111;</FONT> Pre-commencement communications pursuant to Rule&nbsp;13e-4(c) under the Exchange
Act(17CFR240.13e-4(c))
</DIV>


<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>








<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<!-- TOC -->
<A name="toc"><DIV align="CENTER" style="page-break-before:always"><U><B>TABLE OF CONTENTS</B></U></DIV></A>

<P><CENTER>
<TABLE border="0" width="90%" cellpadding="0" cellspacing="0">
<TR>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="76%"></TD>
</TR>
<TR><TD colspan="9"><A HREF="#000">Item&nbsp;1.01. Entry into a Material Definitive Agreement</A></TD></TR>
<TR><TD colspan="9"><A HREF="#001">Item&nbsp;9.01. Financial Statements and Exhibits</A></TD></TR>
<TR><TD colspan="9"><A HREF="#002">Signature(s)</A></TD></TR>
<TR><TD colspan="9"><A HREF="c06160exv99w1.htm">Distributor Agreement</A></TD></TR>
</TABLE>
</CENTER>
<!-- /TOC -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>







<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Items
to be Included in this Report
</DIV>

<!-- link1 "Item&nbsp;1.01. Entry into a Material Definitive Agreement" -->
<DIV align="left"><A NAME="000"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;1.01. Entry into a Material Definitive Agreement</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On June&nbsp;16, 2006 Nanophase Technologies Corporation (the &#147;Company&#148;) received a
fully-executed Z-COTE HP-2 Brand Supply Agreement (dated effective May&nbsp;15, 2006) between the Company and BASF
Corporation, pursuant to which the Company will supply patent-pending surface engineered
nanoparticles for current and future products for BASF&#146;s Z-COTE<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> MAX brand. A
copy of the Supply Agreement is being furnished as Exhibit&nbsp;99.1 to this report and is
incorporated herein by reference.
</DIV>
<!-- link1 "Item&nbsp;9.01. Financial Statements and Exhibits" -->
<DIV align="left"><A NAME="001"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;9.01. Financial Statements and Exhibits</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;99.1 Z-COTE HP-2 Brand Supply Agreement dated May&nbsp;15, 2006 between Nanophase Technologies Corporation
and BASF Corporation*
</DIV>


<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>Confidentiality requested. Confidential portions have been omitted and filed separately with
the Commission as required by Rule&nbsp;24b-2.</TD>
</TR>

</TABLE>


<!-- link1 "Signature(s)" -->
<DIV align="left"><A NAME="002"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Signature(s)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the Requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this Report to be signed on its behalf by the undersigned hereunto duly
authorized.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="46%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="bottom" align="left">Nanophase Technologies Corporation</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Date: June&nbsp;20, 2006
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">/s/ JESS JANKOWSKI</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">JESS JANKOWSKI</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Chief Financial Officer</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>2
<FILENAME>c06160exv99w1.htm
<DESCRIPTION>DISTRIBUTOR AGREEMENT
<TEXT>
<HTML>
<HEAD>
<TITLE>exv99w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>EXHIBIT 99.1</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Z-COTE HP-2 BRAND SUPPLY AGREEMENT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Z-Cote HP-2 zinc oxide and Z-Cote HP-2 titanium dioxide, Supply Agreement dated as of May
15, 2006, (the &#147;Agreement&#148;) is entered into between BASF Corporation, a Delaware corporation with
its principal place of business in Florham Park, New Jersey (&#147;BASF&#148;), and Nanophase Technologies
Corporation, a Delaware corporation with its principal place of business in Romeoville, Illinois
(&#147;Nanophase&#148;).
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Background</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;BASF markets and sells cosmetic ingredients that include zinc oxide and titanium dioxide
for inclusion in consumer products, and is the owner of patents and proprietary technology related
to such products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;Nanophase is the owner of patents and proprietary technologies related to its manufacture
of nanocrystalline formulations of zinc oxide, and its patented and patent-pending nanostructured
surface treatment for coating nanocrystalline formulations of zinc oxide and titanium dioxide.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;BASF wishes to purchase coated nanocrystalline formulations of zinc oxide and titanium
dioxide from Nanophase, and Nanophase wishes to sell coated nanocrystalline formulations of zinc
oxide and titanium dioxide to BASF, on the terms stated in this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW, THEREFORE, BASF and Nanophase agree as follows.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>I. PURCHASE AND SALE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.01. <U><B>Agreement to Purchase and Sell</B></U><B>. </B>On the terms and conditions of this Agreement,
Nanophase agrees to sell to BASF, and BASF agrees to purchase from Nanophase, (a)&nbsp;nanocrystalline
formulations of zinc oxide produced and coated by Nanophase with nanostructured surface treatment,
using Nanophase&#146;s technology, and meeting the specifications in <U>Exhibit&nbsp;A</U> to this Agreement
and produced in accord with those specifications; and (b)&nbsp;nanocrystalline formulations of titanium
dioxide, manufactured under the most current good manufacturing practice standards (&#147;cGMP&#148;, as
defined in the applicable sections in 21 CFR Parts 210 and 211), and either supplied by BASF or a
third party, and coated by Nanophase with nanostructured surface treatment, using Nanophase&#146;s
technology, and meeting and produced in accord with such specifications as the parties subsequently
will agree upon, and then include in an amendment to <U>Exhibit&nbsp;A</U> to this Agreement<U>
</U>(collectively and individually hereinafter referred to as the &#147;Product(s)&#148;). For purposes of
clarification, the Products as described above are distinct and different from the product, zinc
oxide uncoated and coated, sold by Nanophase to BASF under that certain September&nbsp;16, 1999 supply
agreement between Nanophase and BASF (as
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">successor-in-interest to Sun Smart, Inc), as amended (&#147;Zinc Oxide Supply Agreement&#148;). The Zinc
Oxide Supply Agreement shall continue in full force and effect under the terms and conditions of
the Zinc Oxide Supply Agreement. The terms of this Agreement apply only to the sale and use of
the Product for skin care products, hair care products, sun care products, oral care products, baby
care products, toiletries, color cosmetics and topical human sunscreen products (the &#147;Field&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.02. <U><B>Purchases in 2006</B></U><B>. </B>During 2006, BASF from time to time will provide Nanophase
with individual purchase orders for the Product. Nanophase will have the ordered Product available
for shipment F.O.B. its facility and will deliver the Product to the carrier at the Nanophase
loading dock, packaged and labeled in accord with BASF&#146;s written direction provided to Nanophase
from time to time, within 45&nbsp;days after receipt of each individual purchase order provided by BASF
during 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.03. <U><B>Forecasts</B></U><B>. </B>By December&nbsp;1, 2006 and each subsequent December 1 thereafter, BASF
will give Nanophase BASF&#146;s non-binding forecast for the twelve month period beginning January&nbsp;1,
2007 and each January 1 thereafter during the term of this Agreement for the Product under this
Agreement (the &#147;Annual Forecast&#148;). If the total quantity of Product in BASF&#146;s Annual Forecast
exceeds &#091;* * *&#093; kilograms, Nanophase shall notify BASF within 14&nbsp;days after Nanophase&#146;s receipt of
the Annual Forecast whether Nanophase accepts the Annual Forecast. If Nanophase does not accept
the Annual Forecast for reasons set forth in the prior sentence, the parties will work together in
good faith to manufacture quantity over &#091;* * *&#093; kilograms. Beginning on the month following the
date of such Annual Forecast, and each subsequent month during the term of this Agreement, BASF
will deliver to Nanophase an updated rolling six-month forecast of BASF&#146;s expected purchase orders
from Nanophase for the Product under this Agreement for each month during the next six months
(&#147;Rolling Six-Month Forecast&#148;). Only the quantities in the first month and &#091;* * *&#093;% of the second
month of each Rolling Six-Month Forecast shall be binding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.04. <U><B>Orders</B></U><B>. </B>BASF agrees to submit monthly purchase orders consistent with this
Agreement, which purchase orders are binding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.05. <U><B>Price</B></U><B>. </B>(a)&nbsp;The Price per kilogram of the Product ordered shall be determined in
accord with <U>Exhibit&nbsp;B</U> and the quantity of the zinc oxide for pricing purposes under
<U>Exhibit&nbsp;B</U> shall be based on the Annual Forecast and any other forecast which BASF may give
to Nanophase for products containing zinc oxide. Pricing shall be subject to adjustment as stated
in subsection (b). Nanophase shall invoice BASF at the applicable price as set forth in
<U>Exhibit&nbsp;B</U>.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>*** CONFIDENTIAL TREATMENT REQUESTED&#151;This confidential portion has been omitted from this document
and filed separately with the Commission.</B>
</DIV>


<P align="center" style="font-size: 10pt">2
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Within 30&nbsp;days of the end of each calendar year during the term of this Agreement,
Nanophase will deliver to BASF a statement reflecting (i)&nbsp;the amount of the Product invoiced during
the preceding calendar year, (ii)&nbsp;the aggregate price initially paid for the Product
under Section&nbsp;1.05 (a), and (iii)&nbsp;the amount payable calculated in accord with <U>Exhibit&nbsp;B</U>
based upon amounts actually ordered during the relevant year. If the amount referred to in clause
(iii)&nbsp;of the preceding sentence exceeds the amount referred to in clause (ii), BASF will, within 45
days of receiving Nanophase&#146;s statement, pay to Nanophase the amount of such excess, provided that
BASF agrees with Nanophase&#146;s proposed statement. If BASF disagrees with Nanophase&#146;s statement,
BASF will respond in writing and the parties will work together to resolve any issue and BASF will
pay such excess amount within fifteen (15)&nbsp;days of a statement agreed to by BASF and Nanophase. If
the amount referred to in clause (ii)&nbsp;exceeds the amount referred to in clause (iii), Nanophase
will, within 45&nbsp;days of its delivering the statement, discuss in good faith with BASF, and agree
upon, whether BASF will receive a credit or payment of the amount of such excess, provided that
BASF agrees with Nanophase&#146;s proposed statement. If BASF disagrees with Nanophase&#146;s statement,
BASF will respond in writing and the parties will work together to resolve any issue and Nanophase
will credit or pay such excess amount within fifteen (15)&nbsp;days of a statement agreed to by BASF and
Nanophase.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;The pricing set forth in <U>Exhibit&nbsp;B</U> will be subject to annual increases or
decreases based upon changes in the index for labor costs as set forth in <U>Exhibit&nbsp;C</U>, and
changes in the prices actually paid by Nanophase for zinc metal, all in accord with the calculation
described in <U>Exhibit&nbsp;C</U>. The first such adjustment, as applicable, will be made as of
January&nbsp;1, 2007 and will be no more than once per year and effective thirty (30)&nbsp;days after BASF&#146;s
receipt of such notice. Prices calculated pursuant to <U>Exhibit&nbsp;C</U> will be fixed without
further adjustment for twelve months after they become effective.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;BASF may request in writing that a mutually agreed to third party auditor review the
records of Nanophase solely to verify compliance with this Section&nbsp;1.05. (The auditor will sign an
appropriate confidentiality agreement.) In particular, the auditor would confirm the volumes and
pricing of Product referenced above. The expenses of such audit will be incurred by BASF unless
the audit of Nanophase&#146;s records reveals any material inconsistencies with this Section&nbsp;1.05
requiring adjustments in payments made hereunder by Nanophase to BASF, in which case the expenses
will be paid by Nanophase.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.06. <U><B>Shipping Date</B></U><B>. </B>Nanophase will have the Product available for shipment F.O.B.
its facility and will deliver the Product to the carrier at the Nanophase loading dock, packaged
and labeled in accord with <U>Exhibit&nbsp;A</U>, by the date set forth in the relevant purchase order;
provided that, beginning in 2007, Nanophase shall not be required to so ship in any month an
</DIV>

<P align="center" style="font-size: 10pt">3
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">amount of more than &#091;* * *&#093;% of the amount shown for such month in the then-most recent Rolling
Six-Month Forecast. Nanophase will also have available and (if ordered) provide under this Section
1.06 additional Product equal to the amount of inventory required to be on hand pursuant to Section
3.02; provided that if such additional amount is depleted by orders from BASF it shall only be
required to be restored to the extent provided in Section&nbsp;3.02. Title to the Product, and risk of
loss or damage to the Product, each will pass to BASF upon shipment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.07. <U><B>Warranty; Acceptance</B></U><B>. </B>Nanophase warrants (a)&nbsp;that all Product shipped under
this Agreement will conform to the specifications in <U>Exhibit&nbsp;A</U> (&#147;Specifications&#148;) and will
be manufactured in accord with <U>Exhibit&nbsp;A</U>, and (b)&nbsp;Product will be manufactured in
compliance with FDA&#146;s current good manufacturing practices. Nanophase shall be responsible for
quality control prior to shipment. Each shipment of the Product shall be accompanied by a
certificate of analysis certifying that each such shipment conforms to the Specifications. BASF
will issue its certificates of analysis on the basis of the analytical data provided by Nanophase.
In the event that BASF believes that any of the Product delivered hereunder fails to conform to the
warranty in this Section&nbsp;1.07, the parties will adhere to the following protocol: (a)&nbsp;BASF will
contact Nanophase&#146;s Quality Director and then forward to the Quality Director a sample of the
Product that BASF believes is non-conforming; (b)&nbsp;upon receipt of the sample, Nanophase will test
it and then notify BASF of the test results; (c)&nbsp;where the test results confirm that the sample is
non-conforming, Nanophase will provide BASF with Nanophase&#146;s Return Authorization Number (&#147;RAN&#148;);
and (d)&nbsp;to the extent possible, any returned non-conforming Product must be in its original
container, with original labels intact, and all paperwork concerning the returned Product must
include Nanophase&#146;s RAN. Nanophase shall arrange for and pay for the return of confirmed
non-conforming Product to Nanophase. The parties will discuss in good faith and agree upon, on a
case-by-case basis, whether as a result of the returned confirmed non-conforming Product, Nanophase
will either supply to BASF at no additional charge the same volume of conforming Product as soon as
reasonably practicable or grant BASF a refund.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.08. <U><B>Payment</B></U><B>. </B>Payment for the Product ordered under this Agreement shall be due on
the 30th day after BASF&#146;s receipt of invoice, and, the Product will be invoiced on or after
shipment.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>*** CONFIDENTIAL TREATMENT REQUESTED&#151;This confidential portion has been omitted from this document
and filed separately with the Commission.</B>
</DIV>


<P align="center" style="font-size: 10pt">4
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>II. EXCLUSIVITY; REQUIREMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.01. <U><B>Nanophase Exclusivity</B></U><B>. </B>Nanophase covenants that, during the term of this
Agreement, Nanophase will not, directly or indirectly, knowingly sell the Product to any person
other than BASF for use in the Field or resale (directly or indirectly) to any person for use in
the Field.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.02. <U><B>BASF Requirements</B></U><B>. </B>Throughout the term of this Agreement BASF will purchase
from Nanophase 100% of its requirements of the Product for use or resale in the Field, except as
set forth otherwise herein.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>III. CAPACITY</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.01. <U><B>Capacity</B></U><B>. </B>Nanophase warrants that it has, and will have throughout the term of
this Agreement, the capacity to manufacture and ship to BASF in conformity with <U>Exhibit&nbsp;A</U>
at least &#091;* * *&#093;% of the monthly average kilograms of the Product reflected for each month in
BASF&#146;s most recent Rolling Six-Month Forecast.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.02. <U><B>Inventory</B></U><B>. </B>Nanophase shall maintain inventory of manufactured coated or
uncoated zinc oxide available to fill orders from BASF equal to approximately two additional months
demand based on the aggregate monthly average kilograms of the Product under this Agreement (as
reflected in BASF&#146;s most recent Rolling Six-Month Forecast). The parties subsequently will
identify and in good faith agree upon the inventory of both coated and uncoated titanium dioxide
that Nanophase will maintain. If this inventory required under this Section&nbsp;3.02 is depleted by
orders from BASF, Nanophase will restore the required inventory level as soon as capacity in excess
of BASF orders permits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.03. <U><B>Allocation</B></U><B>. </B>Nanophase&#146;s fulfilling its obligations to BASF under this Agreement
shall be the first priority of the Nanophase facilities and resources configured and available for
production of the Product.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>*** CONFIDENTIAL TREATMENT REQUESTED&#151;This confidential portion has been omitted from this document
and filed separately with the Commission.</B>
</DIV>


<P align="center" style="font-size: 10pt">5
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>IV. TERM AND TERMINATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.01. <U><B>Term</B></U><B>. </B>This Agreement is effective as of January&nbsp;1, 2006 until December&nbsp;31,
2010 (&#147;Initial Term&#148;) and continues thereafter unless terminated by either party with at least
twenty-four (24)&nbsp;months prior written notice. Thus, the first effective date on which the
Agreement could be terminated under this Section&nbsp;4.01 would be December&nbsp;31, 2010, unless terminated
earlier pursuant to other provisions of the Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.02 <U><B>Effect of Termination</B></U><B>. </B>Upon the receipt of notice of termination by either
party, BASF has the option to purchase less than the entire one hundred percent (100%) of its
requirements set forth in Article&nbsp;II herein, provided that BASF agrees to purchase a minimum of &#091;*
* *&#093;percent &#091;* * *&#093;(%) of its requirements for Products in the immediate twelve months following
receipt of notice of termination, and, thereafter a minimum of &#091;* * *&#093;percent (&#091;* * *&#093;%) of its
requirements of Products in the next twelve-month period until the termination of the Agreement is
effective (i.e., twenty-four months after the notice of termination).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.03 <U><B>Termination</B></U><B>. </B>(a)&nbsp;Either party may terminate this Agreement by notice to the
other party that such other party has materially breached this Agreement, subject to the breaching
party not having cured such breach within 90&nbsp;days after receiving the non-breaching party&#146;s notice
describing such breach.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;BASF may terminate this Agreement by notice to Nanophase if (i)&nbsp;Nanophase fails to ship in
a timely fashion at least &#091;* * *&#093;% of the Product required to shipped in any three-month period
under BASF&#146;s Annual Forecast (as defined in Section&nbsp;1.03), with Product meeting the specifications
in <U>Exhibit&nbsp;A</U> and manufactured in accord with <U>Exhibit&nbsp;A</U>; or (ii)&nbsp;the board of
directors of Nanophase authorizes the dissolution or winding up of Nanophase, or a receiver is
appointed for Nanophase or a substantial portion of its assets, or Nanophase shall make an
assignment for the benefit of creditors or other state court insolvency proceedings .
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.04. <U><B>Survival of Additional Provisions</B></U><B>. </B>The obligations of the parties to make any
payments as set forth herein but unpaid on the date of termination and the provisions of Sections
1.07, 1.08 and 4.04, Article&nbsp;V, Article&nbsp;VI, and Article&nbsp;VII shall survive any termination of this
Agreement.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>*** CONFIDENTIAL TREATMENT REQUESTED&#151;This confidential portion has been omitted from this document
and filed separately with the Commission.</B>
</DIV>


<P align="center" style="font-size: 10pt">6
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>V. TECHNOLOGY TRANSFER</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.01. <U>Triggering Events</U>. BASF &#146;s rights to transfer of technology under this Article
V shall become effective if: (a)&nbsp;Nanophase gives BASF written notice under Section&nbsp;4.01,
terminating the Agreement; or
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;BASF terminates the Agreement under Section&nbsp;4.03(a) and Nanophase does not cure within the
90&nbsp;day cure period; or
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;BASF terminates this Agreement under Section&nbsp;4.03(b)(i), with such termination directly
resulting from Nanophase&#146;s material breach of its Product shipment obligations, as described under
Section&nbsp;4.03(b)(i), unless Nanophase declares Force Majeure, subject to Nanophase not having cured
such breach within 90&nbsp;days after receiving BASF&#146;s notice describing such breach; or
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;BASF terminates this Agreement pursuant to Section&nbsp;4.03(b)(ii); or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;In the case that Nanophase is in bankruptcy proceedings and Nanophase or its bankruptcy
trustee shall reject the Agreement under Section 365(n) of the United States Bankruptcy Code (or
any successor provision). For purposes of clarification, all rights and licenses granted pursuant
to this Agreement by Nanophase to BASF are for purposes of Section 365(n) of the United States
Bankruptcy Code, licenses of rights to &#147;intellectual property&#148; as defined under Section&nbsp;101(35A) of
the Bankruptcy Code, and the parties agree that BASF, as a licensee of such rights under this
Agreement, shall retain and may fully exercise all of its rights and elections under the Bankruptcy
Code or any similar state law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.02. <U>License.</U> (a)&nbsp;In recognition of BASF&#146;s investment in developing product lines
that include the Product and BASF&#146;s reliance on continued availability, Nanophase grants to BASF,
effective upon (and only upon) a Triggering Event under Section&nbsp;5.01, a worldwide, exclusive
license under U.S. patent nos. 5,460,701; 5,514,349; and 5,874,684 and all corresponding foreign
patents and patent applications (the &#147;Licensed Patents&#148;), and any other intellectual property
included in the material referred to in Section&nbsp;5.03 or otherwise relevant to the manufacture of
the Product for use in the Field (including without limitation existing and future patent
applications or patents and any intellectual property licensed from third parties), with the right
to sublicense, to make, have made, use, offer to sell, sell, import, lease or otherwise dispose of
the Product solely for use in the Field, and to practice and have practiced any method(s) described
and claimed in the Licensed Patents or other intellectual property solely for such purpose. This
license is not intended to, and does not, include Nanophase&#146;s NanoArc synthesis technology because
that technology is not used to manufacture the Product. The license shall be effective immediately
upon the occurrence of all the conditions required for the respective Triggering Event under
Section&nbsp;5.01. However, if the Triggering Event arises under Section&nbsp;5.01(a) or
</DIV>

<P align="center" style="font-size: 10pt">7
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">5.01(b), BASF shall grant to Nanophase an exclusive royalty-free sublicense to manufacture and
sell the Product to BASF for use in the Field during the 24-month period provided in connection
with the notice required under Section&nbsp;4.01. This license includes the right of BASF: (i)&nbsp;to bring
suit in its own name, or if required by law, jointly with Nanophase, at BASF&#146;s own expense and on
its own behalf, for infringement of the Licensed Patents; and (ii)&nbsp;in any such suit to enjoin
infringement and to collect for its use, damages, profits and awards of whatever nature recoverable
for such infringement. Nanophase agrees to cooperate in the prosecution of any such proceedings,
including by execution of any documents that BASF determines to be necessary or appropriate for
such prosecution. In the event that the validity or the priority of the Licensed Patents is
challenged in a legal proceeding, BASF shall have the initial right to defend the same, at its own
expense, whether the legal proceeding is brought against Nanophase or BASF. Nanophase agrees to
cooperate fully with BASF in any such proceeding. This license shall have a term equal to the
remaining term of last to expire of the Licensed Patents or any other existing or future patent
application or patent to manufacture Product for use in the Field as set forth above in this
Section&nbsp;5.02.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;During the effectiveness of the license granted under subsection (a)&nbsp;above, BASF will pay
to Nanophase a royalty of &#091;* * *&#093;% of Net Sales. &#147;Net Sales&#148; shall mean (i)&nbsp;all sales of Product
manufactured by BASF or its sublicensees under the license and (ii)&nbsp;the amount of Product included
in other products sold by BASF or its sublicensees and manufactured by BASF or its sublicensees
under the license (valued at the manufacturer&#146;s then current list price), in either case less any
returns, adjustments, allowances, taxes (other than income taxes) and credits, and excluding sales
of any Product purchased from Nanophase. BASF will, on or before sixty days after the end of each
calendar quarter after effectiveness of the license, deliver to Nanophase a statement setting forth
in reasonable detail the calculation of Net Sales and the royalty due for the preceding quarter.
Delivery of each statement shall be accompanied by payment of the royalty due for the quarter
covered by the statement. Nanophase may request a third party audit, at Nanophase&#146;s expense, of
BASF&#146;s and BASF&#146;s sublicensees&#146; records and supporting documents relating to sales of products
including Products manufactured by BASF or BASF&#146;s licensees under the license. Audits will be made
during normal business hours by a nationally known independent auditor at the place where the above
records are kept. If an audit shows underpayment, BASF will promptly pay Nanophase the amounts
due.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>*** CONFIDENTIAL TREATMENT REQUESTED&#151;This confidential portion has been omitted from this document
and filed separately with the Commission.</B>
</DIV>


<P align="center" style="font-size: 10pt">8
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.03. <U>Escrow.</U> Ninety days after Nanophase receives BASF&#146;s initial purchase order
pursuant to Section&nbsp;1.02, Nanophase agrees to deposit with a mutually agreed escrow agent, at
BASF&#146;s expense, all information that would be required by BASF to configure and operate a facility
to manufacture the Product using Nanophase&#146;s technology, including such blue prints and operating
instructions and other documentation as may be necessary to duplicate Nanophase&#146;s manufacturing
equipment. The information to be deposited in the escrow is not intended to include any
information concerning Nanophase&#146;s NanoArc synthesis technology because that technology is not used
to manufacture the Product. The Escrow Agreement under which the escrow agent will hold such
materials (the &#147;Escrow Agreement&#148;) will provide that such materials will be delivered to BASF only
upon (a)&nbsp;following either (i)&nbsp;BASF receiving Nanophase&#146;s notice of the occurrence of a Triggering
Event, as described under Section&nbsp;5.01(a), or (ii)&nbsp;Nanophase receiving BASF&#146;s notice of the
occurrence of a Triggering Event under Sections&nbsp;5.01(b), (c)&nbsp;or (d); or (b)&nbsp;applicable order (as
necessary) of a United States Bankruptcy Court following Nanophase&#146;s receiving BASF&#146;s notice of the
occurrence of a Triggering Event under Section&nbsp;5.01(d)(ii).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.04. <U>Equipment Purchase Option.</U> Upon the occurrence of a Triggering Event under
Section&nbsp;5.01, BASF shall have the right, at its option, to purchase any or all of the
manufacturing, blending, control and packaging equipment required for the production of the Product
(including operating manuals and instructions and quality control records) in good working
condition at the greater of (a) &#091;* * *&#093;% of the original book value of both such purchased
equipment and any associated improvements to such equipment, or (b) &#091;* * *&#093;% of such purchased
equipment&#146;s net book value (as reflected on the books of Nanophase in accordance with generally
accepted accounting principles consistently applied), F.O.B. Nanophase&#146;s manufacturing facility.
Upon the occurrence of a Triggering Event, BASF will also have the right, at its option, to
purchase any or all of the inventory of the Product, and work in process or raw materials for the
Product, held by Nanophase at a price equal to the cost of such materials, as shown on the books of
Nanophase in accordance with generally accepted accounting principles applied on a consistent
basis, F.O.B. Nanophase&#146;s manufacturing or warehouse facility. Nanophase will provide up to &#091;* *
*&#093; man hours of technology transfer assistance without charge in connection with any such purchase,
and will make additional assistance available to BASF at a rate of $&#091;* * *&#093;.&#091;* * *&#093; per man hour
for each Nanophase employee or contractor providing such technical assistance, together with each
such person&#146;s reasonable expenses (travel, meals and lodging expenses) incurred by Nanophase.
Nanophase will deliver equipment purchased under this Section&nbsp;5.04 to its loading dock in good
condition and prepared for crating and transport by BASF, and will provide access and cooperation
to BASF during normal business hours for removal of all assets purchased pursuant to this Section
5.04. Payment will be due from BASF within 30&nbsp;days of the date on which BASF takes possession.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>*** CONFIDENTIAL TREATMENT REQUESTED&#151;This confidential portion has been omitted from this document
and filed separately with the Commission.</B>
</DIV>


<P align="center" style="font-size: 10pt">9
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.05. <U>Nature of Agreement.</U> This Agreement is intended to be, and shall be treated as,
a contract under which Nanophase is a licensor of a right to intellectual property within the
meaning of Section 365(n) of the United States Bankruptcy Code (or any successor provision), and
the escrow agreement referred to in Section&nbsp;5.03 is intended to be, and shall be treated as, an
agreement supplementary to a contract under which Nanophase is a licensor of a right to
intellectual property within the meaning of such Bankruptcy Code Section (or successor provision).
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>VI. INTELLECTUAL PROPERTY</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.01. <U><B>Ownership of Intellectual Property</B></U><B>. </B>Nanophase and BASF each agree that, as
between them, all patents, trademarks, trade secrets, know-how and other intellectual property
developed by or registered in the name of either party shall remain the property of that party.
Each party acknowledges and agrees that, except as expressly stated herein and except for the
implied license of BASF and its customers to use and sell the Product purchased from Nanophase, no
license, implied or otherwise, is granted hereby under any patent, trademark, trade secret, patent
or trademark application or any other intellectual property right. Nothing contained in this
Agreement shall (i)&nbsp;limit the right of Nanophase to enter into agreements from time to time which
grant rights under patents or patent applications for products other than for the Product for use
in the Field or (ii)&nbsp;affect rights granted to third parties by Nanophase for products other than
the Product for use in the Field.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.02. <U><B>Confidentiality</B></U><B>. </B>As used in this Agreement, &#147;Confidential Information&#148; means
(a)&nbsp;all confidential or proprietary information (including without limitation financial information
and business information such as customer lists) that is or has been disclosed by Nanophase to BASF
or by BASF to Nanophase, and (b)&nbsp;all confidential information, trade secrets, know-how, and all
other intellectual property that would be adversely affected by disclosure. Nanophase and BASF
agree that they will not, and will not permit their respective officers, employees, agents and
representatives to, without first obtaining the written consent of the other party, use, sell or
disclose any Confidential Information, except as expressly contemplated hereby and except that
Confidential Information may be disclosed by the party that owns it. Subject to prior specific
consent of the other party, either party may disclose Confidential Information to potential
customers, and to other third parties to the extent necessary to permit any such third party to
assist in manufacturing or marketing activities, provided that any such potential customer or third
party to whom Confidential Information is disclosed shall execute a confidentiality agreement no
less restrictive than this Section&nbsp;6.02. &#147;Confidential Information&#148; does not include (i)
information that is or becomes (other than by disclosure in violation of this Agreement) generally
available to the public, (ii)&nbsp;information that the receiving party can show was known to the
receiving party prior to its disclosure by the other party, (iii)&nbsp;information acquired by the
receiving party from a third party without continuing restriction on use or breach of any
</DIV>

<P align="center" style="font-size: 10pt">10
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">obligation to the other party to this Agreement, (iv)&nbsp;information that a party can show by
contemporaneous written records was developed by that party without reference to the other party&#146;s
Confidential Information, or (v)&nbsp;information required to be disclosed by law, provided that prompt
notice and an opportunity to seek a protective order is given to the other party prior to
disclosure. Nanophase and BASF agree that this Agreement and the Exhibits hereto are Confidential
Information subject to this Section&nbsp;6.02. BASF consents to the disclosure of the relationship
contemplated by this Agreement in filings by Nanophase with the U.S. Securities and Exchange
Commission relating to publicly traded securities of Nanophase, and the filing of this Agreement as
a related exhibit; provided that Nanophase shall diligently seek confidential treatment of all
pricing information. Nanophase consents to the disclosure of this Agreement to shareholders,
investors, and other third parties with whom BASF has significant business relationships, provided
that any party to whom BASF makes disclosure shall agree to keep all pricing information
confidential.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.03. <U><B>Representations</B></U><B>. </B>Nanophase represents to BASF that: (i)&nbsp;Nanophase has full
authority to enter into this Agreement; (ii)&nbsp;to the best of Nanophase&#146;s knowledge, the Products and
the manufacture of the Products do not infringe any patent, trade secret or other proprietary right
of any third party; and (iii)&nbsp;Nanophase is not aware of any claim of infringement of any patent,
trade secret or other proprietary right having been made or pending against Nanophase relative to
the Products or the manufacture of the Products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;BASF represents to Nanophase that BASF has full authority to enter into this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.04. <U><B>Indemnities</B></U><B>. </B>(a)&nbsp;Nanophase will, at its expense, defend against, hold BASF
harmless from, and pay any final judgment against BASF or any of its customers arising out of (1)
any claim that the Product or the manufacture of the Product infringed a patent, a trade secret or
any other proprietary right (unless such claim results from designs or specifications provided by
BASF) or (2)&nbsp;any claim arising out of the failure of any Product provided by Nanophase to meet the
specifications applicable under Exhibit&nbsp;A at the time of shipment; provided that (i)&nbsp;BASF notifies
Nanophase in writing of such claim or action, and (ii)&nbsp;Nanophase shall conduct the defense of such
claim or action subject to the effective participation of BASF. In defending any claim or action
referred to in clause (1)&nbsp;above, Nanophase may, at its option, agree to any settlement in which
Nanophase shall either (x)&nbsp;procure, for the benefit of BASF, the right to continue to make and have
made, use and sell Product; or (y)&nbsp;modify the Product or the method of manufacture thereof so that
its making, use and sale shall no longer infringe, to the extent that the exercise of either such
option does not result in a material adverse change in the Product or its cost. If Nanophase shall
fail to diligently and effectively defend any such claim or action, BASF shall have the right to
assume the defense without diminishing Nanophase&#146;s indemnity obligations hereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;BASF will, at its expense, defend against, hold Nanophase harmless from, and
</DIV>

<P align="center" style="font-size: 10pt">11
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">pay any final judgment against Nanophase arising out of (1)&nbsp;any claim that modification of
the Product by BASF or use of the Product in the Field infringed a patent, a trade secret or any
other proprietary right (unless such claim results from infringements by Nanophase against which
BASF is indemnified in (a)&nbsp;above) or (2)&nbsp;any claim by a third party arising out of the sale of
Products by BASF (other than claims against which BASF is indemnified in (a)&nbsp;above) except to the
extent due to an act or omission of Nanophase; provided that (i)&nbsp;Nanophase notifies BASF in
writing of such claim or action, and (ii)&nbsp;BASF shall conduct the defense of such claim or action
subject to the effective participation of Nanophase. If BASF shall fail to diligently and
effectively defend any such claim or action, Nanophase shall have the right to assume the defense
without diminishing BASF&#146;s indemnity obligations hereunder.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>VII. GENERAL</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.01 <U><B>Compliance With Law</B></U><B>. </B>Nanophase warrants to BASF that the manufacturing
operations of Nanophase and the production and shipment of the Product will at all times comply
with all applicable laws, including without limitation laws relating to protection of the
environment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.02 <U><B>Plant Visits</B></U><B>. </B>Upon at least 14&nbsp;days prior notice to Nanophase, BASF shall have
the right to visit any Nanophase facility at which the Product is manufactured or stored during
normal business hours. BASF may identify Nanophase as manufacturer of the Product to its
customers and prospective customers and may bring customers and prospective customers to
Nanophase&#146;s facilities to observe the manufacturing process, subject to the execution by the
customers of a confidentiality agreement no less restrictive than the provisions of Section&nbsp;6.02.
Upon request, BASF may review and copy all quality control documentation; provided that all such
documentation shall be deemed &#147;Confidential Information&#148; subject to Section&nbsp;6.02.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.03 <U><B>Force Majeure</B></U><B>. </B>Neither party will be liable hereunder for any delay or failure
to perform its obligations as a result of war, Act of God, Act of State, fire, flood, earthquake,
riot, terrorist acts, terrorism generally affecting commerce, political disturbance, strike,
shortage of materials, transportation difficulties, or other similar cause outside the control of
the affected party for so long as such cause is operative, provided that the affected party shall
promptly give notice of the occurrence of an event of force majeure and shall use best efforts to
remedy the situation as soon as possible. For the duration of any event of force majeure
affecting Nanophase, BASF may purchase its requirements of the Product (and such additional
quantities as BASF may contractually require in connection with obtaining supply commitments) from
sources other than Nanophase notwithstanding Section&nbsp;2.02. If any failure or inability of
Nanophase to ship the Product in accord with this Agreement arising from an event of force majeure
shall not have been cured within 180&nbsp;days after the first occurrence of such event, BASF may then
exercise its rights to terminate this Agreement under Section&nbsp;4.03(b)(i), provided that
</DIV>

<P align="center" style="font-size: 10pt">12
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">no such termination shall constitute a Triggering Event under Section&nbsp;5.01. If an event of
force majeure occurs, the parties will discuss in good faith the appropriate steps required to
restore, at the earliest practical time, the ability of Nanophase to ship Product in accord with
this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.04. <U><B>Limitation of Warranties</B></U><B>. </B>THE OBLIGATIONS OF NANOPHASE AND BASF EXPRESSLY
STATED IN THIS AGREEMENT ARE IN LIEU OF ALL OTHER WARRANTIES OR CONDITIONS, EXPRESS OR IMPLIED.
TO THE EXTENT ALLOWABLE BY LAW, THIS EXCLUSION OF ALL OTHER WARRANTIES AND CONDITIONS EXTENDS TO
IMPLIED WARRANTIES OR CONDITIONS OF MERCHANTABLE QUALITY AND FITNESS FOR A PARTICULAR PURPOSE, AND
THOSE ARISING BY STATUTE OR OTHERWISE IN LAW, OR FROM A COURSE OF DEALING OR USAGE OF TRADE.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.05. <U><B>Governing Law</B></U><B>. </B>This Agreement shall be governed by and construed in accord
with the laws of the State of Delaware.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.06. <U><B>Assignment</B></U><B>. </B>This Agreement shall not be assigned by either party to any other
person or entity, except to an affiliate of such party (defined under this Agreement as a company
or other legal entity which controls, is controlled by, or is under common control with,
respectively, BASF or Nanophase), without the other party&#146;s prior written consent, which shall not
be unreasonably withheld. This Agreement shall be binding upon, and inure to the benefit of, the
respective successors and permitted assigns of the parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.07. <U><B>Effect of Waiver</B></U><B>. </B>The waiver or failure of either party to exercise any right
provided for in this Agreement shall not be deemed a waiver of any further or future right
hereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.08 <U><B>Headings</B></U><B>. </B>The headings used in this Agreement are for convenience of reference
only and are not to be used in interpreting the provisions of this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.09. <U><B>Complete Agreement</B></U><B>. </B>This Agreement is the exclusive statement of the
understanding between the parties with respect to the subject matter of supplying the Product. It
supersedes all prior agreements, negotiations, representations and proposals, written or oral,
relating to this subject matter, with the exception that nothing in this Agreement is intended to
waive or modify any part of the Zinc Oxide Supply Agreement; that certain Technology Agreement
between BASF and Nanophase, effective February&nbsp;1, 2002, as amended; that certain Mutual
Confidentiality Agreement between BASF and Nanophase, entered into as of September&nbsp;2, 1999; that
certain Mutual Confidentiality Agreement between BASF and Nanophase, entered into as of November
15, 2000; that certain Confidentiality and Non-Use Agreement between BASF and Nanophase, dated as
of September&nbsp;4, 2001; and that certain Mutual Confidentiality
</DIV>

<P align="center" style="font-size: 10pt">13
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Agreement between BASF, Nanophase, Noveon Inc. and Schering Plough HealthCare Products Inc.,
entered into as of November&nbsp;4, 2003. No provisions of this Agreement may be changed or modified
except by an agreement in writing signed by the party to be bound. No provision of any Technology
Agreement, purchase order or other instrument issued by BASF or by Nanophase that is inconsistent
with the provisions of this Agreement shall affect this Agreement unless explicitly so stating and
signed by both parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.10. <U><B>Severability</B></U><B>. </B>If any provision of this Agreement is unenforceable in any
particular case, such case shall not render unenforceable any other part of this Agreement. This
Agreement shall be construed as not containing the particular provision or provisions held to be
invalid or unenforceable to the extent of the particular case, and the rights and obligations of
the parties hereto shall be construed and enforced accordingly.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.11. <U><B>Effectiveness of Agreement; Counterparts</B></U><B>. </B>This Agreement may be executed in
counterparts, each of which shall constitute one and the same instrument.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.12 <U><B>Notices</B></U><B>. </B>All notices provided for in this Agreement shall be in writing and
made by personal delivery, courier, facsimile (with confirmation sheet), or first-class U.S. Mail
(via certified and registered mail), addressed to the appropriate party at the respective address
set forth below or to such other then-current address as is specified by notice:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to Nanophase:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-left: 12%; margin-top: 6pt">Nanophase Technologies Corporation<BR>
1319 Marquette Drive<BR>
Romeoville, Illinois 60446<BR>
Facsimile: 630-771-6734<BR>
Attention: Joseph E. Cross
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to BASF:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-left: 12%; margin-top: 6pt">BASF Corporation<BR>
100 Campus Drive<BR>
Florham Park, New Jersey 07932<BR>
Facsimile: 973-245-6764
</DIV>

<DIV align="left" style="font-size: 10pt; margin-left: 12%; margin-top: 6pt">Attention: Marketing Manager, Cosmetic Solutions
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Notices shall be effective upon receipt.
</DIV>


<P align="center" style="font-size: 10pt">14
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.13. <U><B>No Agency</B></U><B>. </B>Nanophase and BASF are independent contractors and separate legal
entities and shall in no way be interpreted as partners, joint venturers, agents, employees or
legal representatives of each other for any purpose. Neither party shall be responsible for or
bound by any act of the other party or the other party&#146;s agents, employees or any persons in any
capacity in its service.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.14 <U><B>Equitable Relief</B></U><B>. </B>Each party acknowledges that the other may be irreparably
harmed by any breach of Article&nbsp;II, Article&nbsp;IV or Article&nbsp;VI, and that damages alone may be an
inadequate remedy for any such breach. Accordingly, the aggrieved party shall be entitled to seek
equitable relief, including without limitation an injunction for specific performance, with
respect to any such breach, without requirement of the posting of a bond or other surety.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the first date set
forth above.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left">NANOPHASE TECHNOLOGIES</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">BASF CORPORATION</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left">CORPORATION</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;/s/ Joe Cross
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;/s/ Simon D. Medley</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Name:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Joe Cross
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Simon D. Medley</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Title:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CEO
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Group VP Fine Chemicals</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">15
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>Exhibit&nbsp;A</B></U>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>ZCOTE HP-2 Zinc Oxide Specifications</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Analytical</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>data for each</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Included on</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>I. Item</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Range</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Inspection Method</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>lot</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>COA</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Appearance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ZnO Content</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ZnO Content</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on Ignition (as
coated)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on drying (as coated)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bulk Density</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">H<SUB style="font-size: 85%; vertical-align: text-bottom">2</SUB> gas evolution</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hydrophobicity passing
status</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mineral Spirits Shake Test</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Surface Energy Test</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Formulation Test with
Carbormer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following all assays are conducted on uncoated basis in accordance with
current USP ZnO Monograph
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>*** CONFIDENTIAL TREATMENT REQUESTED&#151;This confidential portion has been omitted from this
document and filed separately with the Commission.</B>
</DIV>


<P align="center" style="font-size: 10pt">16
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Analytical</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">A. Inspection</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>data for each</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Included on</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>II. Item</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Range</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Method</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>lot</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>COA</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>III. </B>ZnO
Content</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
</TR>

<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>IV. </B>Identification A</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
</TR>


<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>


<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>V. </B>Identification B</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
</TR>


<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>VI. </B>Carbonate &#038;
color</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
</TR>


<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>


<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>VII. </B>Alkalinity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
</TR>


<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>VIII. </B>Iron and
other heavy metals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
</TR>


<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>


<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>IX. </B>Arsenic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
</TR>


<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>X. </B>Lead</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
</TR>


<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>


<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>XI. </B>Loss on Ignition</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Additional non monograph analysis (uncoated basis)</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Analytical</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>data for each</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Included on</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>XII. Item</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Range</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Inspection Method</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>lot</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>COA</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>XIII.</B>
Residue on 325
mesh</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;O</TD>
</TR>

<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>XIV.</B>
Specific
Surface Area (BET)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>


<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>XV. </B>Lead as Pb</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Manufacturing Conditions</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Product under this Agreement will be manufactured under cGMP standards (as defined in the
applicable sections in 21 CFR Parts 210 and 211), as applicable, and such other standards as
the parties may mutually agree from time to time.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>*** CONFIDENTIAL TREATMENT REQUESTED&#151;This confidential portion has been omitted from this document
and filed separately with the Commission.</B>
</DIV>


<P align="center" style="font-size: 10pt">17
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Purity</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Product will meet USP and BP purity requirements. At least &#091;* * *&#093;% of the Product made
will meet the JSCI standard for purity. The Product will be free of foreign bodies.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Particle Size</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">It is the present intention of the parties that the specifications for particle size of the
Product applicable under this Agreement will be those set forth below. The parties will conduct
additional tests to validate such specifications.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The particle size of the Product under this Agreement shall measure a BET of &#091;* * *&#093; meter square
per gram of uncoated zinc oxide Product.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">From samples produced by Nanophase, a Reference Standard will be established and inventoried
for comparison and instrument calibration.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The parties will determine at a later date such specifications in this Exhibit&nbsp;A as may be
applicable to nanostructured coated zinc oxide or titanium dioxide Product under this Agreement.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Packaging</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Product packaging and labeling will be specified by BASF.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>*** CONFIDENTIAL TREATMENT REQUESTED&#151;This confidential portion has been omitted from this document
and filed separately with the Commission.</B>
</DIV>


<P align="center" style="font-size: 10pt">18
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>Exhibit&nbsp;B</B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Subject to pricing changes provided under <U>Exhibit&nbsp;C</U> to this Agreement, the following are
the pricing components for the Product under this Agreement, F.O.B. Nanophase&#146;s Plant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">1. The price per kilogram of <U>nanostructured coated zinc oxide Product</U> will be the sum of:
(a)&nbsp;the price of the uncoated nanocrystalline formulation of zinc oxide, as determined from time to
time under the following price table for cGMP zinc oxide:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="44%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="46%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Kg Quantity</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Price/Kg</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px"><B>250,000 &#150; 299,999</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>$</B>&#091;* * *&#093;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px"><B>300,000 &#150; 349,999</B></DIV></TD>
    <TD>&nbsp;</TD>

<TD align="center" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>$</B>&#091;* * *&#093; &#091;* * *&#093;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px"><B>350,000 &#150; 399,999</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>$</B>&#091;* * *&#093;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px"><B>400,000 &#150; 449,000</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>$</B>&#091;* * *&#093;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px"><B>450,000 &#150; 499,999</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>$     </B>&#091;* * *&#093;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px"><B>500,000 &#150; 549,999</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>$ </B>&#091;* * *&#093;&#091;* * *&#093;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px"><B>550,000 &#150; 649,999</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>$     </B>&#091;* * *&#093;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px"><B>650,000 &#150; 750,000</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>$     </B>&#091;* * *&#093;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">and
(b)&nbsp;the $&#091;* * *&#093; per kilogram cost of providing nanostructured surface treatment for coating the
HP-2 nanocrystalline formulation of zinc oxide (provided that if the total quantity of Product in
an order is less than kilograms, the cost of providing nanostructured surface treatment for
coating the HP-2 nanocrystalline formulation of zinc oxide shall be
$&#091;* * *&#093; per kilogram) and the $&#091;* * *&#093; per
kilogram cost of providing surface treatment for coating the HP-1 nanocrystalline formulation of
zinc oxide; and (c)&nbsp;the total applicable pass-through costs (including, without limitation, the
price of monomers and chemicals used in nanostructured surface treatment, packaging components,
labeling and transportation), as determined from time to time under the above price table.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">2. The price per kilogram of <U>nanostructured coated titanium dioxide Product</U> will be the sum
of: (a) &#091;* * *&#093;for coating the nanocrystalline formulation of titanium dioxide supplied by BASF;
and (b)&nbsp;the total&#091;* * *&#093;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>*** CONFIDENTIAL TREATMENT REQUESTED&#151;This confidential portion has been omitted from this document
and filed separately with the Commission.</B>
</DIV>


<P align="center" style="font-size: 10pt">19
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>Exhibit&nbsp;C</B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Beginning January&nbsp;2007, the pricing set forth in <U>Exhibit&nbsp;B</U> shall be subject to changes in
Nanophase&#146;s labor costs and the prices Nanophase pays for zinc metal as follows.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="26%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">1. For zinc metal:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;.</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2. For labor:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;* * *&#093;.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The price change per kilogram of the Product shall equal % of the calculated price change for zinc
metal plus % of the calculated increase in hourly labor rates per the above Index. As an example,
a price change due to a change in the price of zinc metal and labor would be calculated as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Factor</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Price at period start</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Price at period end</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Change</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Zinc metal per kilogram</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$&#091;* * *&#093;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Labor</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$&#091;* * *&#093;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$&#091;* * *&#093;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Assuming that the price for the Product on January 1 of a given calendar year was $&#091;* * *&#093; per
kilogram, then the net price change to be implemented January 1 of the next calendar year is equal
to:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">$&#091;* * *&#093; &#043; $(&#091;* * *&#093; x &#091;* * *&#093;) &#043; $(&#091;* * *&#093; x &#091;* * *&#093;) = $&#091;* * *&#093;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For a period of &#091;* * *&#093; months following Nanophase&#146;s notifying BASF of any pricing changes pursuant
to this <U>Exhibit&nbsp;C</U>, BASF shall be entitled, at its own cost, to engage an independent
certified public accounting firm, acceptable to Nanophase, to inspect Nanophase&#146;s applicable
records of its zinc metal prices paid during the relevant &#091;* * *&#093;-month period in order to verify
the accuracy of the pricing change. Any such inspection shall be made no more than once every
twelve months during the term of this Agreement and only after reasonable advance notice to
Nanophase and during its normal business hours. If the independent accounting firm finds any
discrepancies in the price changes in BASF&#146;s favor, Nanophase agrees to modify the pricing of
Product retroactively in BASF&#146;s favor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">BASF and Nanophase agree to the following program to minimize BASF&#146;s total supply chain costs:<BR>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>*** CONFIDENTIAL TREATMENT REQUESTED&#151;This confidential portion has been omitted from this document
and filed separately with the Commission.</B>
</DIV>


<P align="center" style="font-size: 10pt">20
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The parties will form a &#147;Cost Reduction Team&#148; whose target is to reduce BASF&#146;s total supply
chain cost per kilogram of Product by &#091;* * *&#093; percent (&#091;* * *&#093;%) annually. The &#147;base costs&#148;
include all costs of purchasing, packaging, analyzing and shipping Products as of January&nbsp;1,
2005 (except labor costs, which are adjusted via the U.S. Governmental Monthly Labor Report
described above in this <U>Exhibit&nbsp;C</U>). Savings generated from the Cost Reduction program
will be reflected in BASF&#146;s purchase price of Products as follows:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>O&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Zinc metal raw material, coating monomers and other raw materials: &#091;*
* *&#093;% of savings to BASF;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>O&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;supply chain and transportation savings: &#091;* * *&#093;% to BASF;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>O&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nanophase&#146;s manufacturing efficiencies resulting from the Cost
Reduction Program: &#091;* * *&#093;% to BASF;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>O&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;packaging: &#091;* * *&#093;% to BASF;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>O&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;analytical costs: &#091;* * *&#093;% to BASF.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Nanophase will notify BASF after Nanophase realizes any of the above savings, and as soon as
practical thereafter, Nanophase shall incorporate such savings into the pricing for Product sold to
BASF hereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>*** CONFIDENTIAL TREATMENT REQUESTED&#151;This confidential portion has been omitted from this document
and filed separately with the Commission.</B>
</DIV>



<P align="center" style="font-size: 10pt">21
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
