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Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
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<SEC-DOCUMENT>0001193125-10-156263.txt : 20100709
<SEC-HEADER>0001193125-10-156263.hdr.sgml : 20100709
<ACCEPTANCE-DATETIME>20100709104232
ACCESSION NUMBER:		0001193125-10-156263
CONFORMED SUBMISSION TYPE:	DEF 14A
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20100823
FILED AS OF DATE:		20100709
DATE AS OF CHANGE:		20100709
EFFECTIVENESS DATE:		20100709

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:		DEF 14A
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-22333
		FILM NUMBER:		10945580

	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>DEF 14A
<SEQUENCE>1
<FILENAME>ddef14a.htm
<DESCRIPTION>DEFINITIVE PROXY STATEMENT
<TEXT>
<HTML><HEAD>
<TITLE>Definitive Proxy Statement</TITLE>
</HEAD>
 <BODY BGCOLOR="WHITE">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="4"><B>UNITED STATES </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="4"><B>SECURITIES AND EXCHANGE COMMISSION </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3"><B>WASHINGTON, D.C. 20549 </B></FONT></P> <P STYLE="font-size:16px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="5"><B>SCHEDULE 14A </B></FONT></P>
<P STYLE="margin-top:16px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3"><B>PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3"><B>SECURITIES EXCHANGE ACT OF 1934 </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:2%; text-indent:-2%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Filed by the Registrant
<FONT STYLE="FONT-FAMILY:WINGDINGS">&#120;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Filed by a Party other than the
Registrant <FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:2%; text-indent:-2%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Check the appropriate box:</I></B>
</FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Preliminary Proxy Statement </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#120;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Definitive Proxy Statement </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Definitive Additional Materials </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Soliciting Material Pursuant to &#167; 240.14a-11(c) or &#167; 240.14a-12 </FONT></TD></TR></TABLE>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3">NANOPHASE TECHNOLOGIES CORPORATION </FONT></P>
<P STYLE="line-height:0px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1">(Name of Registrant as Specified
In Its Charter) </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3"><B>&nbsp;&nbsp;</B></FONT></P> <P STYLE="line-height:0px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1">(Name of Person(s) Filing Proxy Statement, if other than the Registrant) </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:2%; text-indent:-2%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Payment of filing fee (Check the appropriate box):
</FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#120;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">No fee required </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. </FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>

<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Title of each class of securities to which transaction applies: </FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<P STYLE="margin-top:2px;margin-bottom:0px; margin-left:5%" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3">&nbsp;&nbsp;</FONT></P>
<P STYLE="line-height:0px;margin-top:0px;margin-bottom:2px;margin-left:3%;border-bottom:0.5pt solid #000000">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Aggregate number of securities to which transaction applies: </FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<P STYLE="margin-top:2px;margin-bottom:0px; margin-left:5%" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3">&nbsp;&nbsp;</FONT></P>
<P STYLE="line-height:0px;margin-top:0px;margin-bottom:2px;margin-left:3%;border-bottom:0.5pt solid #000000">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">3)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and
state how it was determined): </FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<P STYLE="margin-top:2px;margin-bottom:0px; margin-left:5%" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3">&nbsp;&nbsp;</FONT></P>
<P STYLE="line-height:0px;margin-top:0px;margin-bottom:2px;margin-left:3%;border-bottom:0.5pt solid #000000">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">4)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Proposed maximum aggregate value of transaction: </FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<P STYLE="margin-top:2px;margin-bottom:0px; margin-left:5%" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3">&nbsp;&nbsp;</FONT></P>
<P STYLE="line-height:0px;margin-top:0px;margin-bottom:2px;margin-left:3%;border-bottom:0.5pt solid #000000">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">5)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Total fee paid: </FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<P STYLE="margin-top:2px;margin-bottom:0px; margin-left:5%" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3">&nbsp;&nbsp;</FONT></P>
<P STYLE="line-height:0px;margin-top:0px;margin-bottom:2px;margin-left:3%;border-bottom:0.5pt solid #000000">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Fee paid previously with preliminary materials. </FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously.
Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. </FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Amount Previously Paid: </FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<P STYLE="margin-top:2px;margin-bottom:0px; margin-left:5%" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3">&nbsp;&nbsp;</FONT></P>
<P STYLE="line-height:0px;margin-top:0px;margin-bottom:2px;margin-left:3%;border-bottom:0.5pt solid #000000">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Form, Schedule or Registration Statement No.: </FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<P STYLE="margin-top:2px;margin-bottom:0px; margin-left:5%" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3">&nbsp;&nbsp;</FONT></P>
<P STYLE="line-height:0px;margin-top:0px;margin-bottom:2px;margin-left:3%;border-bottom:0.5pt solid #000000">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">3)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Filing Party: </FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<P STYLE="margin-top:2px;margin-bottom:0px; margin-left:5%" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3">&nbsp;&nbsp;</FONT></P>
<P STYLE="line-height:0px;margin-top:0px;margin-bottom:2px;margin-left:3%;border-bottom:0.5pt solid #000000">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">4)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Date Filed: </FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<P STYLE="margin-top:2px;margin-bottom:0px; margin-left:5%" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3">&nbsp;&nbsp;</FONT></P>
<P STYLE="line-height:0px;margin-top:0px;margin-bottom:2px;margin-left:3%;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>

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<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">


 <P STYLE="margin-top:0px;margin-bottom:0px">

<IMG SRC="g10386ltr01.jpg" ALT="LOGO"> </P>
 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">1319 Marquette Drive </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Romeoville, Illinois 60446 </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:56%" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">July&nbsp;9, 2010 </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Dear Stockholder: </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">On behalf of
the Board of Directors, I invite you to attend the 2010 Annual Meeting of Stockholders of Nanophase Technologies Corporation to be held at Nanophase Technologies Corporation, 1319 Marquette Drive, Romeoville, Illinois, on Monday, August&nbsp;23,
2010 at 10:00 a.m., Chicago time. The formal notice of the Annual Meeting appears on the following page. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We are pleased to
take advantage of the Securities and Exchange Commission rule allowing companies to furnish proxy materials to their stockholders over the Internet. On July&nbsp;9, 2010, we mailed to our stockholders a Notice of Internet Availability of Proxy
Materials containing instructions on how to access our 2010 Proxy Statement and Annual Report and vote online, by phone, in person or by mail. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The attached Notice of Annual Meeting and Proxy Statement describes the matters that we expect to be acted upon at the Annual Meeting.
Management will be available to answer any questions you may have immediately after the Annual Meeting. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Whether or not you
choose to attend the Annual Meeting, it is important that your shares be represented. Regardless of the number of shares you own, please vote your shares via telephone, over the Internet or sign and date a paper copy of the proxy card and promptly
return it to us in the enclosed postage paid envelope. If you sign and return your proxy card without specifying your choices, your shares will be voted in accordance with the recommendations of the Board of Directors contained in the Proxy
Statement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">You are welcome to attend the August&nbsp;23, 2010 meeting, and I urge you to vote via telephone, over the
Internet or by paper proxy as soon as possible. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><DIV ALIGN="right">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0">

<TR>
<TD WIDTH="100%"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Sincerely,</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">/s/ JESS JANKOWSKI</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Jess Jankowski</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">President and Chief Executive Officer</FONT></TD></TR></TABLE></DIV>

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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center">

<IMG SRC="g10386not01.jpg" ALT="LOGO"> </P>
 <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">NOTICE OF ANNUAL MEETING OF STOCKHOLDERS </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">TO BE HELD ON AUGUST 23, 2010 </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">To the Stockholders of </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Nanophase Technologies Corporation: </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The Annual Meeting of Stockholders of Nanophase Technologies Corporation (the &#147;Company&#148;) will be held at 10:00&nbsp;a.m.,
Chicago time, on Monday, August&nbsp;23, 2010, at Nanophase Technologies Corporation, 1319 Marquette Drive, Romeoville, Illinois, for the following purposes: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">To elect three Class&nbsp;I directors to the Company&#146;s Board of Directors; </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">To approve an amendment to the Company&#146;s Certificate of Incorporation to increase the authorized number of shares of common stock from 30,000,000 to 35,000,000;
</FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(3)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">To approve the adoption of the 2010 Equity Compensation Plan; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(4)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">To ratify the appointment by the Company&#146;s Audit and Finance Committee of McGladrey&nbsp;&amp; Pullen, LLP as the independent auditors of the Company&#146;s
financial statements for the year ended December&nbsp;31, 2010; and </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(5)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">To transact such other business as may properly come before the meeting or any adjournments thereof. </FONT></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The foregoing items of business are more fully described in the accompanying Proxy Statement. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The Board of Directors has fixed the close of business on June&nbsp;29, 2010 as the record date for determining stockholders entitled to
notice of, and to vote at, the Annual Meeting. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><DIV ALIGN="right">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0">

<TR>
<TD WIDTH="100%"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">By order of the Board of Directors,</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">/s/ FRANK CESARIO</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Frank Cesario</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Chief Financial Officer</FONT></TD></TR></TABLE></DIV> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Romeoville, Illinois
</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">July&nbsp;9, 2010 </FONT></P>

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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>ALL STOCKHOLDERS ARE URGED TO ATTEND THE MEETING IN PERSON OR BY PROXY. WHETHER OR NOT YOU EXPECT TO BE
PRESENT AT THE MEETING, PLEASE VOTE. INSTRUCTIONS REGARDING THE VARIOUS METHODS OF VOTING ARE CONTAINED ON THE PROXY CARD, INCLUDING VOTING BY TOLL-FREE TELEPHONE NUMBER OR THE INTERNET. IF YOU RECEIVED A PAPER COPY OF YOUR PROXY CARD BY MAIL, YOU
MAY STILL VOTE YOUR SHARES BY MARKING YOUR VOTES ON THE PROXY CARD, SIGNING AND DATING IT AND MAILING IT IN THE ENVELOPE PROVIDED. </B></FONT></P>

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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>NANOPHASE TECHNOLOGIES CORPORATION </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">1319 Marquette Drive </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">Romeoville, Illinois 60446 </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">(630) 771-6708 </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center>
<P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">PROXY STATEMENT
</FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The accompanying proxy is solicited by the Board of Directors (the &#147;Board of Directors&#148;) of Nanophase Technologies Corporation,
a Delaware corporation (the &#147;Company&#148;), for use at the Annual Meeting of Stockholders (the &#147;Annual Meeting&#148;) to be held at 10:00 a.m., Chicago time, Monday, August&nbsp;23, 2010, at Nanophase Technologies Corporation, 1319
Marquette Drive, Romeoville, Illinois, and any adjournments thereof. This Proxy Statement and accompanying form of proxy are first being mailed or made available via the Internet to stockholders on or about July&nbsp;9, 2010. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Record Date and Outstanding Shares</B> &#151; The Board of Directors has fixed the close of business on June&nbsp;29, 2010 as the
record date (the &#147;Record Date&#148;) for the determination of stockholders entitled to notice of, and to vote at, the Annual Meeting or any adjournments thereof. As of the Record Date, the Company had outstanding 21,204,162 shares of Common
Stock, par value $0.01 per share (the &#147;Common Stock&#148;). Each outstanding share of Common Stock is entitled to one vote on all matters to come before the Annual Meeting. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Notice of Electronic Availability of Proxy Statement and Annual Report</B> &#151; As permitted by rules adopted by the Securities and
Exchange Commission, the Company is making this proxy statement and its annual report available to its stockholders electronically via the Internet. On July&nbsp;9, 2010 we mailed to our stockholders a Notice of Internet Availability of Proxy
Materials containing instructions on how to access our 2010 Proxy Statement and Annual Report and vote online, by phone, in person or by mail. If you received a Notice of Internet Availability of Proxy Materials by mail, you will not receive a
printed copy of the proxy materials, unless specifically requested. If you received a Notice of Internet Availability of Proxy Materials by mail and would like to receive a printed copy of our proxy materials you should follow the instructions for
requesting such materials included in the Notice of Internet Availability of Proxy Materials. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Voting of Proxies</B> &#151;
Jess Jankowski, the person named as proxy on the proxy card accompanying this Proxy Statement, was selected by the Board of Directors to serve in such capacity. Mr.&nbsp;Jankowski is an executive officer of the Company and is also a director of the
Company. The shares represented by each executed and returned proxy will be voted in accordance with the directions indicated thereon, or, if no direction is indicated, such proxy will be voted in accordance with the recommendations of the Board of
Directors contained in this Proxy Statement. Each stockholder giving a proxy has the power to revoke it at any time before the shares it represents are voted. Revocation of a proxy is effective upon receipt by the Secretary of the Company of either
(1)&nbsp;an instrument revoking the proxy or (2)&nbsp;a duly executed proxy bearing a later date. Additionally, a stockholder may change or revoke a previously </FONT></P>

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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
executed proxy by voting in person at the Annual Meeting (attendance at the Annual Meeting will not, by itself, revoke a proxy). Stockholders will not have any rights of appraisal or similar
dissenter&#146;s rights with respect to any matter to be acted upon at the Annual Meeting. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Required Vote</B> &#151; The
vote of a plurality of the shares of Common Stock voted in person or by proxy is required to elect the nominees for Class&nbsp;I director. The affirmative vote of the majority of the outstanding shares of Common Stock is required to approve the
amendment to the Company&#146;s Certificate of Incorporation increasing the Company&#146;s authorized Common Stock. The affirmative vote of a majority of the shares of Common Stock represented in person or by proxy is required to approve the
proposed 2010 Equity Compensation Plan and to ratify the appointment of McGladrey&nbsp;&amp; Pullen, LLP as the independent registered public accounting firm of the Company&#146;s financial statements for the year ended December&nbsp;31, 2010.
Stockholders will not be allowed to cumulate their votes in the election of directors. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Quorum; Abstentions and Broker
Non-Votes</B>&nbsp;&#151; The required quorum for transaction of business at the Annual Meeting will be a majority of the shares of Common Stock issued and outstanding as of the Record Date. Votes cast by proxy or in person at the Annual Meeting
will be tabulated by the election inspectors appointed for the meeting and will determine whether or not a quorum is present. Abstentions and broker non-votes will be included in determining the presence of a quorum. Abstentions and broker non-votes
will have no effect on the vote for directors. Abstentions will be considered present and entitled to vote with respect to approving the amendment to the Company&#146;s Certificate of Incorporation increasing the Company&#146;s authorized Common
Stock and the adoption of the 2010 Equity Compensation Plan and ratifying the appointment of the Company&#146;s independent auditors and will have the same effect as votes &#147;against&#148; such proposal(s). Broker non-votes will also be
considered votes &#147;against&#148; the amendment to the Company&#146;s Certificate of Incorporation increasing the Company&#146;s authorized Common Stock and the adoption of the 2010 Equity Compensation Plan, but will have no effect on the vote to
ratify the appointment of the Company&#146;s independent auditors.<B> </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Annual Report to Stockholders</B>&nbsp;&#151;
The Company&#146;s Annual Report to Stockholders for the year ended December&nbsp;31, 2009, containing financial and other information pertaining to the Company, is being furnished to stockholders simultaneously with this Proxy Statement. Printed
copies will be made available upon request. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">2 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>PROPOSAL&nbsp;1 </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">ELECTION OF DIRECTORS </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The Company&#146;s Board of Directors currently consists of eight directors. Article&nbsp;VI of the Company&#146;s Certificate of
Incorporation provides that the Board of Directors shall be classified with respect to the terms for which its members shall hold office by dividing the members into three classes. At the Annual Meeting, three directors of Class&nbsp;I will be
elected for a term of three years expiring at the Company&#146;s 2013 Annual Meeting of Stockholders. The Company prepared the following director summaries using information furnished to the Company by the nominee/director. The nominees are
presently serving as directors of the Company. See &#147;Nominees&#148; below. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The five directors whose terms of office do
not expire in 2010 will continue to serve after the Annual Meeting until such time as their respective terms of office expire or their successors are duly elected and qualified. See &#147;Other Directors&#148; below. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">If at the time of the Annual Meeting the nominees should be unable or decline to serve, the persons named in the proxy will vote for such
substitute nominee as the Board of Directors recommends, or vote to allow the vacancy created thereby to remain open until filled by the Board of Directors, as the Board of Directors recommends. The Board of Directors has no reason to believe that
the nominees will be unable or decline to serve as a director if elected. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
&#147;FOR&#148; THE ELECTION OF THE NOMINEES NAMED BELOW. </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>NOMINEES </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The names of the nominees for the office of director, together with certain information concerning such nominees, is set forth below:
</FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="27%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="63%"></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:20pt"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Name</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Served&nbsp;as</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Director<BR>Since</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Age</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Position with Company</B></FONT></P></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">James A. Henderson</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">2001</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">75</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">Director</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">James A. McClung, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">2000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">72</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">Director</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">R. Janet Whitmore</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">2003</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">55</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">Director</FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>THE BOARD OF DIRECTORS
RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE NOMINEES FOR ELECTION AS CLASS&nbsp;I DIRECTORS. </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Mr.&nbsp;Henderson</B> has
served as a director of the Company since July 2001. He retired as Chairman and Chief Executive Officer of Cummins Engine Company (now Cummins Inc.) in December 1999, after joining the company in 1964. Mr.&nbsp;Henderson became President and Chief
Operating Officer of Cummins in 1977, was promoted to President and Chief Executive Officer in 1994 and served as Chairman and Chief Executive Officer from 1995 until his retirement in 1999. Mr.&nbsp;Henderson attended Culver Military Academy, holds
an A.B. in public and international affairs from Princeton University and an M.B.A. from Harvard Business School. Mr.&nbsp;Henderson also currently serves as a member of the Board of Directors of Hillenbrand, Inc.
</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">3 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
Mr.&nbsp;Henderson previously served as a director of AT&amp;T, Inc., International Paper, Rohm&nbsp;&amp; Haas and Ryerson, Inc. He serves as Chairman of the Board of the Culver Education
Foundation and is a past Chair of the Executive Committee of the Princeton University Board of Trustees. The Company believes that Mr.&nbsp;Henderson&#146;s extensive and diverse background in corporate leadership in technology-based companies,
operations experience, and business acumen makes him a valuable member of its Board of Directors. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Mr.&nbsp;McClung</B> has
served as a director of the Company since February 2000.&nbsp;Currently he is Chairman/CEO of Lismore International. He retired as Senior Vice President and executive officer for FMC Corporation (which has since been split into three public
corporations: 1) FMC, 2) FMC Technology and 3) John Bean Technologies), a leading producer of a diversified portfolio of chemicals and machinery. He has over 30 years of international business development experience in over 75 countries, having
managed and developed new technologies and production processes for diversified global businesses, including specialized chemicals and machinery, while living in the United States, Europe and Africa.&nbsp;Mr.&nbsp;McClung currently serves as
Corporate Board member of Alticor (Amway), NCCI and Hu-Friedy.&nbsp;He was a founding member of the U.S.-Russia Business Council and is active in other international business organizations, such as the Japan American Society, Chicago Council on
Global Affairs, Executive Club of Chicago, and the Economic Club of Chicago.&nbsp;He serves as a board director at Thunderbird School of Global Management and the College of Wooster (Ohio).&nbsp;Mr.&nbsp;McClung earned a Bachelor&#146;s degree from
the College of Wooster, a Master&#146;s degree from the University of Kansas and a Doctorate from Michigan State University. The Company believes that Mr.&nbsp;McClung&#146;s extensive global business development and worldwide management experience,
including his experience in the specialty chemicals industry, make him a valuable member of its Board of Directors. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Ms.&nbsp;Whitmore</B> joined the board in November 2003. She is a former director of Silverleaf Resorts, Inc., where she served as
Chairman of the Compensation Committee and as a member of the Audit Committee. She is also a former director of Epoch Biosciences, a supplier of proprietary products used to accelerate genomic analysis. Ms.&nbsp;Whitmore is Founder of Benton
Consulting, LLC, which specializes in business development and processes. From 1976 through 1999, Ms.&nbsp;Whitmore held numerous engineering and finance positions at Mobil Corporation, including Mobil&#146;s Chief Financial Analyst and Controller
of Mobil's Global Petrochemicals Division. Ms.&nbsp;Whitmore holds a B.S. degree in Chemical Engineering from Purdue University and an M.B.A. from Lewis University. The Company believes that Ms. Whitmore&#146;s combination of global financial,
engineering, and management expertise makes her a valuable member of its Board of Directors. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">4 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>OTHER DIRECTORS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The following persons will continue to serve as directors of the Company after the Annual Meeting until their terms of office expire (as
indicated below) or until their successors are duly elected and qualified. The Company prepared the following director summaries using information furnished to the Company by the directors. </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="27%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD WIDTH="50%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:20pt"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Name</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Age</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Position with Company</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Served&nbsp;as</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Director<BR>Since</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Term<BR>Expires</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Class</B></FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Richard W. Siegel, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">72</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">Director</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">1989</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">2011</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">II</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Jess Jankowski</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">44</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">Director, President and Chief Executive Officer</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">2009</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">2011</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">II</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Donald S. Perkins</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">83</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">Chairman of the Board of Directors</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">1998</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">2012</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">III</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Jerry K. Pearlman</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">71</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">Director</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">1999</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">2012</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">III</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">George A. Vincent, III</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">65</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">Vice Chairman of the Board of Directors</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">2007</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">2012</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">III</FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Dr.&nbsp;Siegel</B>
is a co-founder of the Company and has served as a director of the Company since 1989. Dr.&nbsp;Siegel served as a consultant to the Company from 1990 to 2002 with regard to the application and commercialization of nanomaterials. Dr.&nbsp;Siegel is
an internationally recognized scientist in the field of nanomaterials. During his tenure on the research staff at Argonne National Laboratory from July 1974 to May 1995, he was the principal scientist engaged in research with the laboratory-scale
synthesis process that was the progenitor of the Company&#146;s physical-vapor-synthesis production system. Dr.&nbsp;Siegel has been the Robert W. Hunt Professor in Materials Science and Engineering at Rensselaer Polytechnic Institute since June
1995, and served as Department Head from 1995 to 2000.&nbsp;In April 2001, Dr.&nbsp;Siegel became the founding Director of the newly created Rensselaer Nanotechnology Center at the Institute.&nbsp;During 1995-1998, he was also a visiting professor
at the Max Planck Institute for Microstructure Physics in Germany on an Alexander von Humboldt Research Prize received in 1994.&nbsp;During 2003-2004 he was a visiting professor in Japan on a RIKEN Eminent Scientist Award. He chaired the&nbsp;World
Technology Evaluation Center worldwide study of nanostructure science and technology for the U.S. government, has served on the Council of the Materials Research Society and as Chairman of the International Committee on Nanostructured Materials. He
also served on the Committee on Materials with Sub-Micron Sized Microstructures of the National Materials Advisory Board and was the co-chairman of the Study Panel on Clusters and Cluster-Assembled Materials for the U.S. Department of Energy. He
served on the Nanotechnology Technical Advisory Group to the U.S. President&#146;s Council of Advisors on Science and Technology during 2003-2009. Dr.&nbsp;Siegel holds an A.B. degree in physics from Williams College and an M.S. degree and Ph.D.
from the University of Illinois at Urbana-Champaign. The Company believes that Dr.&nbsp;Siegel&#146;s value to its Board of Directors, as co-founder of the Company and inventor of its initial base technology, is self-explanatory. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Mr.&nbsp;Jankowski </B>joined the board in February 2009. He joined the Company as its Controller in 1995. He was elected Secretary
and Treasurer in1999, Acting Chief Financial </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">5 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
Officer in 2000, Vice President in 2002, Vice President of Finance and Chief Financial Officer in 2004, Acting Chief Executive Officer in August 2008 and President and Chief Executive Officer in
February 2009. From 1990-1995 he served as Controller for two building contractors in the Chicago area, during which time he had significant business development responsibilities. From 1986 to 1990 he worked for Kemper Financial Services.
Mr.&nbsp;Jankowski holds a B.S. from Northern Illinois University and an M.B.A. from Loyola University of Chicago. He has served on the TechAmerica Midwest Board since 2008 and was an active member of the TechAmerica Midwest CFO Committee from 2006
through 2008. He was appointed to the Advisory Board of the Nanobusiness Alliance in 2009. Mr.&nbsp;Jankowski was appointed to the Romeoville Economic Development Commission in 2004. He has also served on the advisory board of NITECH (Formerly
WESTEC), an Illinois Technology Enterprise Center focusing on the commercialization of advanced manufacturing technologies from 2003 to 2008. In 2009, Mr.&nbsp;Jankowski was appointed to the board of directors of the Northern Illinois Technology
Foundation, an economic development and technology transfer entity that is part of Northern Illinois University. The Company believes that Mr.&nbsp;Jankowski&#146;s long-term and intimate experience with Nanophase operations, along with his
financial and management expertise makes him a valuable member of its Board of Directors. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Mr.&nbsp;Perkins</B> has served
as a director of the Company since February 1998. Mr.&nbsp;Perkins retired from Jewel Companies, Inc., the retail supermarket and drug chain, in 1983. He had been with Jewel since 1953, serving as President from 1965 to 1970, as Chairman of the
Board of Directors from 1970 to 1980, and as Chairman of the Executive Committee until his retirement. He has served on a number of corporate boards and is currently a director of LaSalle Hotel Properties and La Salle U.S. Realty Income and Growth
Fund III. For more than 30 years, he has served on corporate boards including AT&amp;T, Aon, Corning, Cummins Engine, Eastman Kodak, Firestone, Inland Steel Industries, Kmart, Lucent Technologies, The Putnam Funds, Springs Industries and
Time-Warner, Inc. He has served as a Trustee of The Ford Foundation and The Brookings Institution, as a member of The Business Council and as a Protector of the Thyssen-Bornemisza Continuity Trust. Mr.&nbsp;Perkins is a life trustee and was Vice
Chairman of the Board of Trustees of Northwestern University. He is also a member of the Civic Committee of The Commercial Club of Chicago, and Advisory Boards for Blue Ridge Partners, Shields-Meneley, RoundTable Healthcare Partners L.P.,
Northwestern University&#146;s School of Communication and its School of Education and Social Policy. Mr.&nbsp;Perkins holds a B.A. degree from Yale University and an M.B.A. degree from the Harvard Graduate School of Business Administration. The
Company believes that Mr.&nbsp;Perkins&#146; extensive resume of corporate leadership, including Board service, makes him a valuable member of its Board of Directors. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Mr.&nbsp;Pearlman</B> has served as a director of the Company since April 1999. Mr.&nbsp;Pearlman retired as Chairman of Zenith
Electronics Corporation in November 1995. He joined Zenith as controller in 1971 and served as chief executive officer from 1983 through April 1995. Mr.&nbsp;Pearlman is currently a director of Smurfit Stone Container Corporation. He is a former
director of First National Bank of Chicago, Ryerson and Royal Packaging Van Leer. He is a life trustee of Northwestern University and a life director and past chairman of the board of Evanston Northwestern Healthcare. Mr.&nbsp;Pearlman graduated
from Princeton with honors from the Woodrow Wilson School and from Harvard Business School with highest honors. The Company believes that Mr.&nbsp;Pearlman&#146;s extensive financial and leadership experience make him a valuable member of its Board
of Directors. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">6 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Mr.&nbsp;Vincent</B> has served as a Director of the Company since November 2007. In
August 2008, he was appointed as Vice Chairman of the Company&#146;s Board of Directors. He is the retired President and Chairman of The HallStar Company, where he served as CEO for more than twenty years. HallStar is a chemical manufacturer and
innovator specializing in material science, marketing its products worldwide, primarily into the polymer and personal care industries. Prior to HallStar, Mr.&nbsp;Vincent held positions in purchasing, sales, commercial development and strategic
planning with FMC Corporation (chemicals) and General Electric Company (chemicals and plastics). Mr. Vincent has served as Chairman of the Illinois Manufacturers&#146; Association (IMA) and the Chemical Industry Council of Illinois (CICI), as well
as Director of the American Chemistry Council (ACC). Mr. Vincent serves on the Boards of several closely-held companies in the chemicals and materials industry sector. Mr. Vincent holds a Bachelor of Arts degree in Chemistry from Dartmouth College
and an M.B.A. degree from Harvard Business School. The Company believes that Mr.&nbsp;Vincent&#146;s extensive experience in the chemicals industry and management leadership makes him a valuable member of its Board of Directors. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Director Compensation</B> &#151; Upon first being elected to the Board of Directors, each director of the Company who is not an
employee or consultant of the Company (an &#147;Outside Director&#148;) is granted stock options to purchase 10,000 shares of common stock at the closing price as of the date of issuance (the fair market value). This initial option grant to an
Outside Director vests over three to five years. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In 2009, the Company paid $5,500 as quarterly compensation to the Chairman
of the Board of Directors totaling $22,000. The Company paid $4,500 as quarterly compensation to the Chairman of the Audit and Finance Committee totaling $18,000. The company paid $4,000 in the first quarter and $4,500 in the second, third and
fourth quarters to the Vice Chairman of the Board of Directors totaling $17,500. All other directors were paid $4,000 each, which amounted to an annual total of $16,000 per such other Outside Director for services performed in their capacity as
directors. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In addition, the Chairman of the Board of Directors received $2,090 in the first quarter of 2009 in deferred
common stock (under the &#147;Non-Employee Director Restricted Stock Plan&#148; and the &#147;Director Deferred Compensation Plan&#148; as described below) based on the closing price on February&nbsp;10, 2009. The Vice Chairman of the Board of
Directors and the Chairman of the Audit and Finance Committee each received $1,710 in deferred common stock, compared to $1,520 to all other directors. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">During the second, third and fourth quarters of 2009, the Company granted its outside directors stock appreciation rights (SAR&#146;s)
totaling 45,750 shares, under the Company&#146;s Amended and Restated 2006 Stock Appreciation Rights Plan. The fair market value of the awards granted was $14,550 and is included in director compensation expense for the year ended December&nbsp;31,
2009. The SAR&#146;s granted vested immediately and are payable upon a director&#146;s separation from service as a director. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In 2005, the Company adopted, and the shareholders approved, the 2005 Non-Employee Director Restricted Stock Plan (the &#147;Director
Restricted Stock Plan&#148;) which reserved 150,000 shares of the Company&#146;s common stock to be issued to Outside Directors in the form of </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">7 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
restricted shares. In 2005, no awards were made under the Director Restricted Stock Plan. In 2005, the Company also adopted the Non-Employee Director Deferred Compensation Plan (the
&#147;Director Deferred Compensation Plan&#148;) which permits an Outside Director to defer the receipt of director fees until separation from service or the Company undergoes a change in control. The Company amended the Director Restricted Stock
Plan in 2005 to permit an Outside Director to defer receipt of restricted stock granted under it. The deferred restricted shares are accounted for under the Director Deferred Compensation Plan and issued upon separation from service or the
Company&#146;s change in control. Under the Director Deferred Compensation Plan, the deferred fees that would have been paid in cash are deemed invested in 5 year U.S. Treasury Bonds during the deferral period. The accumulated hypothetical earnings
are paid following the Outside Director&#146;s separation from service or the Company&#146;s change in control. The deferred fees that would have been paid as restricted shares are deemed invested in common stock of the Company during the deferral
period. The Director Deferred Compensation Plan is an unfunded, nonqualified deferred compensation arrangement. In 2009 and 2008, all Outside Directors elected to defer receipts of all of the restricted shares they became entitled to under the
Director Restricted Stock Plan. In 2009 and 2008, no Outside Directors elected to defer receipt of cash under the Director Deferred Compensation Plan. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">All Outside Directors are reimbursed for their reasonable out-of-pocket expenses incurred in attending board and committee meetings.
</FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><U>2009 Director Compensation </U></B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="66%"></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:20pt"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Name</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Fees&nbsp;Earned<BR>or Paid
in<BR>Cash</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>($)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Stock&nbsp;Awards</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>($)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Stock<BR>Appreciation<BR>Rights ($)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Total($)</B></FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">James A. Henderson</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">16,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,520</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,908</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">19,428</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">James A. McClung, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">18,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,710</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2,147</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">21,857</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Jerry K. Pearlman</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">16,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,520</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,908</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">19,428</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Donald S. Perkins</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">22,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2,090</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2,624</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">26,714</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Richard W. Siegel, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">16,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,520</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,908</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">19,428</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">R. Janet Whitmore</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">16,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,520</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,908</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">19,428</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">George A. Vincent, III</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">17,500</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,710</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2,147</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">21,357</FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Meetings of the
Board and Committees</B> &#151; During the year ended December&nbsp;31, 2009, the Board of Directors held eight formal meetings. No director missed more than one board and one committee meeting held during 2009 (for all committees on which a
particular director served). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Committees of the Board of Directors</B> &#151; The Board of Directors has established an
Audit and Finance Committee, Compensation and Governance Committee and a Nominating Committee, each comprised entirely of independent directors who are not officers or employees of the Company. The members of the Audit and Finance Committee are
Mr.&nbsp;McClung </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">8 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
(Chairman), Mr.&nbsp;Pearlman, Mr.&nbsp;Perkins and Mr.&nbsp;Vincent. The members of the Compensation and Governance Committee are Mr.&nbsp;Pearlman (Chairman), Mr.&nbsp;Henderson,
Mr.&nbsp;Perkins and Mr.&nbsp;Vincent. The members of the Nominating Committee are Mr.&nbsp;Henderson (Chairman), Mr.&nbsp;McClung, Mr.&nbsp;Pearlman, Mr.&nbsp;Perkins, Dr.&nbsp;Siegel and Mr.&nbsp;Vincent. Each of the Audit and Finance,
Compensation and Governance, and Nominating Committees operates pursuant to a written charter. Copies of the Committee charters are available on the Company&#146;s Web site at <I>www.nanophase.com </I>under the link &#147;Investor Relations -
Corporate Governance&#148;. The Company also operates under a written code of ethics, copies of which are available on the Company&#146;s Website under the link &#147;Investor Relations - Corporate Governance&#148;. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The Audit and Finance Committee generally has responsibility for retaining the Company&#146;s independent registered public accounting
firm, reviewing the plan and scope of the accountants&#146; annual audit, reviewing the Company&#146;s internal control functions and financial management policies and reporting to the Board of Directors regarding all of the foregoing. The Audit and
Finance Committee held six formal meetings in 2009 and over the course of such meetings, the Audit and Finance Committee reviewed and discussed the audited financial statements with management. The Committee also discussed with its independent
registered public accounting firm, McGladrey and Pullen, LLP, the matters required to be discussed by the statement on Auditing Standards No.&nbsp;61, as amended. In addition, the Committee has received from McGladrey and Pullen the written
disclosures and the related communications by Independence Standards Board and the Public Company Accounting Oversight Board and discussed with McGladrey and Pullen their independence from the Company and its management. Based on the Audit and
Finance Committee&#146;s review and discussions of the foregoing matters, the Audit and Finance Committee recommended to the Board of Directors that the audited financial statements be included in this Proxy Statement. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The Board of Directors has determined that Mr.&nbsp;Pearlman and Mr.&nbsp;Perkins are &#147;audit committee financial experts&#148; as
described in applicable SEC rules. Each member of the Audit and Finance Committee is independent, as defined under applicable NASDAQ and SEC rules regarding independence. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The Compensation and Governance Committee generally has responsibility for establishing executive officer and key employee compensation,
reviewing and establishing the Company&#146;s executive compensation and general corporate governance policies and reporting to the Board of Directors regarding the foregoing. The Compensation and Governance Committee also has responsibility for
administering the Amended 2004 Equity Compensation Plan, the 2005 Non-Employee Director Restricted Stock Plan and the 2006 Stock Appreciation Rights Plan, determining the number of options, restricted stock and stock appreciation rights, if any, to
be granted to the Company&#146;s employees, directors and consultants pursuant to the Company&#146;s compensation plans and reporting to the Board of Directors regarding the foregoing. The Compensation and Governance Committee held four formal
meetings in 2009. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The Nominating Committee generally has responsibility for nominating candidates to serve on the Board of
Directors, reviewing and evaluating incumbent directors, and assessing the performance of management and the Board pursuant to its charter. All members of the Nominating Committee are independent. The Nominating Committee was formed in 2004 and held
one formal meeting in 2009. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">9 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Communications with the Board of Directors </B>&#151; Any stockholder desiring to
communicate with the Board of Directors or one or more of its directors may send a letter addressed to the Board of Directors or the applicable directors in care of the Corporate Secretary at Nanophase Technologies Corporation, 1319 Marquette Drive,
Romeoville, Illinois 60446. All such communications must have the sender&#146;s name, address, telephone number and e-mail address, if any, as well as a statement of the type and amount of the Company&#146;s securities the sender holds and any other
interest of the sender in the subject of the communication or, if the sender is not a stockholder of the Company, a statement of the nature of the sender&#146;s interest in the Company. Communications will be forwarded to the proper recipient unless
they (a)&nbsp;concern individual grievances or other interests that could not reasonably be construed to be of concern to the stockholders or other constituencies of the Company, (b)&nbsp;advocate the Company&#146;s engaging in illegal activities,
(c)&nbsp;contain offensive, scurrilous or abusive content, or (d)&nbsp;have no relevance to the business or operations of the Company. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Directors&#146; Attendance at Annual Meetings </B>&#151; When a director is unable to attend an Annual Meeting of Stockholders in
person, but is able to attend by electronic conferencing, the Company will arrange for the director to participate by other means such that the director can hear and be heard by those present at the meeting. The entire Board of Directors attended
the Company&#146;s 2009 Annual Meeting of Stockholders. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Board&#146;s Philosophy in Risk Oversight, Roles, and Diversity
</B>&#151; The Board of Directors considers its role in risk oversight to focus primarily on evaluating risk at the entity and strategic levels, with management primarily responsible for managing day-to-day risk factors and presenting summary
materials for those positions to the Board of Directors. Consistent with this philosophy, the Board of Directors has no formal policy as to whether the roles of Chief Executive Officer and Chairman should be segregated or combined. The Board of
Directors considers the circumstances of the Company and makes a determination as to the appropriate leadership structure for the Company at that time. As of the time of this filing, the positions of CEO and Chairman are held by two individuals
&#150; Mr.&nbsp;Perkins serves as Chairman and Mr.&nbsp;Jankowski serves as CEO. Mr.&nbsp;Perkins brings extensive experience in corporate leadership from his own working experience and from the many Boards on which he serves or has served in the
past, and Mr.&nbsp;Jankowski, in his relatively new role as CEO, is expected to benefit from that experience. The Board of Directors believes that is the most appropriate structure for the Company at this time. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The Board of Directors does not have a stated policy regarding diversity. The Board seeks experienced individuals for service who bring
extensive experience in leadership, operations, finance, and engineering, particularly in areas directly applicable to the Company or its intended future endeavors. </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">10 </FONT></P>


<p Style='page-break-before:always'>
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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>EXECUTIVE OFFICERS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The table below identifies executive officers of the Company who are not identified in the tables entitled &#147;Election of
Directors&nbsp;&#151; Nominees&#148; or &#147;&#151; Other Directors.&#148; The Company prepared the following executive officer summaries using information furnished to the Company by the executive officer. </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="27%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="68%"></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:20pt"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Name</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Age</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Position</B></FONT></P></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Frank Cesario</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">40</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">Chief Financial Officer</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">David Nelson</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">43</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">Vice President &#151; Sales and Marketing</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Nancy Baldwin</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">59</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">Vice President&nbsp;&#151; Human Resources and Investor Relations</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Patrick Murray, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">44</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">Vice President&nbsp;&#151; Research and Development</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">H. Glenn Judd</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">42</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">Vice President &#151; Operations</FONT></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Mr.&nbsp;Cesario</B> joined the Company in June 2009 as Chief Financial Officer. He brings more than 10 years of CFO and controller
experience at manufacturing entities. Prior to joining Nanophase, Mr.&nbsp;Cesario served in a similar capacity with ISCO International, Inc., a publicly traded global supplier of telecommunications equipment, as well as Turf Ventures LLC, a
privately held chemicals distributor. He began his career with KPMG Peat Marwick and then served in progressively responsible finance positions within Material Sciences Corporation and Outokumpu Copper, Inc. Mr.&nbsp;Cesario holds an M.B.A.
(Finance) from DePaul University and a B.S. (Accountancy) from the University of Illinois, as well as a CPA license from the state of Illinois. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Mr.&nbsp;Nelson </B>joined the Company in April 2007 as Vice President of Sales. He was appointed Vice President of Sales and
Marketing in August 2008. He is an executive who brings over 15 years of business development experience. Prior to joining Nanophase, Mr.&nbsp;Nelson started and managed the LCD business for Eastman Chemical Company. Prior to that, he was a
consultant with Mercer Management Consulting working on corporate strategy development and implementation. Mr.&nbsp;Nelson has also started two consumer goods manufacturing companies and has served as National Sales Manager for Pelouze Scale
Company. He holds a B.S. in Marketing from Miami University and a M.B.A. from the Kellogg Graduate School of Management at Northwestern University. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Ms.&nbsp;Baldwin </B>has served as the Director of Human Resources and Information Technology since joining the Company in 2000. In
September of 2008, she was appointed as the Company&#146;s Vice-President of Human Resources and Investor Relations. Prior to joining Nanophase, she served as Vice-President of iLink Global, and Chief Human Resources Officer at the Marketing Store,
a global supplier to McDonald&#146;s Corporation. Previous experience includes 14 years at Arthur Andersen, LLP&nbsp;&amp; Andersen Consulting, LLP in various positions. Ms.&nbsp;Baldwin has a B.S. in Education from Western Illinois University and
post graduate studies at Northern Illinois University. She is currently an active member of the Will County Three Rivers Manufacturing Human Resources Association. </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">11 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Dr.&nbsp;Murray </B>joined the Company in 2001 as a senior scientist. He was promoted to
Director of Research and Development in 2005 and appointed Vice President of Research and Development in 2008. He holds an undergraduate degree in Biochemistry from Illinois Benedictine College (Benedictine University) and a doctorate in Organic
Chemistry from the University of Illinois at Urbana-Champaign. Dr.&nbsp;Murray has over 15 years of experience in the areas of polymer synthesis, particle dispersion, chemical process development and technical project management. Dr.&nbsp;Murray has
been focused on dispersion product development and technical support for business development. Prior to joining Nanophase, Dr.&nbsp;Murray held various research and management positions at Nalco Chemical Company. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Mr.&nbsp;Judd</B> joined the Company in 2000 as a senior process engineer. In December of 2009, he was appointed as the Company&#146;s
Vice President of Operations. In his 9 years with the Company, he has served in progressively responsible engineering positions and has been instrumental in developing, building, and improving the Company&#146;s engineering and production
capabilities.&nbsp;He has 20 years of experience in the area of chemical process scale-up, particle dispersion technology, and manufacturing support.&nbsp;Before joining Nanophase, Mr.&nbsp;Judd held various research and engineering positions at the
Eastman Kodak Company, and prior to that, spent time as an intern at Michigan Biotechnology Institute while attending college.&nbsp;He graduated with Honors from Michigan State University with a B.S. in Chemical Engineering, and currently holds a
professional engineering license. </FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>EXECUTIVE COMPENSATION </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Compliance with Section&nbsp;162(m) </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The Compensation and Governance Committee currently intends for all compensation paid to the executive officers to be tax deductible to
the Company pursuant to Section&nbsp;162(m) of the Internal Revenue Code of 1986, as amended (&#147;Section 162(m)&#148;). Section&nbsp;162(m) provides that compensation paid to the executive officers in excess of $1,000,000 cannot be deducted by
the Company for Federal income tax purposes unless, in general, (1)&nbsp;such compensation is performance-based, established by a committee of outside directors and objective, and (2)&nbsp;the plan or agreement providing for such performance-based
compensation has been approved in advance by stockholders. The Compensation and Governance Committee believes that the requirements of Section&nbsp;162(m) are uncertain at this time and may arbitrarily impact the Company. In the future, the
Compensation and Governance Committee may determine to adopt a compensation program that does not satisfy the conditions of Section&nbsp;162(m) if in its judgment, after considering the additional costs of not satisfying Section&nbsp;162(m), such
program is appropriate. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Section&nbsp;16(A) Beneficial Ownership Reporting Compliance</B> &#150; Section&nbsp;16 of the
Securities Exchange Act of 1934, as amended (the &#147;Exchange Act&#148;), requires the Company&#146;s officers (as defined under Section&nbsp;16), directors and persons who beneficially own greater than 10% of a registered class of the
Company&#146;s equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Based solely on a review of the forms it has received and on written representations from certain reporting persons
that no such forms were required for them, the Company believes that during 2009, all Section&nbsp;16 filing </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">12 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
requirements applicable to its officers, directors and 10% beneficial owners were complied with by such persons, except for an option grant to Mr.&nbsp;Jankowski executed on May&nbsp;4, 2009,
which was filed one day late, on May&nbsp;7, 2009. During 2010, the Company believes that the required Section&nbsp;16 filings executed on May&nbsp;3, 2010 were one day late with regard to option grants to certain employees, including officers. The
filings for those transactions with respect to Messrs. Jankowski, Cesario, Murray and Nelson and Ms.&nbsp;Baldwin occurred on May&nbsp;6, 2010. </FONT></P>
<P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>SUMMARY COMPENSATION TABLE </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The following table sets forth a summary of the compensation for each of our named executive officers in U.S. dollars for the financial
year ended December&nbsp;31, 2009. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="47%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" ROWSPAN="2" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:97pt"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Name and Principal Position</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ROWSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Year</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ROWSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Salary</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>($)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ROWSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Bonus</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>($)</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1">
<B>(1)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ROWSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Option<BR>Awards<BR>($)</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>(2)</B>
</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ROWSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Non-Equity<BR>Incentive
Plan<BR>Compensation<BR>($)</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>(3)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ROWSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>All
Other<BR>Compensation<BR>($)</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>(4)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ROWSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Total</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>($)</B></FONT></TD></TR>

<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Jess Jankowski<BR>President and Chief Executive Officer (formerly Chief Financial Officer) (5)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2009<BR>2008</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">$<BR>$</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">246,311<BR>196,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">$<BR>$</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">35,000<BR>125,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">$<BR>$</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">22,314<BR>51,702</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">$<BR>$</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;<BR>&#151;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">$<BR>$</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">18,218<BR>23,626</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">$<BR>$</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">321,843<BR>396,328</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Frank Cesario<BR>Chief Financial Officer (6)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2009</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">50,192</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">5,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">15,606</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">70,798</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">David Nelson<BR>Vice President Sales and Marketing</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2009</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">176,670</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">16,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">22,314</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">17,073</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">232,057</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Nancy Baldwin<BR>Vice President Human Resources and Investor Relations</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2009</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">147,992</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">22,314</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">7,633</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">187,939</FONT></TD></TR></TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">These amounts were earned in 2009 and 2008, but paid in early 2010 and 2009, respectively. Sixty percent of the 2008 bonus to Mr.&nbsp;Jankowski was authorized at the
special meeting of the Board of Directors held on August&nbsp;13, 2008, when Mr.&nbsp;Jankowski was appointed Acting Chief Executive Officer. This bonus was in recognition of additional responsibilities required of Mr.&nbsp;Jankowski and paid in
quarterly increments. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">The amounts in this column represent the dollar amount recognized for financial statement reporting purposes with respect to the 2009 and 2008 fiscal years in
accordance with FASB ASC Topic 718 (formerly SFAS 123R). See Note 12 of the notes to our financial statements contained elsewhere in this Annual Report for a discussion of all assumptions made by us in determining the FASB ASC Topic 718 (formerly
SFAS 123R) values. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(3)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">None. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(4)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">The amounts in this column represent 401(k) match, health and life insurance. Health insurance benefits are the same for all employees. Life insurance is provided in
the amount equal to the annual base salary with a maximum of $150,000. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(5)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Effective August 2008, Mr.&nbsp;Jankowski was appointed Acting Chief Executive Officer. Effective February 2009, Mr.&nbsp;Jankowski was appointed President and Chief
Executive Officer. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(6)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Effective June 2009, Mr.&nbsp;Cesario joined Nanophase as our Chief Financial Officer. </FONT></TD></TR></TABLE>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">13 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Employment Agreements </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Effective August&nbsp;12, 2009, the Company entered into an employment agreement with Mr.&nbsp;Jankowski in connection with his services
as President and Chief Executive Officer of the Company. No term has been assigned to Mr.&nbsp;Jankowski&#146;s employment agreement. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Pursuant to the terms of his employment agreement, Mr.&nbsp;Jankowski will receive an annual base salary of not less than $275,000. In
addition, Mr.&nbsp;Jankowski will be eligible for discretionary bonuses for services to be performed as an executive officer of the Company based on performance and achieving milestones approved by the Board of Directors of the Company (the
&#147;Board&#148;). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Mr.&nbsp;Jankowski will be eligible for such stock options and other equity compensation as the Board
deems appropriate, subject to the provisions of the Company&#146;s 2004 Equity Compensation Plan or any successor plan (the &#147;Plan&#148;). Mr.&nbsp;Jankowski will also be entitled to the employee benefits made available by the Company generally
to all other executive officers of the Company, subject to the terms and conditions of the Company&#146;s employee benefit plans in effect from time to time. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In the event Mr.&nbsp;Jankowski&#146;s employment is terminated other than for &#147;cause&#148;, as defined in the employment agreement,
Mr.&nbsp;Jankowski will receive a sum equal to his base salary in effect at the time of termination for 52 full weeks after the effective date of termination, payable in proportionate amounts on the Company&#146;s regular pay cycle for professional
employees, provided that Mr.&nbsp;Jankowski signs, without subsequent revocation, a separation agreement and release in a form acceptable to the Company. In addition, all stock options granted to Mr.&nbsp;Jankowski prior to termination will become
fully vested and exercisable in accordance with the applicable option grant agreement and the Plan. If he is terminated for cause, or if he resigns as an employee of the Company, Mr.&nbsp;Jankowski will not be entitled to any severance or other
benefits accruing after the term of the employment agreement and such rights will be forfeited immediately upon the end of such term. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">If, within two years after the occurrence of a change in control, as defined in his employment agreement, Mr.&nbsp;Jankowski&#146;s
employment is terminated other than for cause, his responsibilities or annual compensation are materially reduced without his prior consent, or the Company ceases to be publicly held (each, a &#147;Trigger&#148;), then, subject to Mr.&nbsp;Jankowski
signing, without subsequently revoking, a separation agreement and release in a form acceptable to the Company, Mr.&nbsp;Jankowski will receive a sum equal to his base salary for 104 full weeks after the date the Trigger occurs. In addition, all
stock options granted to Mr.&nbsp;Jankowski prior to the Trigger will become fully vested and exercisable in accordance with the applicable option grant agreement and the Plan. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Effective as of June&nbsp;24, 2009, the Company entered into an employment agreement with Mr. Cesario providing for an annual base salary
of not less than $150,000. The Company also granted to Mr.&nbsp;Cesario options to purchase up to 20,000 shares of Common Stock at an exercise price of $1.07 per share with options for one-third of such shares becoming exercisable on each of the
first three anniversaries of the dates of grant. No term has been assigned to Mr.&nbsp;Cesario&#146;s employment agreement. If Mr.&nbsp;Cesario is terminated other than for &#147;cause&#148; (as such term is defined in Mr.&nbsp;Cesario&#146;s
employment agreement), Mr.&nbsp;Cesario will receive severance benefits in an amount equal to Mr.&nbsp;Cesario&#146;s base salary for 3 weeks. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">14 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Effective as of September&nbsp;28, 2008, the Company entered into an employment agreement
with Mr.&nbsp;Nelson providing for an annual base salary of not less than $185,000. No term has been assigned to Mr.&nbsp;Nelson&#146;s employment agreement. If Mr.&nbsp;Nelson is terminated other than for &#147;cause&#148; on or before
September&nbsp;22, 2010 (as such term is defined in Mr.&nbsp;Nelson&#146;s employment agreement), Mr.&nbsp;Nelson will receive severance benefits in an amount equal to Mr.&nbsp;Nelson&#146;s base salary for 52 weeks; if termination without cause
occurs thereafter, the Company shall pay Mr.&nbsp;Nelson's base salary for 39 weeks. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Effective as of September&nbsp;25, 2008,
the Company entered into an employment agreement with Ms.&nbsp;Baldwin providing for an annual base salary of not less than $150,000. No term has been assigned to Ms.&nbsp;Baldwin&#146;s employment agreement. If Ms.&nbsp;Baldwin is terminated other
than for &#147;cause&#148; (as such term is defined in Ms.&nbsp;Baldwin&#146;s employment agreement), Ms.&nbsp;Baldwin will receive severance benefits in an amount equal to Ms.&nbsp;Baldwin&#146;s base salary for 26 weeks. </FONT></P>
<P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The following table sets forth information regarding each unexercised option held by each of our named executive officers as of
December&nbsp;31, 2009. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="33%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="8" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>O<SMALL>PTION</SMALL> A<SMALL>WARDS</SMALL></B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="3" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>S<SMALL>TOCK</SMALL> A<SMALL>WARDS</SMALL></B></FONT></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:20pt"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>N<SMALL>AME</SMALL></B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>N<SMALL>UMBER</SMALL>
OF</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>S<SMALL>ECURITIES</SMALL></B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>U<SMALL>NDERLYING</SMALL></B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1">
<B>U<SMALL>NEXERCISED</SMALL></B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>E<SMALL>ARNED</SMALL></B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>O<SMALL>PTIONS</SMALL></B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1">
<B>(#)</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>E<SMALL>XERCISABLE</SMALL></B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>E<SMALL>QUITY</SMALL>&nbsp;I<SMALL>NCENTIVE</SMALL><BR>P<SMALL>LAN</SMALL>
A<SMALL>WARDS</SMALL>:<BR>N<SMALL>UMBER</SMALL>&nbsp;O<SMALL>F</SMALL>&nbsp;S<SMALL>ECURITIES</SMALL><BR>U<SMALL>NDERLYING</SMALL><BR>U<SMALL>NEXERCISED</SMALL><BR>U<SMALL>NEARNED</SMALL>&nbsp;
O<SMALL>PTIONS</SMALL></B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>(#)</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>U<SMALL>NEXERCISABLE</SMALL></B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>O<SMALL>PTION</SMALL></B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>E<SMALL>XERCISE</SMALL>
</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>P<SMALL>RICE</SMALL></B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>($)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>O<SMALL>PTION</SMALL></B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>E<SMALL>XPIRATION</SMALL></B>
</FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>D<SMALL>ATE</SMALL></B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>E<SMALL>QUITY</SMALL></B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>I<SMALL>NCENTIVE</SMALL>&nbsp;
P<SMALL>LAN</SMALL><BR>A<SMALL>WARDS</SMALL>:&nbsp;N<SMALL>UMBER</SMALL></B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>O<SMALL>F</SMALL>
S<SMALL>HARES</SMALL>&nbsp;O<SMALL>F</SMALL><BR>S<SMALL>TOCK</SMALL></B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>T<SMALL>HAT</SMALL>&nbsp;H<SMALL>AVE</SMALL>&nbsp;
N<SMALL>OT</SMALL></B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>V<SMALL>ESTED</SMALL></B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>(#)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>E<SMALL>QUITY</SMALL>&nbsp;I<SMALL>NCENTIVE</SMALL><BR>P<SMALL>LAN</SMALL>&nbsp;A<SMALL>WARDS</SMALL>:&nbsp;
M<SMALL>ARKET</SMALL><BR>V<SMALL>ALUE</SMALL></B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>O<SMALL>F</SMALL> S<SMALL>HARES</SMALL> O<SMALL>F</SMALL>
S<SMALL>TOCK</SMALL></B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>T<SMALL>HAT</SMALL> H<SMALL>AVE</SMALL>
N<SMALL>OT</SMALL></B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>V<SMALL>ESTED</SMALL></B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>($)</B></FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Jess Jankowski</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">21,775</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">-0-</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">7.687</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">05/24/10</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">13,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">-0-</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.875</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">01/26/11</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">13,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">-0-</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">7.062</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">02/28/11</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">20,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">-0-</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.650</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">01/03/12</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">18,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">-0-</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3.660</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">03/24/13</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">11,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">-0-</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.550</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">10/11/14</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">-0-</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.030</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">09/27/15</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">15,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">-0-</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.010</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">09/27/16</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">12,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">6,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">4.480</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">11/06/17</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">7,666</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">15,334</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3.140</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">05/12/18</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">-0-</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">30,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1.020</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">05/04/19</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Frank Cesario</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">-0-</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">20,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1.070</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">06/24/19</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">David Nelson</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">14,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">21,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.130</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">04/09/17</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">5,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">4.480</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">11/06/17</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">6,666</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">13,334</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3.140</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">05/12/18</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">-0-</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">30,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1.020</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">05/04/19</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">15 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">


<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="33%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Nancy Baldwin</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">-0-</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">11.625</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">11/20/10</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">6,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">-0-</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.650</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">01/03/12</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">-0-</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.550</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10/11/14</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">7,500</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">-0-</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.010</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">09/27/16</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">6,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">4.480</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">11/06/17</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">5,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3.140</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">05/12/18</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">-0-</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">30,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1.020</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">05/04/19</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD></TR></TABLE>
<P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>POTENTIAL PAYMENT UPON TERMINATION OR CHANGE IN CONTROL </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Severance Protection. </I></B>Please see discussion of severance benefits under &#147;Executive Compensation - Employment
Agreements&#148; above. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Change in Control. </I></B>Upon a change in control, the 2001 Equity Compensation Plan (the
predecessor to the 2004 Equity Compensation Plan), the 2004 Equity Compensation Plan and the 2010 Equity Compensation Plan (the proposed successor to the 2004 Equity Compensation Plan), provide that: (1)&nbsp;vesting under all outstanding stock
options will automatically accelerate and each option will become fully exercisable; (2)&nbsp;the restrictions and conditions on all outstanding restricted shares shall immediately lapse; and (3)&nbsp;the holders of performance shares will receive a
payment in settlement of the performance shares, in an amount determined by the Compensation and Governance Committee, based on the target payment for the performance period and the portion of the performance period that precedes the change in
control. If the Company is not the surviving entity, the successor is required to assume all unexercised options. Under the Company&#146;s 1992 Stock Option Plan, the vesting of options issued in connection with the plan is accelerated upon a
&#147;sale or merger&#148; (as defined in the 1992 Stock Option Plan). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The following table quantifies the estimated payments
that would be made in each covered circumstance: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="50%"></TD>
<TD VALIGN="bottom" WIDTH="12%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="12%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="12%"></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:20pt"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>N<SMALL>AME</SMALL></B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>T<SMALL>ERMINATION</SMALL>&nbsp;B<SMALL>Y</SMALL>&nbsp;C<SMALL>OMPANY</SMALL><BR>W<SMALL>ITHOUT</SMALL>
C<SMALL>AUSE</SMALL> (1)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>C<SMALL>HANGE</SMALL>&nbsp;I<SMALL>N</SMALL><BR>C<SMALL>ONTROL</SMALL>&nbsp;(2)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>I<SMALL>NVOLUNTARY</SMALL>&nbsp;T<SMALL>ERMINATION</SMALL>&nbsp;
I<SMALL>N</SMALL><BR>C<SMALL>ONNECTION</SMALL>&nbsp;W<SMALL>ITH</SMALL>&nbsp;O<SMALL>R</SMALL>&nbsp;F<SMALL>OLLOWING</SMALL><BR>A C<SMALL>HANGE</SMALL> I<SMALL>N</SMALL> C<SMALL>ONTROL</SMALL> (3)</B></FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Jess Jankowski</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">275,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">-0-</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">550,000</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Frank Cesario</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">9,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">-0-</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">9,000</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">David Nelson</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">185,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">-0-</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">185,000</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Patrick Murray</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">75,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">-0-</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">75,000</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Nancy Baldwin</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">75,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">-0-</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">75,000</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">H. Glenn Judd</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">74,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">-0-</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">74,000</FONT></TD></TR></TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">This amount represents the severance benefits that would be received under the executive officer's employment agreement as described had the executive officer been
terminated by the Company without cause on December&nbsp;31, 2009. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">This amount represents an estimate of the value that would have been received under the equity incentive plans had a change in control occurred as of December&nbsp;31,
2009 and the executive officers benefited from an acceleration of vesting in the equity-based plan awards as described above. For this purpose, the share price as of December&nbsp;31, 2009 was used. The amount represents the difference between the
exercise price of any unvested options and $0.87. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(3)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">This amount represents an estimate of the payments and value that would have been received by the executive officers had the executive officers been terminated by the
Company without cause on December&nbsp;31, 2009 in connection with a change in control on this date. It is the sum of the first two columns, except with respect to Mr.&nbsp;Jankowski, who would receive 104 weeks of his base salary upon termination
without cause within two years after a change in control. </FONT></TD></TR></TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">16 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>SECURITY OWNERSHIP OF MANAGEMENT </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>AND PRINCIPAL STOCKHOLDERS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The following table sets forth, as of May&nbsp;15, 2010 certain information with respect to the beneficial ownership of the common stock
by (1)&nbsp;each person known by the Company to own beneficially more than 5% of the outstanding shares of common stock, (2)&nbsp;each Company director, (3)&nbsp;each of the Company&#146;s named executive officers and (4)&nbsp;all Company executive
officers and directors as a group. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="71%"></TD>
<TD VALIGN="bottom" WIDTH="11%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="11%"></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:20pt"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Name</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Number&nbsp;of&nbsp;Shares</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Beneficially&nbsp;
Owned&nbsp;(1)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Percent&nbsp;of&nbsp;Shares<BR>Beneficially&nbsp;Owned</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Bradford T. Whitmore</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">5,188,307</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">(2)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">24.47</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">%&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Spurgeon Corporation</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">4,763,920</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">(3)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">22.47</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">%&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Grace Brothers, Ltd.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">4,463,920</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">(4)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">21.05</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">%&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Altana Chemie, AG</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,256,281</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">(5)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.92</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">%&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">James A. Henderson</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">22,410</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">(6)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">*</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Richard W. Siegel, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">223,350</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">(7)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">1.05</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">%&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">James McClung</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">31,771</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">(8)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">*</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Jerry Pearlman</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">39,948</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">(9)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">*</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Donald S. Perkins</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">69,811</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">(10)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">*</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">R. Janet Whitmore</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">184,291</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">(11)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">*</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">George A. Vincent, III</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">6,667</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">(12)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">*</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Jess Jankowski</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">172,524</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">(13)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">*</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">David Nelson</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">56,333</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">(14)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">*</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Patrick Murray, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">44,066&nbsp;</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">(15)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">*</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Nancy Baldwin</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">52,500</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">(16)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">*</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Frank Cesario</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">6,666</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">(17)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">*</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">All executive officers and directors as a group (13 persons)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">959,170</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">(18)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">4.49</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">%&nbsp;</FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Unless
otherwise indicated below, the persons address is the same as the address for the Company. </FONT></P> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">*</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Denotes beneficial ownership of less than one percent. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission (the &#147;Commission&#148;). Unless otherwise indicated
below, the persons in the above table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Includes 4,463,920 shares of common stock held by Grace Brothers, Ltd., 300,000 shares of common stock held by Grace Investments, Ltd. and 424,387 shares held by
Bradford T. Whitmore. Mr.&nbsp;Whitmore is a general partner of both Grace entities. In such capacities, Mr.&nbsp;Whitmore shares voting and investment power with respect to the shares of common stock held by the Grace entities. This information is
based on information reported on Form 4 filed on December&nbsp;24, 2009 with the Commission by Mr.&nbsp;Whitmore. The address of the stockholder is 1560 Sherman Avenue, Suite 900, Evanston, Illinois 60201. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(3)</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Includes 4,463,920 shares of common stock held by Grace Brothers, Ltd. and 300,000 shares of common stock held by Grace Investments, Ltd. Spurgeon
Corporation is a general partner of </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">17 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P><FONT STYLE="font-family:Times New Roman" SIZE="2">
both Grace entities and shares voting and investment power with respect to the shares of common stock held by such Grace entities. This information is based on information reported on Form 4
filed on December&nbsp;24, 2009 with the Commission by Spurgeon Corporation. The address of the stockholder is 1560 Sherman Avenue, Suite 900, Evanston, Illinois 60201. </FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(4)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">This information is based on information reported on Form 4 filed on December&nbsp;24, 2009 with the Commission by Spurgeon Corporation and Bradford&nbsp;T. Whitmore.
The address of the stockholder is 1560 Sherman Avenue, Suite 900, Evanston, Illinois 60201. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(5)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">In accordance with the terms of the private placement of 1,256,281 shares of common stock to Altana Chemie GmbH, the Company filed a registration statement for the
shares on February&nbsp;5, 2007 which was declared effective by the SEC on May&nbsp;18, 2007. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(6)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Includes Mr.&nbsp;Henderson&#146;s 14,000 shares of common stock issuable upon exercise of options exercisable currently or within 60 days of May&nbsp;15, 2010.
</FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(7)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Includes Dr.&nbsp;Siegel&#146;s 6,000 shares of common stock issuable upon exercise of options exercisable currently or within 60 days of May&nbsp;15, 2010.
</FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(8)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Includes Mr.&nbsp;McClung&#146;s 8,000 shares of common stock issuable upon exercise of options exercisable currently or within 60 days of May&nbsp;15, 2010.
</FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(9)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Includes Mr.&nbsp;Pearlman&#146;s 8,000 shares of common stock issuable upon exercise of options exercisable currently or within 60 days of May&nbsp;15, 2010.
</FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(10)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Includes Mr.&nbsp;Perkins&#146; 21,000 shares of common stock issuable upon exercise of options exercisable currently or within 60 days of May&nbsp;15, 2010.
</FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(11)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Includes Ms.&nbsp;Whitmore&#146;s 10,000 shares of common stock issuable upon exercise of options exercisable currently or within 60 days of May&nbsp;15, 2010.
</FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(12)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Includes Mr.&nbsp;Vincent&#146;s 6,667 shares of common stock issuable upon exercise of options exercisable currently or within 60 days of May&nbsp;15, 2010.
</FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(13)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Includes Mr.&nbsp;Jankowski&#146;s 159,108 shares of common stock issuable upon exercise of options exercisable currently or within 60 days of May&nbsp;15, 2010.
</FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(14)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Includes Mr.&nbsp;Nelson&#146;s 54,333 shares of common stock issuable upon exercise of options exercisable currently or within 60 days of May&nbsp;15, 2010.
</FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(15)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Includes Dr.&nbsp;Murray&#146;s 44,066 shares of common stock issuable upon exercise of options exercisable currently or within 60 days of May&nbsp;15, 2010.
</FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(16)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Includes Ms.&nbsp;Baldwin&#146;s 52,500 shares of common stock issuable upon exercise of options exercisable currently or within 60 days of May&nbsp;15, 2010.
</FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(17)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Includes Mr.&nbsp;Cesario&#146;s 6,666 shares of common stock issuable upon exercise of options exercisable currently or within 60 days of May&nbsp;15, 2010.
</FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(18)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Includes all executive officers and directors as a group&#146;s 439,173 shares of common stock issuable upon exercise of options exercisable currently or within 60 days
of May 15, 2010. </FONT></TD></TR></TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">18 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Equity Compensation Plan Information </B> </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The following table gives information as of December&nbsp;31, 2009 about our common stock that may be issued upon the exercise of options
and rights under our compensation plans, including the 1992 Amended and Restated Stock Option Plan, the 2001 and the Amended 2004 Equity Compensation Plan and the 2005 Non-Employee Director Restricted Stock Plan. </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="41%"></TD>
<TD VALIGN="bottom" WIDTH="10%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="10%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="10%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="10%"></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:49pt"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Plan Category</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>(a)&nbsp;Number&nbsp;of&nbsp;Securities<BR>to be Issued Upon<BR>Exercise of Outstanding<BR>Options and
Rights</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>(b)&nbsp;Weighted&nbsp;Average<BR>Exercise Price of<BR>Outstanding Options<BR>and Rights</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>(c)&nbsp;Number&nbsp;of&nbsp;Securities<BR>Remaining Available<BR>for Future Issuance<BR>Under Equity<BR>Compensation
Plans<BR>(Excluding Securities<BR>Reflected in Column<BR>(a))</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>(d)&nbsp;Total&nbsp;of&nbsp;Securities<BR>Reflected in Columns<BR>(a) and (c)</B></FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" NOWRAP> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Plans Approved by Shareholders</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,046,075</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">(1)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">4.13</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">654,805</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">(2)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,700,880</FONT></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Plans Not Approved by Shareholders</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">None</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">None</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Consists of the 1992 Amended and Restated Stock Option Plan, the 2001 and the Amended 2004 Equity Compensation Plans and shares of authorized but unissued Preferred
Stock. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Consists of shares available for future issuance under the Amended 2004 Equity Compensation Plan and the 2005 Non-Employee Director Restricted Stock Plan. The proposed
2010 Equity Compensation Plan, if approved, will replace the foregoing plans and increase the number of shares available for future issuance. For more detail on the proposed plan, please see the discussion below under Proposal 3 &#150; Adoption of
the 2010 Equity Compensation Plan. </FONT></TD></TR></TABLE> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
</B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Review of Related Person Transactions</B>. The Company had no transactions in 2009 in which any related person had or
will have a direct or indirect material interest. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Director Independence</B>. The Board of Directors has determined that
the following directors are &#147;independent&#148; as that term is defined in (i)&nbsp;paragraph (m)&nbsp;of Section&nbsp;10A of the Securities Exchange Act of 1934 (15 U.S.C. 78f), and the rules and regulations of the Securities and Exchange
Commission promulgated thereunder, and (ii)&nbsp;the rules of the NASDAQ stock market: Mr.&nbsp;McClung, Mr.&nbsp;Henderson, Mr.&nbsp;Pearlman, Mr.&nbsp;Perkins, Dr.&nbsp;Siegel and Mr.&nbsp;Vincent. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The Board of Directors has established an Audit and Finance Committee, Compensation and Governance Committee and a Nominating Committee
each comprised entirely of independent directors. The members of the Audit and Finance Committee are Mr.&nbsp;McClung (Chairman), Mr.&nbsp;Pearlman, Mr.&nbsp;Perkins and Mr.&nbsp;Vincent. The members of the Compensation and Governance Committee are
Mr.&nbsp;Pearlman (Chairman), Mr.&nbsp;Henderson, Mr.&nbsp;Perkins and Mr.&nbsp;Vincent. The members of the Nominating Committee are Mr.&nbsp;Henderson (Chairman), Mr.&nbsp;McClung, Mr.&nbsp;Pearlman, Mr.&nbsp;Perkins, Dr.&nbsp;Siegel and
Mr.&nbsp;Vincent. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">19 </FONT></P>


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<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>PROPOSAL 2 </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>AMENDMENT TO CERTIFICATE OF INCORPORATION </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>TO INCREASE AUTHORIZED SHARES OF COMMON STOCK </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The Board of Directors has approved and recommends that the shareholders adopt an amendment to the Company&#146;s Certificate of
Incorporation to increase the total authorized shares of common stock of the Company from 30,000,000 to 35,000,000. The Company is currently authorized to issue 24,088&nbsp;shares of preferred stock and the proposed amendment will not affect this
authorization. The form of the proposed amendment is included as <U>Exhibit&nbsp;A</U> of this Proxy Statement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">If the
amendment is adopted, it will become effective upon the filing of a Certificate of Amendment to the Certificate of Incorporation with the Secretary of State of the State of Delaware. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Purpose of the Proposed Amendment</I>&nbsp;&#151; Presently, except as described in Proposal 3 related to the 2010 Equity Compensation
Plan, the Board of Directors has no immediate or specific plans to issue the additional shares of common stock. But the Board believes it is in the best interest of the Company to have additional authorized shares available to provide the Company
with flexibility in responding to potential business opportunities in the future. The additional shares may be used for various purposes at the direction of the Board of Directors, when such issuance is deemed to be in the best interests of the
Company. These purposes may include: establishing strategic relationships with other companies, expanding business or product lines through the acquisition of other businesses or products, and other corporate purposes. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The additional shares of common stock to be authorized by adoption of the amendment would have rights identical to the currently
outstanding shares of common stock. Adoption of the proposed amendment and issuance of the common stock would not directly affect the rights of the holders of currently outstanding common stock, but effects incidental to the increase are possible.
The issuance may decrease the proportionate holdings of existing stockholders and could have the effect of diluting voting power per share. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Required Vote</I>&nbsp;&#151; To be approved, Proposal&nbsp;2 must receive &#147;For&#148; votes from a majority of the shares
outstanding on the record date. As a result, abstentions and broker non-votes will have the same effect as a vote &#147;Against&#148; such proposal. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE &#147;FOR&#148; THE AMENDMENT TO THE COMPANY&#146;S CERTIFICATE OF INCORPORATION AND
INCREASE IN THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK TO 35 MILLION SHARES. </B></FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>PROPOSAL 3 </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>ADOPTION OF THE 2010 EQUITY COMPENSATION PLAN </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The Board of Directors has approved and recommends that the shareholders adopt the Company&#146;s 2010 Equity Compensation Plan (the
&#147;Plan&#148; or the &#147;2010 Plan&#148;), which is designed </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">20 </FONT></P>


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<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
to replace the existing 2004 Equity Compensation Plan (the &#147;2004 Plan&#148;), the 2005 Non-Employee Director Restricted Stock Plan (as amended, the &#147;2005 Plan&#148;), and the Amended
and Restated 2006 Stock Appreciation Rights Plan (the &#147;2006 Plan&#148;). These three plans would be terminated and shall collectively be referred to as the &#147;Terminating Plans&#148;. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The following is a general summary of the 2010 Plan and is qualified in its entirety by the full text of the 2010 Plan attached to this
Proxy Statement as <U>Exhibit B</U>. Capitalized terms not defined herein have the meanings ascribed to such terms in the plan document. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Purpose of the 2010 Plan</I> &#151; The Company&#146;s Board believes that the proposed 2010 Plan will simplify the Company&#146;s
equity compensation structure by combining three plan documents into a single plan document, and by increasing to 3&nbsp;million the aggregate number of shares that may be granted (an increase of 1,650,000 shares over the aggregate of the
Terminating Plans as further described below) and strengthen the Company&#146;s continued capacity to attract and retain the services of key employees and directors who will contribute to the Company&#146;s long-term growth and financial success.
The Board recognizes that there is competition among businesses for talented employees and that these employees play an important role in maintaining the Company&#146;s technology leadership position in nanomaterials and advanced nanoengineered
products. The Board believes that the equity compensation available under the 2010 Plan, and the enhanced flexibility provided by the amendment, is vital to our ability to secure and build the Company&#146;s talented human resources and thereby
remain competitive and a technology leader in our industry. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Administration</I> &#151; The 2010 Plan will be administered
by the Compensation and Governance Committee of the Board of Directors (the &#147;Committee&#148;). The Committee will have sole authority to (i)&nbsp;determine the individuals to whom grants shall be made under the 2010 Plan, (ii)&nbsp;determine
the type, size and terms of the grants to be made to each such individual, (iii)&nbsp;determine the time when the grants will be made and the duration of any applicable exercise or restriction period, including the criteria for exercisability and
the acceleration of exercisability, and (iv)&nbsp;make all determinations with respect to any other matters arising under the 2010 Plan. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Participants</I> &#151; Participants of the 2010 Plan will include certain employees of the Company and certain advisors, including
non-employee members of the Board who perform services for the Company, as designated by the Committee. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Shares Available
for the 2010 Plan</I> &#151; Subject to adjustment as provided in the 2010 Plan (for example, in the event of recapitalization, stock split, stock dividend, merger, reorganization or similar event), the maximum number of shares of common stock that
may be issued under the 2010 Plan is 3,000,000 shares (up from 1,200,000 in the 2004 Plan and 150,000 in the 2005 Plan) and the maximum number of shares of common stock that may be issued under the 2010 Plan in any single calendar year is the lesser
of 2% of outstanding shares of the Company&#146;s common stock for employees and 0.5% for directors, or 600,000&nbsp;shares in the aggregate (subject to exceptions contained in the Plan). For purposes of calculating the aggregate number of shares
available for grants and calculating the limitations on calendar year grants, each grant of a Restricted Share or a Performance Share (other than New Hire Grants) shall be the equivalent of a grant of three (3)&nbsp;shares. </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">21 </FONT></P>


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<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Awards</I> &#151; Awards under the 2010 Plan may consist of grants of (i)&nbsp;incentive
stock options as described in Section&nbsp;2.1 (&#147;Incentive Stock Options&#148;), (ii)&nbsp;non-qualified options as described in Section&nbsp;2.1 (&#147;Non-qualified Options&#148;) (Incentive Stock Options and Non-qualified Options are
collectively&nbsp;referred to as &#147;Options&#148;), (iii)&nbsp;restricted stock as described in Section&nbsp;2.2 (&#147;Restricted Shares&#148;), (iv)&nbsp;performance stock as described in Section&nbsp;2.3 (&#147;Performance Shares&#148;) and
(v)&nbsp;Stock Appreciation Rights as described in Section&nbsp;2.4 (&#147;SARs&#148;) (collectively &#147;Grants&#148;). The terms and features of the various forms of Grants are described more fully in the 2010 Plan itself, attached as <U>Exhibit
B</U>. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">No person may receive more than 20% of the aggregate number of any class of Grants made during any calendar year. For
purposes of calculating the aggregate number of shares of each class, (1)&nbsp;Options will be deemed a single class of Grants and (2)&nbsp;Restricted Shares and performance Shares will together be deemed a single class of Grants. In addition, the
aggregate number of Restricted Shares and Performance Shares (taken as a single class) granted in any calendar year shall not exceed the lesser of 100,000 Shares or 50% of the aggregate number of Shares subject to all Grants made during any calendar
year. However, the limitations set forth in this paragraph will not apply to grants made to a person as an inducement material to the individual&#146;s entering into employment with the Company (&#147;New Hire Grants&#148;). </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Reorganization or Change in Control</I> &#151; Under the 2010 Plan, a &#147;Reorganization&#148; shall be deemed to occur if the
shareholders of the Company approve (or, if shareholder approval is not required, the Board of Directors approves) an agreement providing for (i)&nbsp;the merger or consolidation of the Company with another corporation where the shareholders of the
Company, immediately prior to the merger or consolidation, will not beneficially own, immediately after the merger or consolidation, shares of the Company&#146;s stock entitling such shareholders to more than 50% of all votes to which all
shareholders of the surviving corporation would be entitled in the election of directors (without consideration of the rights of any class of stock to elect directors by a separate class vote), (ii)&nbsp;the sale or other disposition of all or
substantially all of the assets of the Company, or (iii)&nbsp;a liquidation or dissolution of the Company. A &#147;Change of Control&#148; shall be deemed to have occurred if any &#147;person&#148; (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act) or any of its subsidiaries or affiliates becomes a &#147;beneficial owner&#148; (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing a majority of the voting power
of the then outstanding securities of the Company except where the acquisition is approved by the Board of Directors. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Upon a
Reorganization where the Company is not the surviving corporation (or survives only as a subsidiary of another corporation), all outstanding Options that are not exercised will be assumed by, or replaced with comparable options or rights by, the
surviving corporation. In addition, upon any Reorganization or a Change of Control, (i)&nbsp;the Company will provide each participant with outstanding grants written notice of such event, (ii)&nbsp;all outstanding Options will automatically
accelerate and become fully exercisable, (iii)&nbsp;the restrictions and conditions on all outstanding Restricted Shares will immediately lapse, and (iv)&nbsp;grantees holding Performance Shares will receive a payment in settlement of such
Performance Shares, in an amount determined by the Committee. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Termination and Amendment</I> &#151; The Board of Directors
may at any time terminate or from time to time amend the 2010 Plan; provided that the Board of Directors may not make any </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;
</FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
amendment to the 2010 Plan without the approval of the shareholders, if such shareholder approval is required by any requirement of applicable law or regulation. The 2010 Plan shall terminate on
the day immediately preceding the tenth anniversary of the effective date of the plan, unless the plan is terminated earlier by the Board of Directors or is extended by the Board of Directors with the approval of the shareholders. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>United States Federal Income Tax Consequences</I> &#151; The following discussion briefly summarizes the material federal income tax
consequences of participation in the 2010 Plan. This discussion is general in nature and does not address issues related to the tax circumstances of any particular participant. The discussion is limited to the impact of the Internal Revenue Code as
is currently in effect upon United States citizens residing in the United States. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Stock Options</U>. Under the Internal
Revenue Code, a participant granted a Nonqualified Stock Option or Incentive Stock Option generally realizes no taxable income upon receipt of the stock option, but in the case of a Nonqualified Stock Option a participant is deemed to have realized
ordinary taxable income upon the exercise of the stock option equal to the excess of the fair market value of the shares of Common Stock acquired at the time of the exercise of the stock option over the exercise price of such stock option. The
Company will be entitled to a deduction equal to the same amount to the extent such amount is treated as reasonable compensation under the Internal Revenue Code. The deduction will be allowed in the Company&#146;s taxable year which includes the
last day of the participant&#146;s taxable year in which the stock option is exercised. A participant&#146;s tax basis in shares of Common Stock acquired upon the exercise of a stock option will be the fair market value of such Common Stock shares
on the date the stock option is exercised. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Restricted Share</U>. A recipient of a Restricted Share award will recognize
ordinary income equal to the fair market value of the common stock at the time the restrictions on the Restricted Share lapse, less any amount which the recipient paid for the stock. However, instead of postponing the income tax consequences of a
stock award, the recipient may elect to include the fair market value of the common stock (less any purchase price paid) in income in the year the award is granted. This election is made under Section&nbsp;83(b) of the Code by filing a written
notice with the Internal Revenue Service. In general, the Company receives a deduction for federal income tax purposes equal to the amount of compensation recognized by the recipient at the time the recipient recognizes such income. The tax
treatment of the subsequent disposition of Restricted Share will depend upon whether the recipient has made a Section&nbsp;83(b) election to include the value of the common stock in income when awarded. If the recipient makes a Section&nbsp;83(b)
election and elects to include the fair market value of the common stock (less any purchase price paid) in income in the year the award is granted, any subsequent disposition will result in a capital gain or loss equal to the difference between the
selling price of the common stock and the fair market value of the common stock on the date of grant. If no Section&nbsp;83(b) election is made and the recipient has recognized ordinary income equal to the fair market value of the common stock at
the time the restrictions lapse, less any amount the recipient paid for the stock, any disposition will result in a capital gain or loss equal to the difference between the selling price of the common stock and the fair market value of the common
stock on the date the restrictions lapsed. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Performance Share</U>. A participant will not recognize income and will not be taxed upon
the grant of Performance Shares. Generally, at the time a participant receives payment under Performance Shares, the participant will recognize compensation taxable as ordinary income in an amount equal to the cash or fair market value of the shares
received, and the Company will then be entitled to a corresponding deduction. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Stock Appreciation Right</U>. No income will
be recognized by a participant in connection with the grant of a SAR. When the SAR is exercised, the participant normally will be required to include as taxable ordinary income in the year of exercise an amount equal to the amount of cash received
and the fair market value of any unrestricted common shares received on the exercise. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I><U>Withholding Taxes</U></I>. The
Company shall be entitled to withhold from any payments or deemed payments any amount of tax withholding (including all federal, state and local taxes) determined by the Committee to be required by law. If the Committee so permits, a Grantee may
make a written election to satisfy the Company&#146;s income tax withholding obligation with respect to an Option, Restricted Shares or Performance Shares by having Shares withheld by the Company from the Shares otherwise to be received, or to
deliver previously owned Shares (not subject to restrictions hereunder). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Outstanding Grants and Effect on Prior Plans
</I>&#151;<I></I> Upon the effective date of the 2010 Plan, the 2004 Plan, the 2005 Plan and the 2006 Plan shall be terminated subject to the provisions of Section&nbsp;3.5(c) of the 2004 Plan, Section&nbsp;3.2 of the 2005 Plan and Section&nbsp;3.1
of the 2006 Plan, each relating to the post-termination effectiveness of grants under the 2004 Plan, the 2005 Plan and the 2006 Plan, respectively. The 2010 Plan shall not be deemed an amendment or restatement of the 2004 Plan, the 2005 Plan or the
2006 Plan. Nothing in the 2010 Plan shall be deemed to impair the rights of or give any new or additional rights to any person who received grants under the 2004 Plan, the 2005 Plan or the 2006 Plan. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Vote Required</I>&nbsp;&#151; To be approved, Proposal&nbsp;3 must receive &#147;For&#148; votes from a majority of the shares
represented in person or by proxy to become effective. If you abstain from voting, it will have the same effect as an &#147;Against&#148; vote. Broker non-votes will not have any effect for purposes of determining whether Proposal&nbsp;3 has been
approved. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>THE BOARD OF DIRECTORS AND THE COMPENSATION COMMITTEE RECOMMEND THAT THE STOCKHOLDERS VOTE &#147;FOR&#148; THE RATIFICATION OF
THE PLAN. </B></FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>PROPOSAL 4 </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>RATIFICATION OF APPOINTMENT OF AUDITORS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The Audit and Finance Committee has appointed McGladrey and Pullen, LLP, an independent registered public accounting firm, as auditors of
the Company's financial statements for the year ended December&nbsp;31, 2010. McGladrey and Pullen, LLP has been engaged as auditors for the Company beginning in November 2001. The Audit and Finance Committee has determined to afford stockholders
the opportunity to express their opinions on the matter of </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
auditors and, accordingly, is submitting to the stockholders at the Annual Meeting a proposal to ratify the Audit and Finance Committee&#146;s appointment of McGladrey&nbsp;&amp; Pullen, LLP. If
a majority of the shares voted at the Annual Meeting, in person or by proxy, are not voted in favor of the ratification of the appointment of McGladrey&nbsp;&amp; Pullen, LLP, the Audit and Finance Committee will interpret this as an instruction to
seek other auditors. The following fees were incurred by the Company for the services of McGladrey&nbsp;&amp; Pullen, LLP in relation to the 2009 and 2008 fiscal years. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Audit Fees. The aggregate amount billed by our principal accountant, McGladrey&nbsp;&amp; Pullen, LLP, for audit services performed for
the fiscal years ended December&nbsp;31, 2009 and 2008 was $163,000 and $164,000, respectively. Audit services include the auditing of financial statements and quarterly reviews. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Audit Related Fees. Total fees billed by McGladrey&nbsp;&amp; Pullen, LLP were $16,000 and $14,000 for the years ended December&nbsp;31,
2009 and 2008, which included costs incurred for reviews of registration statements, assistance with Staff comment letters, and consultation on various accounting matters in support of the Company&#146;s financial statements. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Tax Fees. Total fees billed by RSM McGladrey, Inc. (an affiliate of McGladrey&nbsp;&amp; Pullen, LLP) for tax related services for the
fiscal years ended December&nbsp;31, 2009 and 2008 were $7,000 and $9,000, respectively. These services include the preparation of federal and state income tax returns and other tax matters. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">All Other Fees. Other than those fees described above, during the fiscal year ended December&nbsp;31, 2009 and 2008, there were no other
fees billed for services performed by McGladrey&nbsp;&amp; Pullen, LLP or RSM McGladrey, Inc. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">All of the fees described above
were approved by the Company&#146;s Audit and Finance Committee. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Audit Committee Pre-Approval Policies and Procedures. The
Company&#146;s Audit and Finance Committee pre-approves the audit and non-audit services performed by McGladrey&nbsp;&amp; Pullen, LLP, our principal accountants, and RSM McGladrey, Inc. (an affiliate of McGladrey&nbsp;&amp; Pullen, LLP) in order to
assure that the provision of such services does not impair McGladrey&nbsp;&amp; Pullen, LLP&#146;s independence. Unless a type of service to be provided by McGladrey&nbsp;&amp; Pullen, LLP and RSM McGladrey, Inc. has received general pre-approval,
it will require specific pre-approval by the Audit and Finance Committee. In addition, any proposed services exceeding pre-approval cost levels will require specific pre-approval by the Audit and Finance Committee. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The term of any pre-approval is 12&nbsp;months from the date of pre-approval, unless the Audit and Finance Committee specifically
provides for a different period. The Audit and Finance Committee will periodically revise the list of pre-approved services, based on subsequent determinations, and has delegated pre-approval authority to the Chairman of the Audit and Finance
Committee. In the event the Chairman exercises such delegated authority, he shall report such pre-approval decisions to the Audit and Finance Committee at its next scheduled meeting. The Audit and Finance Committee does not delegate its
responsibilities to pre-approve services performed by the independent auditor to management. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">It is expected that representatives of McGladrey&nbsp;&amp; Pullen will be present at the
meeting and will be available to respond to questions. They will be given an opportunity to make a statement if they desire to do so. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>THE
BOARD OF DIRECTORS AND THE AUDIT AND FINANCE COMMITTEE RECOMMEND THAT THE STOCKHOLDERS VOTE &#147;FOR&#148; THE RATIFICATION OF THE APPOINTMENT OF McGLADREY&nbsp;&amp; PULLEN, LLP AS THE INDEPENDENT AUDITORS OF THE COMPANY'S FINANCIAL STATEMENTS FOR
THE YEAR ENDED DECEMBER&nbsp;31, 2010. </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>MISCELLANEOUS AND OTHER MATTERS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Solicitation&nbsp;&#151;</I> The cost of this proxy solicitation will be borne by the Company. The Company may request banks, brokers,
fiduciaries, custodians, nominees and certain other record holders to send proxies, proxy statements and other materials to their principals at the Company&#146;s expense. Such banks, brokers, fiduciaries, custodians, nominees and other record
holders will be reimbursed by the Company for their reasonable out-of-pocket expenses of solicitation. The Company does not anticipate that costs and expenses incurred in connection with this proxy solicitation will exceed an amount normally
expended for a proxy solicitation for an election of directors in the absence of a contest. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Proposals of
Stockholders</I>&nbsp;&#151; Proposals of stockholders (1)&nbsp;intended to be considered at the Company&#146;s 2011 Annual Meeting of Stockholders (the &#147;2011 Annual Meeting&#148;) and (2)&nbsp;to be considered for inclusion in the
Company&#146;s proxy statement and proxy for the 2011 Annual Meeting must be received by the Secretary of the Company on or before January&nbsp;4, 2011. If a stockholder submits a proposal to be considered at the 2011 Annual Meeting other than in
accordance with Rule 14a-8 under the Securities Exchange Act of 1934, as amended, and does not provide notice of such proposal to the Company by March&nbsp;18, 2011, the holders of any proxy solicited by the Company&#146;s Board of Directors for use
at such meeting will have discretionary authority to vote with respect to any proposal as to which timely notice is not given. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Other Business</I>&nbsp;&#151; The Board of Directors is not aware of any other matters to be presented at the Annual Meeting other
than those mentioned in this Proxy Statement and the Company&#146;s Notice of Annual Meeting of Stockholders enclosed herewith. If any other matters are properly brought before the Annual Meeting, however, it is intended that the persons named in
the proxies will vote such proxies as the Board of Directors directs. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Section&nbsp;16(a) Beneficial Ownership Reporting
Compliance</I>&nbsp;&#151; Section&nbsp;16 of the Securities Exchange Act of 1934, as amended (the &#147;Exchange Act&#148;), requires the Company&#146;s officers (as defined under Section&nbsp;16), directors and persons who beneficially own greater
than 10% of a registered class of the Company&#146;s equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Based solely on a review of the forms it has received and on written
representations from certain reporting persons that no such forms were required for them, the Company believes that during 2009, all Section&nbsp;16 filing requirements applicable to its officers, directors and 10% beneficial owners were complied
with by such persons, with one exception. An option grant to Mr.&nbsp;Jankowski on May&nbsp;4, 2009 was filed one day late, on May&nbsp;7, 2009. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Historical Legal Proceedings Involving Director</I>&nbsp;&#151; In 2001, George Tatz, a purchaser of 200 shares of the Company&#146;s
common stock, filed a class action complaint against the Company and its former Chief Executive Officer, Joseph Cross, in the United States District Court for the Northern District of Illinois.&nbsp;The complaint alleged that defendants violated the
federal Securities Exchange Act of 1934 (the &#147;Act&#148;) by making supposedly fraudulent material misstatements of fact in connection with the Company&#146;s public disclosures about a British customer, Celox.&nbsp;Plaintiff subsequently filed
an amended complaint, alleging that the Company, three former officers and Jess Jankowski, then-acting chief financial officer,&nbsp;made&nbsp;additional&nbsp;supposedly fraudulent material misstatements of fact in connection with the Company&#146;s
public disclosures concerning the Company&#146;s dealings with Celox.&nbsp;The Company denied&nbsp;these&nbsp;allegations.&nbsp;The Company and its directors and officers liability insurance carrier decided in 2003 to avoid protracted litigation and
defense costs by agreeing to settle all claims against all defendants for $2,500,000.&nbsp;Thereafter, the Court approved the settlement and dismissed the case with prejudice.&nbsp;The settlement did not admit liability by any
party.&nbsp;In&nbsp;2005, the Court ordered distribution of the net settlement fund to the plaintiff class.&nbsp;Because the settlement was funded by the Company&#146;s directors and officers liability insurance, the settlement did not have a
material adverse effect on the Company&#146;s financial position or results of operation. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Additional
Information</I>&nbsp;&#151; The Company will furnish without charge a copy of its Annual Report on Form 10-K for its year ended December&nbsp;31, 2009, as filed with the Commission, upon the written request of any person who is a stockholder as of
the Record Date, and will provide copies of the exhibits to such Form&nbsp;10-K upon payment of a reasonable fee which shall not exceed the Company&#146;s reasonable expenses in connection therewith. Requests for such materials should be directed to
Nanophase Technologies Corporation, 1319 Marquette Drive, Romeoville, Illinois 60446, Attention: Nancy Baldwin, Vice President - Human Resources and Investor Relations. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;
</FONT></P>
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<DIV ALIGN="right">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0">

<TR>
<TD WIDTH="100%"></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">By order of the Board of Directors</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">/s/ FRANK CESARIO</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Frank Cesario</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Chief Financial Officer</FONT></TD></TR></TABLE></DIV> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Romeoville, Illinois
</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">July&nbsp;9, 2010 </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>ALL STOCKHOLDERS ARE REQUESTED TO COMPLETE, </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>DATE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY. </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;
</FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Exhibit A </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>SECOND AMENDMENT </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>TO </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>THE
CERTIFICATE OF INCORPORATION </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>OF </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>NANOPHASE TECHNOLOGIES CORPORATION </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Pursuant to the Certificate of Incorporation of Nanophase Technologies Corporation, as amended, and Delaware General Corporation Law, the
undersigned corporation hereby adopts the following Amendment to its Certificate of Incorporation: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">FIRST: That at a meeting
of the Board of Directors of Nanophase Technologies Corporation (the &#147;Corporation&#148;) resolutions were duly adopted setting forth this proposed amendment of the Certificate of Incorporation of the Corporation, declaring said amendment to be
advisable and preparing a meeting of the stockholders of the Corporation for consideration thereof. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">SECOND: Article IV,
Section A of the Certificate of Incorporation of the Corporation is hereby amended as follows: </FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>ARTICLE IV </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">A. The Corporation shall have authority to issue the following classes of stock in the number of shares and at the par value as indicated
opposite the name of the class: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="78%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:18pt"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Class</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Number&nbsp;of&nbsp;Shares<BR>Authorized</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Par&nbsp;Value<BR>per&nbsp;Share</B></FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Common Stock (&#147;the Common Stock&#148;)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">35,000,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">.01</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Preferred Stock (the &#147;Preferred Stock&#148;)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">24,088</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">.01</FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">The designations and the powers,
preferences and relative participating, option or other rights of the Common and Preferred stockholders, and the qualifications, limitations or restrictions thereof remain unchanged. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">THIRD: Pursuant to Section&nbsp;242 of the Delaware General Corporation Law, a majority of the outstanding stock entitled to vote thereon
and a majority of the outstanding stock of each class entitled to vote thereon as a class has duly approved, the amendment to the Certificate of Incorporation of the Corporation, as amended, set forth in this Certificate of Amendment. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">FOURTH: That said amendment was duly adopted, in accordance with the provisions of Section&nbsp;242 of the General Corporation law of the
State of Delaware. </FONT></P>

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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">FIFTH: This amendment shall be effective on the date this Certificate of Amendment is filed
and accepted by the Secretary of State of the State of Delaware. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">IN WITNESS WHEREOF, the undersigned, being the Chief
Financial Officer of the Corporation, for purposes of amending its Certificate of Incorporation pursuant to the General Corporation Law of the State of Delaware, acknowledges that it is his act and deed and that the facts stated herein are true, and
has signed this instrument this <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> day of August, 2010. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><DIV ALIGN="right">
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<TD VALIGN="top" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2">Nanophase Technologies Corporation</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">/s/ Frank Cesario</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Frank Cesario</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Chief Financial Officer</FONT></TD></TR></TABLE></DIV>

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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Exhibit B </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>NANOPHASE TECHNOLOGIES CORPORATION </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>2010 EQUITY COMPENSATION PLAN </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The purpose of the 2010 Nanophase Technologies Corporation Equity Compensation Plan (the &#147;Plan&#148;) is to provide designated
employees of Nanophase Technologies Corporation (the &#147;Company&#148;) and its subsidiaries, and certain advisors, including non-employee members of the Board of Directors of the Company (the &#147;Board&#148;) who perform services for the
Company or its subsidiaries, with the opportunity to receive grants of incentive stock options, non-qualified options, restricted shares, performance shares and stock appreciation rights. The Company believes that the Plan will encourage the
participants to contribute materially to the growth of the Company, thereby benefiting the Company&#146;s shareholders, and will align the economic interests of the participants with those of the shareholders. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>ARTICLE I </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>ADMINISTRATION OF THE PLAN
</B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Section&nbsp;1.1 <U>Administration</U>. </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(a) Committee.</B> The Plan shall be administered and interpreted by the Compensation and Governance Committee of the Board (the
&#147;Committee&#148;). The Committee shall consist of three or more persons appointed by the Board, all of whom shall be &#147;outside directors&#148; as defined under Section&nbsp;162(m) of the Internal Revenue Code of 1986, as amended (the
&#147;Code&#148;) and related Treasury regulations, shall be &#147;non-employee directors&#148; as defined under Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the &#147;Exchange Act&#148;), and shall be
&#147;independent directors&#148; as defined in NASDAQ Marketplace Rule 4200(15), as amended. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(b) Committee Authority.</B>
The Committee shall have the sole authority to (i)&nbsp;determine the individuals to whom grants shall be made under the Plan, (ii)&nbsp;determine the type, size and terms of the grants to be made to each such individual, (iii)&nbsp;determine the
time when the grants will be made and the duration of any applicable exercise or restriction period, including the criteria for exercisability and the acceleration of exercisability, and (iv)&nbsp;make all determinations with respect to any other
matters arising under the Plan. The Committee may delegate the authority to make grants during the periods between regularly scheduled meetings of the Committee; however, grants in excess of 5,000 shares or grants with non-standard terms shall be
made subject to Committee approval. Any grant made pursuant to the Committee&#146;s delegated authority shall be reported to the Board at the next meeting following the grant. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(c) Committee Determinations.</B> The Committee shall have power and authority to interpret the Plan, make factual determinations, and
to adopt or amend such rules, regulations, agreements and instruments for implementing the Plan as it deems necessary or advisable, in its sole discretion. The Committee&#146;s interpretations and determinations shall be conclusive and binding on
all persons having any interest in the Plan. Determinations made by the Committee under the Plan need not be uniform as to similarly situated individuals. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Section&nbsp;1.2 <U>Grants</U>.</B> Awards under the Plan may consist of grants of (i)&nbsp;incentive stock options as described in
Section&nbsp;2.1 (&#147;Incentive Stock Options&#148;), (ii)&nbsp;non-qualified options as described in Section&nbsp;2.1 (&#147;Non-qualified Options&#148;) (Incentive Stock Options and Non-qualified Options are
</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">1 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
collectively&nbsp;referred to as &#147;Options&#148;), (iii)&nbsp;restricted stock as described in Section&nbsp;2.2 (&#147;Restricted Shares&#148;), (iv)&nbsp;performance stock as described in
Section&nbsp;2.3 (&#147;Performance Shares&#148;) and (v)&nbsp;Stock Appreciation Rights as described in Section&nbsp;2.4 (hereinafter collectively referred to as &#147;Grants&#148;). All Grants shall be subject to the terms and conditions set forth
herein and to such other terms and conditions specified in the individual in a grant instrument (the &#147;Grant Instrument&#148;). The Committee shall approve the form and provisions of each Grant Instrument. Subject to the sole discretion of the
Committee as contemplated by Section&nbsp;1.1(c) above, it is the intent of the Company that grants of Options will be preferred over other Grants under this Plan. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Section&nbsp;1.3 <U>Shares Subject to the Plan</U>. </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(a) Shares Authorized.</B> </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(i) For purposes of the Plan, a &#147;Share&#148; means one share of common stock of the Company, par value $0.01 per
share. Subject to adjustments as provided in Section&nbsp;1.3(b) below, the aggregate number of Shares available for Grants under the Plan shall be 3,000,000 Shares. For purposes of calculating the aggregate number of Shares available for Grants and
calculating the limitations on calendar year Grants set forth in subsection (ii)&nbsp;below, each Grant of a Restricted Share or a Performance Share (other than New Hire Grants contemplated in subsection (iii)&nbsp;below) shall be the equivalent of
a Grant of three (3)&nbsp;Shares. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(ii) For each calendar year, Grants under the Plan shall also be subject to
the following limitations: </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(A) Subject to adjustments as provided in Section&nbsp;1.3(b) below, the maximum
aggregate number of Shares that shall be subject to Grants made under this Plan during any calendar year shall be 600,000 Shares. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(B) No grant recipient (&#147;Grantee&#148;) shall receive more than twenty (20)&nbsp;percent of the aggregate number of
any class of Grants made during any calendar year. As used in this subsection, (1)&nbsp;Options will be deemed a single class of Grants, and (2)&nbsp;Restricted Shares and Performance Shares will together be deemed a single class of Grants.
</FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(C) Following the application of the final sentence of subsection (i)&nbsp;above, the aggregate number of
Restricted Shares and Performance Shares (taken as a single class) granted in any calendar year shall not exceed the lesser of 100,000 Shares or fifty (50)&nbsp;percent of the aggregate number of Shares subject to all Grants made during any calendar
year. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(D) During each calendar year, Employees shall be granted under the Plan no more than two
(2)&nbsp;percent of the Company&#146;s outstanding Shares and Non-Employee Directors shall be granted no more than one-half (1/2)&nbsp;percent of the Company&#146;s outstanding Shares. The number of outstanding Shares for purpose of this subsection
will be determined as of the first business day of each applicable calendar year on a fully-diluted basis. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(iii) The limitations set forth in subsection (ii)&nbsp;above shall not apply to Grants made to a person as an inducement
material to the individual&#146;s entering into employment with the Company (&#147;New Hire Grants&#148;), except for the overall limit as described in subsection (ii)(A). In addition, New Hire Grants shall not count against the aggregate maximum
amounts set forth above in subsection (ii)&nbsp;above except for subsection (ii)(A). </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">2 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(iv) The Shares may be authorized but unissued Shares or reacquired Shares,
including Shares purchased by the Company on the open market for purposes of the Plan. If and to the extent Options granted under the Plan terminate, expire, or are canceled, forfeited, exchanged or surrendered without having been exercised, the
Shares subject to such Grants shall again be available for purposes of the Plan. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(b) Adjustments for Significant
Events.</B> If the number or kind of outstanding Shares change by reason of (i)&nbsp;a dividend, spin-off, recapitalization, split or combination or exchange of Shares, (ii)&nbsp;a merger, reorganization or consolidation in which the Company is the
surviving corporation, (iii)&nbsp;a reclassification or change in par value, or (iv)&nbsp;any other extraordinary or unusual event affecting the outstanding Shares of the Company as a class without the Company&#146;s receipt of consideration, or if
the value of outstanding Shares is substantially reduced as a result of a spin-off or the Company&#146;s payment of an extraordinary dividend or distribution the maximum number of Shares available for Grants, the maximum number of Shares that any
individual participating in the Plan may be granted in any year, the number of Shares covered by outstanding Grants, the kind of Shares issued under the Plan, and the price per Share or the applicable market value of such Grants may be appropriately
adjusted by the Committee to reflect any increase or decrease in the number of, or change in the kind or value of, issued Shares to preclude, to the extent practicable, the enlargement or dilution of rights and benefits under such Grants. Any
fractional Shares resulting from such adjustment shall be eliminated. Any adjustments determined by the Committee shall be final, binding and conclusive. Any Restricted Shares distributed to a Grantee, or which a Grantee is entitled to receive by
reason of any of the events described in clauses (i), (ii), (iii)&nbsp;or (iv)&nbsp;above shall be subject to the restrictions and requirements imposed on such Restricted Shares as provided in Section&nbsp;2.2, unless determined otherwise by the
Committee. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Section&nbsp;1.4 <U>Eligibility for Participation</U>. </B> </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(a) Eligible Persons.</B> All employees of the Company, its parents and its subsidiaries (&#147;Employees&#148;), including Employees
who are officers or members of the Board, and members of the Board who are not Employees (&#147;Non-Employee Directors&#148;) shall be eligible to participate in the Plan. Advisors who perform services to the Company or any of its parents or its
subsidiaries (&#147;Key Advisors&#148;) shall be eligible to participate in the Plan if the Key Advisors render bona fide services and such services are not in connection with the offer or sale of securities in a capital-raising transaction.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(b) Selection of Grantees.</B> The Committee shall select the Employees, Non-Employee Directors and Key Advisors to
receive Grants. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>ARTICLE II </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>EQUITY INCENTIVE GRANTS </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Section&nbsp;2.1 <U>Options</U>. </B> </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(a) Number of Shares.</B> The Committee shall determine the number of Shares that will be subject to each Grant of Options.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(b) Type of Option and Price. </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(i) The Committee may grant Incentive Stock Options that are intended to qualify as &#147;incentive stock options&#148;
within the meaning of Section&nbsp;422 of the Code or Non-qualified </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">
Options that are not intended so to qualify or any combination of Incentive Stock Options and Non-qualified Options. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(ii) The purchase price (the &#147;Exercise Price&#148;) of Shares subject to an Option shall be equal to, or greater
than, the Fair Market Value (as defined below) of a Share on the date the Option is granted. The Exercise Price of an Incentive Stock Option shall be equal to, or greater than, the Fair Market Value of a Share on the date the Incentive Stock Option
is granted and may not be granted to an Employee who, at the time of grant, owns Shares possessing more than 10 percent of the total combined voting power of all Shares and other classes of stock of the Company or any parent or subsidiary of the
Company, unless the Exercise Price per Share is not less than 110% of the Fair Market Value of a Share on the date of grant. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(iii) If the Shares are publicly traded, then the Fair Market Value per Share shall be determined as follows: (x)&nbsp;if
the principal trading market for the Shares is a national securities exchange or the Nasdaq National Market, the last reported sale price thereof on the date of grant or, if there were no trades on that date, the earliest subsequent date upon which
a sale was reported, or (y)&nbsp;if the Shares are not principally traded on such exchange or market, the mean between the last reported &#147;bid&#148; and &#147;asked&#148; prices of a Share on the following date, as reported on Nasdaq or, if not
so reported, as reported by the National Daily Quotation Bureau, Inc. or as reported in a customary financial reporting service, as applicable and as the Committee determines. If the Shares are not publicly traded or, if publicly traded, are not
subject to reported transactions or &#147;bid&#148; or &#147;asked&#148; quotations as set forth above, the Fair Market Value per Share shall be as determined in good faith by the Committee; provided that, if the Shares are publicly traded, the
Committee may make such discretionary determinations where the Shares have not been traded for 10 trading days. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(c) Option
Term.</B> The Committee shall determine the term of each Option. The term of any Option shall not exceed ten years from the date of grant. For Incentive Stock Options granted to an Employee who, at the time of grant, owns Shares possessing more than
10 percent of the total combined voting power of all Shares and other classes of stock of the Company, or any parent or subsidiary of the Company, the term shall not exceed five years from the date of grant. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(d) Vesting of Options.</B> Options shall vest in accord with the terms and conditions specified in the Grant Instrument. The
Committee may accelerate the vesting of any or all outstanding Options at any time for any reason. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(e) Termination of
Employment, Disability or Death. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(i) Except as provided below, an Option may only be exercised while the
Grantee is an Employee, Key Advisor or member of the Board. In the event that a Grantee has a Termination of Service (as defined below) for any reason other than Disability (as defined below), death or Cause (as defined below), any Option which is
otherwise exercisable by the Grantee shall terminate unless exercised within 90 days after the date of such termination, but in any event no later than the date of expiration of the Option term. Any Options that the Grantee cannot exercise at the
time of a Termination of Service shall terminate as of such date. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(ii) In the event a Grantee is terminated
for Cause, unless otherwise determined by the Committee (x)&nbsp;any Option held by the Grantee shall terminate as of the date of such Termination of Service and (y)&nbsp;the Grantee shall automatically forfeit all Shares underlying any exercised
portion of an Option for which the Company has not yet delivered the certificates, upon refund by the Company of the Exercise Price paid by the Grantee for such Shares. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;
</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">4 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(iii) In the event a Grantee has a Termination of Service on account of
Disability, any Option which is otherwise exercisable by the Grantee shall terminate unless exercised within one year after the date of such Termination of Service, but in any event no later than the date of expiration of the Option term. Unless
provided otherwise in the applicable Grant Instrument, any of the Grantee&#146;s Options which are not otherwise exercisable as of the date of such Termination of Service shall terminate as of such date. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(iv) If the Grantee dies while an Employee, Key Advisor or member of the Board or within 90 days after the date on which
the Grantee has a Termination of Service, any Option that is otherwise exercisable by the Grantee shall terminate unless exercised within one year after the date of such death or Termination of Service, but in any event no later than the date of
expiration of the Option term. Unless provided otherwise in the applicable Grant Instrument, any of the Grantee&#146;s Options that are not otherwise exercisable as of the date shall terminate as of such date. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(v) For purposes of the Plan: </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(A) &#147;Cause&#148; shall mean a finding by the Committee that (1)&nbsp;the Grantee has breached his or her employment,
service, noncompetition, nonsolicitation or other similar contract with the Company or its parent and subsidiary corporations, (2)&nbsp;has been engaged in disloyalty to the Company or its parent and subsidiary corporations, including, without
limitation, fraud, embezzlement, theft, commission of a felony or dishonesty in the course of his or her employment or service, (3)&nbsp;has disclosed trade secrets or confidential information of the Company or its parents and subsidiary
corporations to persons not entitled to receive such information or (4)&nbsp;has entered into competition with the Company or its parent or Subsidiary Corporations. Notwithstanding the foregoing, if the Grantee has an employment agreement with the
Company defining &#147;Cause,&#148; then such definition shall supersede the foregoing definition. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(B)
&#147;Disability&#148; shall mean a Grantee&#146;s becoming disabled within the meaning of Section&nbsp;22(e)(3) of the Code. Notwithstanding the foregoing, if the Grantee has an employment agreement with the Company defining &#147;Disability,&#148;
then such definition shall supersede the foregoing definition. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(C) &#147;Termination of Service&#148; shall
mean a Grantee&#146;s termination of employment or service as an Employee, Key Advisor or member of the Board unless the Grantee continues without interruption to serve thereafter in another such capacities. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(f) Exercise of Options.</B> A Grantee may exercise an Option that has become exercisable, in whole or in part, by delivering a notice
of exercise to the Company with payment of the Exercise Price. The Grantee shall pay the Exercise Price (x)&nbsp;in cash, (y)&nbsp;by delivering Shares owned by the Grantee for the period necessary to avoid a charge to the Company&#146;s earnings
for financial reporting purposes and to avoid adverse accounting consequences to the Company (including Shares acquired in connection with the exercise of an Option, subject to such restrictions as the Committee deems appropriate) and having a Fair
Market Value on the date of exercise equal to the Exercise Price, or (z)&nbsp;by such other method as the Committee may approve, including payment through a broker in accord with procedures permitted by Regulation T of the Federal Reserve Board;
provided, that, for purposes of assisting a Grantee (other than a Grantee who is a director or an executive officer of the Company) to exercise an Option, the Company may make loans to such Grantee or guarantee loans made by third parties to such
Grantee, on such terms and conditions as the Committee may authorize. Such Grantee shall pay the Exercise Price at the time of exercise and shall satisfy the withholding tax requirements of Section&nbsp;3.1. </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(g) Limits on Incentive Stock Options.</B> Each Incentive Stock Option shall provide
that, if the aggregate Fair Market Value of the Shares on the date of the grant with respect to which Incentive Stock Options are exercisable for the first time by a Grantee during any calendar year, under the Plan and any other equity compensation
plan of the Company or a parent or subsidiary, exceeds $100,000, then the option, as to the excess, shall be treated as a Non-qualified Option. No Incentive Stock Option shall be granted to any person who is not an Employee of the Company or a
parent or subsidiary of the Company (within the meaning of Section&nbsp;424(f) of the Code). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Section&nbsp;2.2
<U>Restricted Shares</U>. </B> </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(a) General Requirements.</B> Shares issued or transferred pursuant to Restricted Share
Grants may be issued or transferred for consideration or for no consideration. The period of time, if any, during which the Restricted Shares will remain subject to restrictions and any performance conditions imposed by the Committee will be
designated in the Grant Instrument as the &#147;Restriction Period.&#148; All restrictions on transfer of Restricted Shares will be stated on the Grant Instrument. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(b) Number of Shares.</B> The Committee shall determine the number of Restricted Shares to be issued or transferred. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(c) Requirement of Employment.</B> If a Grantee, who is an Employee, has a Termination of Service during a period designated in the
Grant Instrument as the Restriction Period, or if other specified conditions are not met, the Restricted Share Grant shall terminate as to all Shares covered by the Grant as to which the restrictions have not lapsed, and those Shares must be
immediately returned to the Company, and the Company shall refund to the Grantee the lesser of (x)&nbsp;the consideration, if any, paid by the Grantee for such Shares and (y)&nbsp;the Fair Market Value of the Shares as of the date of such
Termination of Service. The Committee may provide for complete or partial exceptions to these requirements. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(d)
Restrictions on Transfer and Legend on Certificate.</B> During the Restriction Period, a Grantee may not sell, assign, transfer, pledge or otherwise dispose of the Restricted Shares except as permitted under Section&nbsp;3.2. Each certificate for
Restricted Shares shall contain a legend giving appropriate notice of the restrictions in the Grant. The Grantee shall be entitled to have the legend removed from the certificate covering the Restricted Shares when all restrictions on such Shares
have lapsed. The Committee may determine that the Company will not issue certificates for Restricted Shares until all restrictions on such Shares have lapsed, or that the Company will retain possession of certificates for Restricted Shares until all
restrictions on such Shares have lapsed. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(e) Right to Vote and to Receive Dividends.</B> Holders of Restricted Shares may
be granted the right to vote the Restricted Shares and to receive any dividends or other distributions paid on such Shares, subject to any restrictions deemed appropriate by the Committee. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(f) Lapse of Restrictions.</B> All restrictions imposed on Restricted Shares shall lapse upon the expiration of the applicable
Restriction Period provided that all conditions imposed by the Committee are satisfied. In the event that the conditions imposed by the Committee on such Restricted Shares are not satisfied, the Restricted Shares shall be forfeited unless the
Committee determines that the restrictions shall lapse without regard to any Restriction Period. Any Restricted Shares that are forfeited for failure to satisfy the conditions imposed by the Committee shall again be available for purposes of the
Plan. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(g) Deferral of Receipt</B>. Notwithstanding anything to the contrary in this Plan, a Grantee, who is a Non-Employee
Director, may, in a manner prescribed by the Committee, elect to defer the receipt of all the Restricted Shares subject to a Grant Instrument. Such election must be made before the </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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end of the calendar year prior to the year in which the Restricted Shares are granted. Any election may either: (i)&nbsp;continue in effect until the Grantee changes or discontinues it or
(ii)&nbsp;apply for a single year only. Any change or discontinuance of an election shall be effective for the year beginning after the change or discontinuance notice is received by the Committee. Elections must be made on a form and in a manner
prescribed by the Committee. Any Restricted Shares deferred pursuant to this Section&nbsp;2.2(g) shall be distributed to the Grantee (or his or her beneficiary, as applicable) as soon as administratively possible following the Grantee&#146;s
separation from service to the Company (within the meaning provided in Code Section&nbsp;409A) or upon a Change of Control or a Reorganization (as each term is defined in Section&nbsp;3.3). The eventual payment of the deferred Restricted Shares
shall not be secured in any way and shall be a general obligation of the Company. The Committee may hold the Restricted Shares in a grantor trust established by the Company for purposes of meeting its obligations with respect to deferred
compensation under this Plan or any other plan established by the Company. The Restricted Shares deferred pursuant to this Section&nbsp;2.2 shall be credited for the benefit of any participating Grantee pursuant to the terms of the Plan. During the
deferral period, the deferred Restricted Shares shall not be available for issuance under this Plan. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Section&nbsp;2.3
<U>Performance Shares</U>. </B> </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(a) General Requirements.</B> Each Performance Share shall represent the right of the
Grantee to receive an amount based on the value of the Performance Share, if performance goals established by the Committee are met. The value of a Performance Share shall be based on the Fair Market Value of a Share as of the date of payment in
respect of such Performance Share is to be made or on such other measurement base as the Committee deems appropriate. The Committee shall determine the requirements applicable to such Shares. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(b) Performance Period and Performance Goals.</B> When Performance Shares are granted, the Committee shall establish the period during
which performance shall be measured (the &#147;Performance Period&#148;) and performance goals applicable to the Shares (&#147;Performance Goals&#148;), if any. Performance Goals may relate to the financial performance of the Company or its
operating shares, the performance of Shares, individual performance, or such other criteria as the Committee deems appropriate. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(c) Payment with respect to Performance Shares.</B> At the end of each Performance Period, the Committee shall determine to what
extent the Performance Goals and other conditions of the Performance Shares have been met and the amount, if any, to be paid. Payments shall be made in Shares with any fractional Performance Share paid in cash. Unless otherwise determined by the
Committee, any Performance Shares with respect to which the Committee determines that the applicable Performance Goals or other conditions have not been met within the Performance Period shall be forfeited. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(d) Requirement of Employment.</B> If the Grantee has a Termination of Service during a Performance Period, or if other conditions
established by the Committee are not met, the Grantee&#146;s Performance Shares shall be forfeited. The Committee may, however, provide for complete or partial exceptions to this requirement. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(e) Restrictions on Transfer.</B> Rights to payments with respect to Performance Shares granted under the Plan shall not be subject in
any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, garnishment, levy, execution, or other legal or equitable process, either voluntary or involuntary; and any attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber, attach or garnish, or levy or execute on any right to benefits payable hereunder, shall be void. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(f) Limited Rights.</B> Performance Shares are solely a device for the measurement and
determination of the amounts to be paid to a Grantee under the Plan. Each Grantee&#146;s right in the Performance Shares is limited to the right to receive payment, if any, as may herein be provided. The Performance Shares do not constitute Shares
and shall not be treated as (or as giving rise to) property or as a trust fund of any kind; provided, however, that the Company may establish a bookkeeping reserve to meet its obligations hereunder or a trust or other funding vehicle that would not
cause the Plan to be deemed to be funded for tax purposes or for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended. The right of any Grantee of Performance Shares to receive payments by virtue of participation in
the Plan shall be no greater than the right of any unsecured general creditor of the Company. Nothing contained in the Plan shall be construed to give any Grantee any rights with respect to Shares or any ownership interest in the Company. No
provision of the Plan shall be interpreted to confer upon any Grantee any voting, dividend or derivative or other similar rights with respect to any Performance Share. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Section&nbsp;2.4 <U>Stock Appreciation Rights</U>. </B> </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(a) General Requirements.</B> All Employees, including Employees who are officers or members of the Board, and all Non-Employee
Directors, are eligible for a grant of Stock Appreciation Rights (&#147;SARs&#148;). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(b) Exercise Price.</B> The Committee
will establish the exercise price of the SAR at the time it is granted, which exercise price will be equal to the Fair Market Value of one Share. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(c) Exercisability. </B>A SAR shall be exercisable during the period specified by the Committee in the Grant Instrument and shall be
subject to such vesting and other restrictions as may be specified in the Grant Instrument. The Committee may accelerate the exercisability of any or all outstanding SARs at any time for any reason. SARs may only be exercised while the Grantee is an
Employee or a Non-Employee Director or during an applicable period after the Employee&#146;s or the Non-Employee Director&#146;s separation from service as specified in the Grant Instrument. No SAR may be exercised by an executive officer or
director of the Company or any of its subsidiaries who is subject to Section&nbsp;16 of the Exchange Act, except in accordance with Rule&nbsp;16b-3 under the Exchange Act.<B> </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(c) Value of SARs. </B>When a Grantee exercises a SAR, the Grantee shall receive in settlement of such SAR an amount equal to the
amount by which the Fair Market Value of a Share on the date of exercise of the SAR exceeds the exercise price of the SAR specified in the Grant Instrument. Such amount shall be payable in cash or in Shares at the discretion of the Committee.<B>
</B></FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>ARTICLE III </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>GENERAL
MATTERS </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Section&nbsp;3.1 <U>Withholding of Taxes</U>. </B> </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(a) Required Withholdings. </B>The Company shall be entitled to withhold from any payments or deemed payments any amount of tax
withholding (including all federal, state and local taxes) determined by the Committee to be required by law. Without limiting the generality of the foregoing, the Committee may, in its discretion, require the Grantee to pay the amount that the
Committee deems necessary to satisfy the Company&#146;s obligation to withhold federal, state or local income or other taxes incurred by reason of (i)&nbsp;the exercise of any Option, (ii)&nbsp;the lapsing of any restrictions applicable to any
Restricted Shares, (iii)&nbsp;the receipt of a payment in respect of Performance Shares, or (iv)&nbsp;any other applicable income recognition event (for example, an election under Section&nbsp;83(b) of the Code).
</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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Notwithstanding anything contained in the Plan to the contrary, the Grantee&#146;s satisfaction of any tax- withholding requirements imposed by the Committee shall be a condition precedent to the
Company&#146;s obligation as may otherwise be provided hereunder to provide Shares to the Grantee and to the release of any restrictions as may otherwise be provided hereunder, as applicable; and the applicable options, Restricted Shares or
Performance Shares shall be forfeited upon the failure of the Grantee to satisfy such requirements with respect to, as applicable, (i)&nbsp;the exercise of the option or (ii)&nbsp;the lapsing of restrictions on the Restricted Share (or other income
recognition event). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(b) Election to Withhold Shares.</B> If the Committee so permits, a Grantee may make a written
election to satisfy the Company&#146;s income tax withholding obligation with respect to an Option, Restricted Shares or Performance Shares by having Shares withheld by the Company from the Shares otherwise to be received, or to deliver previously
owned Shares (not subject to restrictions hereunder). The number of Shares so withheld or delivered shall have an aggregate Fair Market Value on the date of exercise sufficient to satisfy the applicable withholding taxes. Where the exercise of an
Incentive Stock Option does not give rise to an obligation by the Company to withhold federal, state or local income or other taxes on the date of exercise, but may give rise to such an obligation in the future, the Committee may, in its discretion,
make such arrangements and impose such restrictions as it deems necessary or appropriate. The election must be in a form and manner prescribed by the Committee and shall be subject to the prior approval of the Committee. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Section&nbsp;3.2 <U>Transferability of Grants</U>. </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(a) In General. </B>Except as provided in Section&nbsp;3.2(b), only the Grantee may exercise rights under a Grant during the
Grantee&#146;s lifetime. A Grantee may not transfer those rights except by will or by the laws of descent and distribution. When a Grantee dies, the personal representative or other person entitled to succeed to the rights of the Grantee
(&#147;Successor Grantee&#148;) may exercise such rights in accordance with the terms of the Plan. A Successor Grantee must furnish proof satisfactory to the Company of his or her right to receive the Grant under the Grantee&#146;s will or under the
applicable laws of descent and distribution. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(b) Transfer of Non-qualified Options.</B> Notwithstanding the foregoing, the
Committee may provide in a Grant Instrument that a Grantee may transfer Non-qualified Options to family members or other persons or entities according to such terms as the Committee may determine where the Committee determines that such
transferability does not result in accelerated federal income taxation; provided that the Grantee receives no consideration for the transfer of an Option and the transferred Option shall continue to be subject to the same terms and conditions as
were applicable to the Option immediately before the transfer. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Section&nbsp;3.3 <U>Reorganization or Change in Control of
the Company</U>. </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(a) Definitions. </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(i) As used herein, a &#147;Reorganization&#148; shall be deemed to have occurred if the shareholders of the Company
approve (or, if shareholder approval is not required, the Board approves) an agreement providing for (i)&nbsp;the merger or consolidation of the Company with another corporation where the shareholders of the Company, immediately prior to the merger
or consolidation, will not beneficially own, immediately after the merger or consolidation, Shares entitling such shareholders to more than 50% of all votes to which all shareholders of the surviving corporation would be entitled in the election of
directors (without consideration of the rights of any class of stock to elect directors by a separate class vote), (ii)&nbsp;the sale or other </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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disposition of all or substantially all of the assets of the Company, or (iii)&nbsp;a liquidation or dissolution of the Company. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(ii) As used herein, a &#147;Change of Control&#148; shall be deemed to have occurred if any &#147;person&#148; (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act) or any of its subsidiaries or affiliates becomes a &#147;beneficial owner&#148; (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company
representing a majority of the voting power of the then outstanding securities of the Company except where the acquisition is approved by the Board. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(b) Assumption of Grants. </B>Upon a Reorganization where the Company is not the surviving corporation (or survives only as a
subsidiary of another corporation), all outstanding Options that are not exercised shall be assumed by, or replaced with comparable options or rights by, the surviving corporation. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(c) Notice and Acceleration.</B> Upon a Reorganization or a Change of Control, (i)&nbsp;the Company shall provide each Grantee with
outstanding Grants written notice of such event and (ii)&nbsp;all outstanding Options shall automatically accelerate and become fully exercisable, (iii)&nbsp;the restrictions and conditions on all outstanding Restricted Shares shall immediately
lapse, and (iv)&nbsp;Grantees holding Performance Shares shall receive a payment in settlement of such Performance Shares, in an amount determined by the Committee, based on the Grantee&#146;s target payment for the Performance Period and the
portion of the Performance Period that precedes the Change of Control. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Section&nbsp;3.4 <U>Requirements for Issuance or
Transfer of Shares</U>. </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(a) Shareholder&#146;s Agreement.</B> The Committee may require that a Grantee execute a
shareholder&#146;s agreement with respect to any Shares distributed pursuant to the Plan. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(b) Limitations on Issuance or
Transfer of Shares.</B> No Shares shall be issued or transferred in connection with any Grant hereunder unless and until all legal requirements applicable to the issuance or transfer of such Shares have been complied with to the satisfaction of the
Committee. The Committee shall have the right to condition any Grant made to any Grantee hereunder on such Grantee&#146;s undertaking in writing to comply with such restrictions on his or her subsequent disposition of such Shares as the Committee
shall deem necessary or advisable as a result of any applicable law, regulation or official interpretation thereof, and certificates representing such Shares may be legended to reflect any such restrictions. Certificates representing Shares issued
or transferred under the Plan will be subject to such stop-transfer orders, registration and other restrictions as may be required by applicable laws, regulations and interpretations, including any requirement that a legend be placed thereon.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Section&nbsp;3.5 <U>Amendment and Termination of the Plan</U>. </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(a) Amendment.</B> If shareholder approval for any amendment to the Plan is required by any applicable law or regulation, the Board
may not make such amendment to the Plan without the approval of the shareholders. Otherwise, the Board may amend or terminate the Plan at any time. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(b) Termination of Plan.</B> The Plan shall terminate on the day immediately preceding the tenth anniversary of the Effective Date (as
defined below), unless the Plan is terminated earlier by the Board or is extended by the Board with the approval of the shareholders. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(c) Termination and Amendment of Outstanding Grants.</B> A termination or amendment of the Plan that occurs after a Grant is made
shall not materially impair the rights of a Grantee unless the </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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Grantee consents or unless the amendment is required in order to comply with applicable law. The termination of the Plan shall not impair the power and authority of the Committee with respect to
an outstanding Grant. Whether or not the Plan has terminated, an outstanding Grant may be terminated or amended in accord with the Plan or may be amended by agreement of the Company and the Grantee consistent with the Plan. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(d) Governing Document.</B> The Plan shall be the controlling document. No other statements, representations, explanatory materials or
examples, oral or written, may amend the Plan in any manner. The Plan shall be binding upon and enforceable against the Company and its successors and assigns. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Section&nbsp;3.6 <U>Miscellaneous</U>. </B> </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(a) Programs.</B> The Committee may adopt one or more programs not inconsistent with this Plan pursuant to which Grants may be made
under this Plan. Such programs shall be deemed merely programs of implementation of this Plan and shall not be deemed new plans. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(b) Funding of the Plan.</B> The Plan shall be unfunded. The Company shall not be required to establish any special or separate fund
or to make any other segregation of assets to assure the payment of any Grants under the Plan. In no event shall interest be paid or accrued on any Grant, including unpaid installments of Grants. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(c) Rights of Participants.</B> Nothing in the Plan shall entitle any Employee, Non-Employee Director, Key Advisor or other person to
any claim or right to be granted a Grant under the Plan. Neither the Plan nor any action taken under it shall be construed as giving any individual any rights to be retained by or in the employ of the Company or any other employment rights.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(d) No Fractional Shares.</B> No fractional Shares shall be issued or delivered pursuant to the Plan or any Grant. The
Committee shall determine whether cash, other awards or other property shall be issued or paid in lieu of such fractional Shares or whether such fractional Shares or any rights thereto shall be forfeited or otherwise eliminated. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(e) Section Headings.</B> Section headings are for reference only. In the event of a conflict between a title and the content of a
Section, the content of the Section shall control. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(f) Effective Date of the Plan. </B>Provided the Plan has been approved
by the Company&#146;s Board of Directors, the Plan shall be effective on the first business day immediately following the Plan&#146;s approval by the Shareholders of the Company (the &#147;Effective Date&#148;). </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(g) Deferred Compensation. </B>No deferral of compensation (as defined under Code Section&nbsp;409A or guidance thereto) is intended
under this Plan, except as provided in Section&nbsp;2.2(g). The Committee may permit deferrals of compensation pursuant to the terms of the Grant Agreement, a separate plan or a subplan which meets the requirements of Code Section&nbsp;409A and any
related guidance. Participants shall only be granted Awards under this Plan that meet the requirements of Code Section&nbsp;409A or qualify for an exemption under Code Section&nbsp;409A or any related guidance. If any participant receives an Award
that does not comply with Code Section&nbsp;409A or qualify for an exemption thereto, such Award shall be null and void and shall be deemed to have never been granted. Additionally, to the extent any Award is subject to Code Section&nbsp;409A,
notwithstanding any provision herein to the contrary, the Plan does not permit the acceleration of the time or schedule of any distribution related to such Award, except as permitted by Code Section&nbsp;409A, the regulations thereunder, and/or the
Secretary of the United States Treasury. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">11 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(h) Grants in Connection with Corporate Transactions and Otherwise.</B> Nothing contained
in the Plan shall be construed to (i)&nbsp;limit the right of the Committee to make Grants under the Plan in connection with the acquisition, by purchase, lease, merger, consolidation or otherwise, of the business or assets of any corporation, firm
or association, including Grants to employees thereof who become Employees or for other proper corporate purposes, or (ii)&nbsp;limit the right of the Company to grant stock options or make other awards outside of the Plan. Without limiting the
foregoing, the Committee may make a Grant to an employee of another corporation who becomes an Employee by reason of a corporate merger, consolidation, acquisition of stock or property, reorganization or liquidation involving the Company or any of
its subsidiaries in substitution for a stock option grant made to such employee by such corporation. The terms and conditions of the substitute grants may vary from the terms and conditions required by the Plan and from those of the substituted
stock incentives. The Committee shall prescribe the provisions of the substitute grants. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(i) Compliance with Law.</B> The
Plan, the exercise of Options and the obligations of the Company to issue or transfer Shares under Grants shall be subject to all applicable laws and to approvals by any governmental or regulatory agency as may be required. With respect to persons
subject to Section&nbsp;16 of the Exchange Act, it is the intent of the Company that the Plan and all transactions under the Plan comply with all applicable provisions of Rule 16b-3 or its successors under the Exchange Act. The Committee may revoke
any Grant if it is contrary to law or modify a Grant to bring it into compliance with any valid and mandatory government regulation. The Committee may, in its sole discretion, agree to limit its authority under this Section. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(j) Successors.</B> All obligations of the Company under the Plan with respect to awards granted under it shall be binding on any
successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation or otherwise, of all or substantially all of the business or assets of the Company. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(k) Governing Law.</B> The validity, construction, interpretation and effect of the Plan and Grant Instruments issued under the Plan
shall exclusively be governed by and determined in accordance with the law of the State of Delaware. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(l) Transition
Provisions Relating to the Prior Plans.</B> Upon the Effective Date of the Plan, the Company&#146;s 2004 Equity Compensation Plan (as amended, the &#147;2004 Plan&#148;), 2005 Non-Employee Director Restricted Stock Plan (as amended, the &#147;2005
Plan&#148;) and Amended and Restated 2006 Stock Appreciation Rights Plan (the &#147;2006 Plan) shall be terminated subject to the provisions of Section&nbsp;3.5(c) of the 2004 Plan, Section&nbsp;3.2 of the 2005 Plan and Section&nbsp;3.1 of the 2006
Plan, each relating to the post-termination effectiveness of grants under the 2004 Plan, the 2005 Plan and the 2006 Plan, respectively. The Plan shall not be deemed an amendment or restatement of the 2004 Plan, the 2005 Plan or the 2006 Plan.
Nothing in the Plan shall be deemed to impair the rights of or give any new or additional rights to any person who received grants under the 2004 Plan, the 2005 Plan or the 2006 Plan. </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">12 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>NANOPHASE TECHNOLOGIES CORPORATION </B></FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="47%"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>PROXY</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>PROXY</B></FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>NANOPHASE
TECHNOLOGIES CORPORATION </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>1319 MARQUETTE DRIVE </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>ROMEOVILLE, ILLINOIS 60446 </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>TO BE HELD ON AUGUST 23, 2010 </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">The undersigned stockholder(s) hereby appoints Jess Jankowski with full power of substitution, as attorney and proxy for, and in the name and place of,
the undersigned, and hereby authorizes Mr.&nbsp;Jankowski to represent and to vote all of the shares which the undersigned is entitled to vote at the Annual Meeting of Stockholders of Nanophase Technologies Corporation to be held at Nanophase
Technologies Corporation, 1319 Marquette Drive, Romeoville, Illinois, 60446, on Monday, August&nbsp;23, 2010 at 10:00 a.m., Chicago time, and at any adjournments thereof, upon the matters as set forth in the Notice of Annual Meeting of Stockholders
and Proxy Statement, receipt of which is hereby acknowledged. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">THIS PROXY, WHEN PROPERLY EXECUTED AND RETURNED IN A TIMELY MANNER, WILL BE
VOTED AT THE ANNUAL MEETING AND AT ANY ADJOURNMENTS THEREOF IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO CONTRARY INDICATION IS MADE, THE PROXY WILL BE VOTED FOR NOMINEES LISTED IN PROPOSAL&nbsp;1, FOR PROPOSAL 2, FOR
PROPOSAL 3, AND FOR PROPOSAL 4, AND IN ACCORDANCE WITH THE JUDGMENT OF THE PERSONS NAMED AS PROXIES HEREIN ON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">(continued, and to be signed and dated, on reverse side) </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>

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<TR>
<TD HEIGHT="16" STYLE="BORDER-TOP:1px solid #000000">&nbsp;</TD>
<TD HEIGHT="16" COLSPAN="2" STYLE="BORDER-TOP:1px solid #000000">&nbsp;</TD>
<TD HEIGHT="16" COLSPAN="2" STYLE="BORDER-TOP:1px solid #000000">&nbsp;</TD></TR>
<TR>
<TD VALIGN="top" ALIGN="right"> <P STYLE="margin-left:1.00em; text-indent:-1.00em" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><FONT STYLE="FONT-FAMILY:WINGDINGS 3">&#104;</FONT><B></B></B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B></B><B><I>FOLD AND DETACH HERE</I></B><B></B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><FONT STYLE="FONT-FAMILY:WINGDINGS 3">&#104;</FONT><B></B></B></FONT></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>NANOPHASE TECHNOLOGIES CORPORATION </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="42%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="56%"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">PLEASE MARK VOTE IN OVAL IN THE</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:1px; margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">FOLLOWING&nbsp;MANNER&nbsp;USING&nbsp;DARK&nbsp;INK&nbsp;ONLY.&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P></TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#120;</FONT></FONT></TD></TR></TABLE>

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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR NOMINEES LISTED IN PROPOSALS 1,2,3, AND FOR
PROPOSAL 4. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">1.</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">ELECTION OF CLASS&nbsp;I DIRECTORS. </FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="31%"></TD>
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<TD WIDTH="67%"></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">For nominees listed below</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Withhold authority to vote</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">(except as marked to the contrary below)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR THE INDIVIDUAL NOMINEES, STRIKE A LINE THROUGH THE NOMINEE'S NAME BELOW) </I></B>
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">James A. Henderson </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">James A. McClung, Ph.D. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">R. Janet Whitmore </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">2.</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">PROPOSAL TO APPROVE THE AMENDMENT TO THE COMPANY&#146;S CERTIFICATE OF INCORPORATION AND INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK TO 35 MILLION SHARES.
</FONT></TD></TR></TABLE> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="9%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="44%"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">FOR</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT></TD></TR>
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<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">AGAINST</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">ABSTAIN</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT></TD></TR></TABLE> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">3.</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">PROPOSAL TO APPROVE THE ADOPTION OF THE 2010 EQUITY COMPENSATION PLAN. </FONT></TD></TR></TABLE> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="45%"></TD>
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<TD WIDTH="9%"></TD>
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<TD WIDTH="44%"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">FOR</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">AGAINST</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">ABSTAIN</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT></TD></TR></TABLE>

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<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">4.</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">PROPOSAL TO RATIFY THE APPOINTMENT OF McGLADREY&nbsp;&amp; PULLEN, LLP AS THE INDEPENDENT AUDITORS OF THE COMPANY&#146;S FINANCIAL STATEMENTS FOR THE YEAR ENDED
DECEMBER 31, 2010. </FONT></TD></TR></TABLE> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="44%"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">FOR</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">AGAINST</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">ABSTAIN</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT></TD></TR></TABLE> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">EACH OF THE PERSONS NAMED AS PROXIES HEREIN ARE AUTHORIZED, IN SUCH PERSON&#146;S DISCRETION, TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL
MEETING, OR ANY ADJOURNMENTS THEREOF. </FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Date:
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>, 2010 </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><DIV ALIGN="right">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0">

<TR>
<TD WIDTH="100%"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></P></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">Signature</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Signature (if held jointly)</FONT></P></TD></TR></TABLE></DIV>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Please date this Proxy and sign it exactly as your name(s) appears hereon. </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">When shares are held by joint tenants, both should sign. When signing as an attorney, executor, administrator, trustee, guardian or other fiduciary,
please indicate your capacity. If you sign for a corporation, please print full corporate name and indicate capacity of duly authorized officer executing on behalf of the corporation. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">If you sign for a partnership, please print full partnership name and indicate capacity of duly authorized person executing on behalf of the partnership.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>PLEASE VOTE, SIGN EXACTLY AS NAME APPEARS ABOVE, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
</I></B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
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<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="32%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="31%"></TD></TR>
<TR>
<TD HEIGHT="16" STYLE="BORDER-TOP:1px solid #000000">&nbsp;</TD>
<TD HEIGHT="16" COLSPAN="2" STYLE="BORDER-TOP:1px solid #000000">&nbsp;</TD>
<TD HEIGHT="16" COLSPAN="2" STYLE="BORDER-TOP:1px solid #000000">&nbsp;</TD></TR>
<TR>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><FONT STYLE="FONT-FAMILY:WINGDINGS 3">&#104;</FONT><B></B></B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>FOLD AND DETACH HERE</I></B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><FONT STYLE="FONT-FAMILY:WINGDINGS 3">&#104;</FONT><B></B></B></FONT></TD></TR></TABLE>
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`
end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
