-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, C8gCD1cMXW2pLnhwm1KOKsBCqsgmvbHoEfjLaBucMorIsq/E4/NBAm9/3ySjHMpP b3P/876Lqh4i6yg2kBihkQ== 0000950137-00-001816.txt : 20000424 0000950137-00-001816.hdr.sgml : 20000424 ACCESSION NUMBER: 0000950137-00-001816 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000525 FILED AS OF DATE: 20000421 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: SEC FILE NUMBER: 000-22333 FILM NUMBER: 606598 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 DEF 14A 1 SCHEDULE 14A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 14A PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934 Filed by the Registrant [X] Filed by a Party other than the Registrant [ ] Check the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [X] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12 NANOPHASE TECHNOLOGIES CORPORATION - -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of filing fee (Check the appropriate box): [X] No fee required [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. 1) Title of each class of securities to which transaction applies: - -------------------------------------------------------------------------------- 2) Aggregate number of securities to which transaction applies: - -------------------------------------------------------------------------------- 3) 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): - -------------------------------------------------------------------------------- 4) Proposed maximum aggregate value of transaction: - -------------------------------------------------------------------------------- 5) Total fee paid: - -------------------------------------------------------------------------------- [ ] Fee paid previously with preliminary materials. - -------------------------------------------------------------------------------- [ ] 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. 1) Amount Previously Paid: - -------------------------------------------------------------------------------- 2) Form, Schedule or Registration Statement No.: - -------------------------------------------------------------------------------- 3) Filing Party: - -------------------------------------------------------------------------------- 4) Date Filed: - -------------------------------------------------------------------------------- 2 NANOPHASE LOGO 453 COMMERCE STREET BURR RIDGE, ILLINOIS 60521 April 21, 2000 Dear Stockholder: On behalf of the Board of Directors, I cordially invite you to attend the 2000 Annual Meeting of Stockholders of Nanophase Technologies Corporation to be held at Ashton Place, 341 West 75th Street, Willowbrook, Illinois, on Thursday, May 25, 2000 at 9:00 a.m., local time. The formal notice of the Annual Meeting appears on the following page. The attached Notice of Annual Meeting and Proxy Statement describe the matters that we expect to be acted upon at the Annual Meeting. Immediately after the Annual Meeting, stockholders will be able to view a presentation by the Company and have the opportunity to ask questions. Whether or not you plan to attend the Annual Meeting, it is important that your shares be represented. Regardless of the number of shares you own, please sign and date the enclosed 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. We look forward to seeing you on May 25, 2000 and urge you to return your proxy card as soon as possible. Sincerely, /s/ Joseph E. Cross JOSEPH E. CROSS President and Chief Executive Officer 3 NANOPHASE LOGO ------------------------------------------------------------------------------ NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 25, 2000 ------------------------------------------------------------------------------ To the Stockholders of Nanophase Technologies Corporation: The Annual Meeting of Stockholders of Nanophase Technologies Corporation (the "Company") will be held at 9:00 a.m., Chicago time, on Thursday, May 25, 2000, at Ashton Place, 341 West 75th Street, Willowbrook, Illinois, for the following purposes: (1) To elect two Class III directors to the Company's Board of Directors; (2) To ratify the appointment by the Board of Directors of Ernst & Young LLP as the independent auditors of the Company's financial statements for the year ended December 31, 2000; and (3) To transact such other business as may properly come before the meeting or any adjournments thereof. The foregoing items of business are more fully described in the accompanying Proxy Statement. The Board of Directors has fixed the close of business on March 27, 2000 as the record date for determining stockholders entitled to notice of, and to vote at, the Annual Meeting. By Order of the Board of Directors, JESS JANKOWSKI Secretary Burr Ridge, Illinois April 21, 2000 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 COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE PAID ENVELOPE FURNISHED FOR THAT PURPOSE. 4 NANOPHASE TECHNOLOGIES CORPORATION 453 COMMERCE STREET BURR RIDGE, ILLINOIS 60521 (630) 323-1200 --------------------- PROXY STATEMENT --------------------- The accompanying proxy is solicited by the Board of Directors (the "Board of Directors") of Nanophase Technologies Corporation, a Delaware corporation (the "Company"), for use at the Annual Meeting of Stockholders (the "Annual Meeting") to be held at 9:00 a.m., Chicago time, Thursday, May 25, 2000, at Ashton Place, 341 West 75th Street, Willowbrook, Illinois, and any adjournments thereof. This Proxy Statement and accompanying form of proxy are first being mailed to stockholders on or about April 21, 2000. RECORD DATE AND OUTSTANDING SHARES -- The Board of Directors has fixed the close of business on March 27, 2000, as the record date (the "Record Date") 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 13,449,293 shares of Common Stock, par value $.01 per share (the "Common Stock"). Each outstanding share of Common Stock is entitled to one vote on all matters to come before the Annual Meeting. VOTING OF PROXIES -- Joseph E. Cross and Jess Jankowski, the persons named as proxies on the proxy card accompanying this Proxy Statement, were selected by the Board of Directors to serve in such capacity. Messrs. Cross and Jankowski are executive officers of the Company and Mr. Cross 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) an instrument revoking the proxy or (2) a duly executed proxy bearing a later date. Additionally, a stockholder may change or revoke a previously executed proxy by voting in person at the Annual Meeting (attendance at the Annual Meeting will not, by itself, revoke a proxy). REQUIRED VOTE -- 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 III directors. The affirmative vote of a majority of the shares of Common Stock represented in person or by proxy is required to ratify the appointment of Ernst & Young LLP as the independent auditors of the Company's financial statements for the year ended December 31, 2000. Stockholders will not be allowed to cumulate their votes in the election of directors. QUORUM; ABSTENTIONS AND BROKER NON-VOTES -- 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 ratifying the appointment of the Company's independent auditors and will have the same effect as votes "against" such proposal. Broker non-votes will not be considered present and entitled to vote with respect to ratifying the appointment of the Company's independent auditors and will have no effect on such proposal. ANNUAL REPORT TO STOCKHOLDERS -- The Company's Annual Report to Stockholders for the year ended December 31, 1999, containing financial and other information pertaining to the Company, is being furnished to stockholders simultaneously with this Proxy Statement. 5 PROPOSAL 1 ELECTION OF DIRECTORS The Company's Board of Directors currently consists of six directors. Article VI of the Company'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, two directors of Class III will be elected for a term of three years expiring at the Company's 2003 Annual Meeting of Stockholders. Both of the nominees are presently serving as directors of the Company. See "Nominees" below. The four directors whose terms of office do not expire in 2000 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 "Other Directors" below. If at the time of the Annual Meeting any of the nominees should be unable or decline to serve, the persons named in the proxy will vote for such substitute nominee or nominees 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 any nominee will be unable or decline to serve as a director if elected. NOMINEES The names of the nominees for the office of director, together with certain information concerning such nominees, are set forth below:
SERVED AS DIRECTOR NAME SINCE AGE POSITION WITH COMPANY ---- --------- --- --------------------- Jerry K. Pearlman.......................... 1999 61 Director Donald S. Perkins.......................... 1998 73 Chairman of the Board of Directors
MR. PEARLMAN has served as a director of the Company since April 1999. Mr. 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. Pearlman is a director of Smurfit Stone Container Corporation, Ryerson-Tull, Inc., Parson Group LLC, and the Bernard van Leer Foundation. He is a trustee of Northwestern University where he is vice chairman of the capital campaign and a director and past chairman of the board of Evanston Northwestern Healthcare. Mr. Pearlman graduated from Princeton with honors from the Woodrow Wilson School and from Harvard Business School with highest honors. MR. PERKINS has served as a director of the Company since February 1998. Mr. 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 Aon Corporation, LaSalle Hotel Properties and Luminant Worldwide. For more than 30 years, he has served on corporate boards including AT&T, Cummins Engine Company, Kmart Corporation, Lucent Technologies, Inc., and Time-Warner, Inc. Mr. Perkins is a trustee and Vice Chairman of the Board of Trustees of Northwestern University. Mr. Perkins holds a B.A. degree from Yale University and an M.B.A. degree from the Harvard Graduate School of Business Administration. THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR BOTH OF THE NOMINEES FOR ELECTION AS CLASS III DIRECTORS. 2 6 OTHER DIRECTORS 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.
SERVED AS TERM NAME AGE POSITION WITH COMPANY DIRECTOR SINCE EXPIRES ---- --- --------------------- -------------- ------- Joseph S. Cross................... 52 President, Chief Executive Officer 1998 2002 Edward E. Hagenlocker, Ph.D....... 60 Director 1999 2001 James A. McClung, Ph.D............ 62 Director 2000 2001 Richard W. Siegel, Ph.D........... 62 Director 1989 2002
MR. CROSS has served as Chief Executive Officer of the Company since December 1998 and President and a director of the Company since joining the Company in November 1998. From November 1998 to December 1998, Mr. Cross served as the Company's Chief Operating Officer. Prior to joining the Company in November 1998, Mr. Cross served as President and Chief Executive Officer of Aptech, a manufacturer of measurement, metering and control devices for the electric utility market, from August 1996 to October 1998. From December 1993 to July 1996, Mr. Cross served as President of Aegis Technologies, a telecommunications company. He holds a BS degree from Southwest Missouri University and attended graduate school at Southwest Missouri University. DR. HAGENLOCKER has served as a director of the Company since April 1999. Dr. Hagenlocker served as vice chairman of Ford Motor Company from November 1996 to January 1999 and chairman of Visteon, an automotive systems enterprise, from September 1997 to January 1999. Dr. Hagenlocker served in various other capacities after joining Ford as a research scientist in 1964, including Executive Vice President of Ford North American Automotive Operations from January 1993 to May 1994, President of Ford Automotive Operations from May 1994 to November 1996 and Chairman, Ford of Europe from August 1996 to November 1996. Dr. Hagenlocker is a director of Boise Cascade Corporation, Amerisource Corporation, and Air Products and Chemicals. Dr. Hagenlocker earned B.S. and M.S. degrees in engineering physics from Ohio State University, an M.B.A. degree from Michigan State University and a Ph.D. in physics from Ohio State University. MR. MCCLUNG has served as a director of the Company since February 2000. He is currently a senior vice president of FMC Corporation, a leading producer of chemicals and machinery for industry and agriculture. At FMC he has managed machinery operations in the United States, Africa and Europe. After living outside the United States for over seven years, he returned in 1978 to assume the responsibility for FMC's largest chemical operation. In 1981 he was appointed vice president international. In his current position, Mr. McClung is FMC's global executive with over 25 years of international business experience and the responsibility for worldwide marketing as well as international development and government affairs. Mr. McClung serves on the boards of directors of Turtle Wax, and William Kent International. He also serves as a board member of: Thunderbird, The American Graduate School of International Management (Glendale, Arizona); College of Wooster (Ohio); U.S.-Russia Business Council (Washington, D.C.); Japan American Society; Ravinia International Festival of the Arts; and the Mid-America Club. In addition, Mr. McClung is a member of the Economic Club, Chicago Council on Foreign Relations, Executive Club, and the Mid-America Committee for International Business and Government Cooperation. Mr. McClung earned a B.S. degree from the College of Wooster, an M.S. from the University of Kansas and a Ph.D. from Michigan State University. DR. SIEGEL is a co-founder of the Company and has served as a director of the Company since 1989. Dr. Siegel also has served as a consultant to the Company since 1990 with regard to the application and commercialization of nanocrystalline materials. Dr. Siegel is an internationally renowned scientist in the field of nanocrystalline materials. 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's physical-vapor-synthesis production system. He currently is the Robert W. Hunt Professor and Head of the Materials Science and Engineering Department of Rensselaer 3 7 Polytechnic Institute, a position he has held since June 1995. During 1995, he was also a visiting professor at the Max Planck Institute for Microstructure Physics in Germany on an Alexander von Humboldt Research Prize. He 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. Dr. 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. DIRECTOR COMPENSATION -- 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 "Outside Director") is granted, pursuant to the Company's Amended and Restated 1992 Stock Option Plan, as amended (the "Stock Option Plan"), stock options to purchase 10,000 shares of Common Stock at the fair market value of the Common Stock, as determined by a committee appointed by the Board of Directors, as of the date of issuance of such stock options. On the date of each annual meeting of the stockholders of the Company, each Outside Director who is re-elected or continues to serve as a director because his or her term has not expired is granted stock options to purchase 2,000 shares of Common Stock pursuant to the Stock Option Plan; provided that no such automatic grant is made to an Outside Director who was first elected to the Board of Directors within three months prior to such annual meeting. The options granted to Outside Directors under the Stock Option Plan vest in three equal annual installments beginning on the first anniversary of the date of grant. All options granted under the Stock Option Plan to Outside Directors expire ten years from the date of grant. Effective January 1, 2000, the Company granted 3,177 shares of common stock to each of Donald Perkins, Richard Siegel, Jerry Pearlman and Edward Hagenlocker. The Company also agreed to issue a cash payment of $10,000 to reimburse these Directors for personal income tax liabilities relating to this grant of common shares. In addition the Company entered into a consulting agreement dated March 1, 2000 with Richard Siegel, Ph.D. pursuant to which the Company pays Mr. Siegel $2,000 per month for consulting services over a twelve-month term. This agreement is renewable for successive twelve-month terms or may be terminated by either party under conditions defined in the agreement. All Outside Directors are reimbursed for their reasonable out-of-pocket expenses incurred in attending board and committee meetings. MEETINGS -- During the year ended December 31, 1999, the Board of Directors held ten formal meetings. Each of the Company's current directors attended at least 75% of the aggregate of the number of board meetings held (during the period in which he was a director) and the total number of committee meetings on which he served that were held (during the period in which he was a member of such committee) during 1999. COMMITTEES OF THE BOARD OF DIRECTORS -- The Board of Directors has established an Audit and Finance Committee and a Compensation and Governance Committee, each comprised entirely of directors who are not officers or employees of the Company. The members of the Audit and Finance Committee are Mr. Hagenlocker (Chairman), Mr. Pearlman and Mr. Perkins. The members of the Compensation and Governance Committee are Mr. Pearlman (Chairman), Mr. Hagenlocker and Mr. Perkins. The Company does not have a standing nominating committee. The Audit and Finance Committee generally has responsibility for recommending independent public auditors to the Board of Directors for selection, reviewing the plan and scope of the accountants' annual audit, reviewing the Company'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 two formal meetings in 1999. The Compensation and Governance Committee generally has responsibility for recommending to the Board of Directors guidelines and standards relating to the determination of executive and key employee compensation, reviewing the Company's executive compensation policies and reporting to the Board of Directors regarding the foregoing. The Compensation and Governance Committee also has responsibility for administering the Stock Option Plan, determining the number of options, if any, to be granted to the 4 8 Company's employees and consultants pursuant to the Stock Option Plan and reporting to the Board of Directors regarding the foregoing. The Compensation and Governance Committee held 3 formal meetings in 1999. See "Report of the Compensation and Governance Committee of the Board of Directors." EXECUTIVE OFFICERS The table below identifies executive officers of the Company who are not identified in the tables entitled "Election of Directors -- Nominees" or " -- Other Directors."
NAME AGE POSITION ---- --- -------- Jess Jankowski............................... 34 Acting Chief Financial Officer, Corporate Controller, Secretary and Treasurer Gina R. Kritchevsky, Ph.D. .................. 46 Vice President -- Technology and Engineering Daniel S. Bilicki............................ 56 Vice President -- Sales and Marketing Richard W. Brotzman, Ph.D. .................. 46 Vice President -- Research and Development Donald J. Freed, Ph.D. ...................... 58 Vice President -- Business Development
MR. JANKOWSKI has served as Controller of the Company since joining in 1995. He was elected Secretary and Treasurer in November 1999. From 1990-1995 he served as Controller for two building contractors in the Chicago area. Mr. Jankowski holds a BS in accountancy from Northern Illinois University, an MBA from Loyola University, and received his certified public accountant certificate from the State of Illinois. DR. KRITCHEVSKY has served as Vice President -- Technology and Engineering of the Company since joining the Company in February 1999. From June 1998 to February 1999, Dr. Kritchevsky provided consulting services to companies in a variety of markets, including electronics packaging and liquid crystal display technology. From January 1997 to May 1998, Dr. Kritchevsky was Vice President of Strategic Initiatives for Donnelly Optics Corporation, an optics company. From 1989 to January 1997, Dr. Kritchevsky served in various positions with Donnelly Corporation, an automotive supplier, including Director of Corporate New Business Development. She holds a B.S. degree in chemistry and a Ph.D. in material sciences and engineering from MIT. MR. BILICKI has served as Vice President -- Sales and Marketing of the Company since joining the Company in March 1999. From January 1996 until March 1999, Mr. Bilicki served as President/Director of PT Crosfield Indonesia in Jakarta, Indonesia, a subsidiary of Crosfield Company, which is a global chemical company. From January 1994 to December 1995, Mr. Bilicki held the position of President/Director North America of Crosfield Company. He holds a B.S. degree from Indiana Institute of Technology and an M.B.A. degree from Winthrop University. DR. BROTZMAN joined the Company in July 1994 as a senior scientist and has served as Vice President -- Research and Development of the Company since July 1996. He is the inventor of the Company's coating technology. Dr. Brotzman has 15 years experience in research and development of advanced materials leading to new products. His technical areas of expertise include interfacial adhesion and chemistry, self-assembled polymeric coatings, nanosized inorganic powders, powder processing, reactive coupling agents, solgel derived protective coatings, non-destructive evaluation of composites, neo-debye relaxation in green inorganic gels, asymmetric membranes and plasma processing. From January 1991 to July 1994, Dr. Brotzman served as Director of Research at TPL, Inc., an advanced materials company. He holds a B.S. degree in chemical engineering from Lafayette College, an M.S. degree in engineering and applied science from the University of California, Davis and a Ph.D. in chemistry from the University of Washington. DR. FREED joined the Company in April 1995 as Vice President -- Marketing and has served as Vice President -- Business Development of the Company since June 1998. He has extensive experience in the commercial development of new technology products, and has been responsible for the successful startup of advanced-materials initiatives in three Fortune 50 companies. From 1985 to April 1995, Dr. Freed held senior marketing, strategic planning and product-development positions with AMP, Inc., and certain of its 5 9 subsidiaries, primarily in the development and marketing of advanced materials for microelectronics and photonics. From 1980 to 1985, he held similar positions with GTE Corp. and Imperial Chemical Industries, PLC. Previously, Dr. Freed held various scientific and managerial positions at Bell Laboratories. He holds a B.A. degree in chemistry from Queens College and an A.M. degree and Ph.D. in chemistry from Harvard University. Dr. Freed is a member of The Illinois Coalition and is past chairman of the International Standards Council for Electronic Interconnection and Packaging Technologies. The Board of Directors elects executive officers annually and such executive officers, subject to the terms of certain employment agreements, serve at the discretion of the Board of Directors. Messrs. Cross, Jankowski, Bilicki and Drs. Freed and Kritchevsky each have employment agreements with the Company. See "Executive Compensation -- Employment and Consulting Agreements." There are no family relationships among any of the directors or officers of the Company. SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE -- Section 16 of the Securities Exchange Act of 1934, as amended (the "1934 Act"), requires the Company's officers (as defined under Section 16), directors and persons who beneficially own greater than 10% of a registered class of the Company'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 1999 all Section 16 filing requirements applicable to its officers, directors and 10% beneficial owners were complied with by such persons. 6 10 EXECUTIVE COMPENSATION The following table provides information concerning the annual and long-term compensation for services in all capacities to the Company for the years ended December 31, 1999, 1998 and 1997 of those persons who were (i) during 1999, the chief executive officer of the Company, (ii) at December 31, 1999, the four other most highly compensated (based upon combined salary and bonus) executive officers of the Company whose total salary and bonus exceeded $100,000 during 1999, and (iii) two additional individuals for whom disclosures would have been provided but for the fact that the individual was not serving as an executive officer of the Company at December 31, 1999 (collectively, the "Named Officers"). SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION ------------ AWARDS(1) ANNUAL COMPENSATION ------------ ------------------------------------------ SECURITIES OTHER ANNUAL UNDERLYING ALL OTHER NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS(1) COMPENSATION($) --------------------------- ---- --------- -------- --------------- ---------- --------------- Joseph E. Cross(2).............. 1999 $216,538 $ 0 $120,188(3) 100,000 $71,157(4) President and Chief 1998 29,487 0 14,111(5) 100,000 36,450(6) Executive Officer Gina R. Kritchevsky, Ph.D.(7)... 1999 $142,789 $ 0 $ 51,370(8) 100,000 $ 0 Vice President Technology and Engineering Daniel S. Bilicki(9)............ 1999 $130,096 $ 0 $ 0 100,000 $ 0 Vice President Sales and Marketing Donald J. Freed, Ph.D........... 1999 $126,154 $ 0 $ 0 10,000 $ 0 Vice President Business 1998 120,753 0 0 27,572 0 Development 1997 112,806 35,000 0 0 0 Richard Brotzman, Ph.D.......... 1999 $126,154 $ 6,000 $ 0 15,000 $ 0 Vice President Research and 1998 119,721 0 0 40,600 0 Development 1997 109,779 0 0 0 0 Dennis J. Nowak(10)............. 1999 $114,035 $ 0 $ 85,000(11) 0 $ 0 Vice President Finance and 1998 159,258 0 0 43,500 0 Administration, Chief 1997 178,037(12) 35,000 0 0 0 Financial Officer, Treasurer and Secretary
- --------------- (1) With the exception of 24,500 shares of stock granted to Joseph Cross in August of 1999 (see note 4), none of the Named Officers had any restricted stock holdings as of December 31, 1999. (2) Joseph E. Cross commenced employment as the President and Chief Operating Officer of the Company in November 1998 and became its Chief Executive Officer in December 1998. (3) Includes $50,571 paid for lodging in Burr Ridge, Illinois, $35,085 paid for airfare to and from Chicago, Illinois, and $26,820 in payments related to use of a car,. These expenses were incurred evenly throughout 1999. All amounts have been "grossed-up" significantly to compensate Mr. Cross for personal income tax liabilities associated with the reimbursement of these expenses. (4) Represents compensation relating to the grant of 24,500 shares of unregistered common stock to Mr. Cross in August of 1999. This amount has been "grossed-up" to compensate Mr. Cross for personal income tax liabilities associated with the grant of these shares. (5) Includes $8,602 paid for airfare to and from Chicago, Illinois. (6) Represents a one-time payment to Mr. Cross for the preparation of his residence for sale in connection with his intended move to the greater Chicago metropolitan area. (7) Dr. Kritchevsky's employment with the Company commenced on February 15, 1999. 7 11 (8) Includes $25,000 paid at signing of her employment agreement and $13,082 paid for lodging in Burr Ridge, Illinois. All amounts other than the $25,000 paid at the signing of her employment agreement have been "grossed-up" to compensate Dr. Kritchevsky for personal income tax liabilities associated with the reimbursement of these expenses. (9) Mr. Bilicki's employment commenced with the Company on March 15, 1999. (10) Mr. Nowak's employment terminated pursuant to a Consulting Agreement dated June 25, 1999. (11) Represents payments made to Mr. Nowak in 1999 pursuant to the Consulting Agreement mentioned in Note 10 above. (12) Includes a lump sum payment of $35,000 paid to Mr. Nowak in September 1997 in consideration of him still being employed by the Company at such time. OPTION GRANTS IN 1999 -- The following table provides information on grants of stock options to the Named Officers during 1999. No stock appreciation rights were granted to the Named Officers during 1999. OPTION GRANTS IN 1999
INDIVIDUAL GRANTS POTENTIAL REALIZABLE ---------------------------------------- VALUE AT ASSUMED NUMBER OF PERCENT OF ANNUAL RATES OF STOCK SECURITIES TOTAL OPTIONS EXERCISE PRICE APPRECIATION FOR UNDERLYING GRANTED TO OR BASE OPTION TERM(2) OPTIONS EMPLOYEES IN PRICE EXPIRATION ----------------------- NAME GRANTED(#)(1) FISCAL YEAR ($/SH) DATE 5%($) 10%($) ---- ------------- ------------- -------- ---------- ---------- ---------- Joseph E. Cross................. 50,000 12.59% $2.1875 1/4/09 $ 68,785 $174,316 50,000 12.59% $1.7500 7/27/09 $ 55,028 $139,452 Gina R. Kritchevsky, Ph.D....... 75,000 18.88% $2.8125 2/15/09 $132,657 $336,180 25,000 6.30% $1.7500 7/27/09 $ 27,514 $ 69,726 Daniel S. Bilicki............... 50,000 12.59% $2.3750 3/15/09 $ 74,681 $189,257 50,000 12.59% $1.7500 7/27/09 $ 55,028 $139,452 Donald J. Freed, Ph.D........... 10,000 2.52% $1.7500 7/27/09 $ 11,006 $ 27,890 Richard W. Brotzman, Ph.D....... 15,000 3.78% $1.7500 7/27/09 $ 16,508 $ 41,836
- --------------- (1) These options are all non-qualified stock options. Subject to certain restrictions, these options become exercisable in five or three (7/27/99 grant) equal annual installments, beginning on the first anniversary of the date of grant. These options expire ten years from their date of grant. (2) Potential realizable value is presented net of the option exercise price but before any federal or state income taxes associated with exercise. These amounts represent certain assumed rates of appreciation only. Actual gains will be dependent on the future performance of the Common Stock and the option holder's continued employment through the vesting period. The amounts reflected in the table may not necessarily be achieved. 8 12 AGGREGATED OPTION EXERCISES IN 1999 AND YEAR-END 1999 OPTION VALUES -- The following table provides information regarding each of the Named Officers' option exercises in 1999 and unexercised options at December 31, 1999. YEAR-END 1999 OPTION VALUES
NUMBER OF VALUE OF SECURITIES UNDERLYING UNEXERCISED IN-THE-MONEY UNEXERCISED OPTIONS AT OPTIONS AT SHARES YEAR-END 1999(#) YEAR-END 1999($)(1) ACQUIRED ON VALUE --------------------------- --------------------------- NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE ---- ----------- ----------- ----------- ------------- ----------- ------------- Joseph E. Cross.............. 0 $ 0 20,000 180,000 $ 38,750 $445,625 Gina R. Kritchevsky, Ph.D.... 0 $ 0 0 100,000 $ 0 $232,813 Daniel S. Bilicki............ 0 $ 0 0 100,000 $ 0 $281,250 Donald J. Freed, Ph.D........ 0 $ 0 59,049 82,743 $118,808 $144,816 Richard W. Brotzman, Ph.D.... 0 $ 0 91,700 111,545 $235,036 $207,246 Dennis J. Nowak.............. 0 $ 0 72,206 87,094 $ 72,051 $ 88,694
- --------------- (1) The value per option is calculated by subtracting the exercise price per option from the closing price of the Common Stock on the Nasdaq National Market on December 31, 1999, which was $4.875. EMPLOYMENT AND CONSULTING AGREEMENTS The Company entered into an employment agreement with Joseph E. Cross dated November 9, 1999 which provides for an annual base salary of not less than $220,000. In addition, Mr. Cross will receive a lump sum payment of $50,000 on the first anniversary of the commencement of this agreement if he is employed by the Company at such time. The Company also granted to Mr. Cross options to purchase up to 100,000 shares of Common Stock at an exercise price of $2.9375 per share and options to purchase up to 50,000 shares of Common Stock at an exercise price of $2.1875, with options for one-fifth of such shares becoming exercisable on each of the first five anniversaries of the dates of grant. No term has been assigned to Mr. Cross' employment agreement. If Mr. Cross is terminated other than for "cause" (as such term is defined in Mr. Cross' employment agreement), Mr. Cross will receive severance benefits in an amount equal to Mr. Cross' base salary for 52 weeks. Effective as of February 15, 1999, the Company also entered into an employment agreement with Gina R. Kritchevsky, Ph.D. providing for an annual base salary of not less than $165,000. In addition, Dr,. Kritchevsky was granted a signing bonus of $25,000 and a further bonus of $35,000 on the first anniversary of the commencement of this agreement if she is employed by the Company at such time. The Company also granted to Dr. Kritchevsky options to purchase up to 75,000 shares of Common Stock at an exercise price of $2.8125. No term has been assigned to Dr. Kritchevsky's employment agreement. If Dr. Kritchevsky is terminated other than for "cause" (as such term is defined in Dr. Kritchevsky's employment agreement), Dr. Kritchevsky will receive severance benefits in an amount equal to Dr. Kritchevsky's base salary for 52 weeks. Effective as of March 15, 1999, the Company also entered into an employment agreement with Daniel Bilicki providing for an annual base salary of not less than $165,000. In addition, Mr. Bilicki was granted options to purchase up to 50,000 shares of Common Stock at an exercise price of $2.375. No term has been assigned to Mr. Bilicki's employment agreement. If Mr. Bilicki is terminated other than for "cause" (as such term is defined in Mr. Bilicki's employment agreement), Mr. Bilicki will receive severance benefits in an amount equal to Mr. Bilicki's base salary for 26 weeks. Effective as of June 1, 1999, the Company also entered into an employment agreement with Donald Freed providing for an annual base salary of not less than $125,000. No term has been assigned to Mr. Freed's employment agreement. If Mr. Freed is terminated other than for "cause" (as such term is defined in Mr. Freed's employment agreement), Mr. Freed will receive severance benefits in an amount equal to Mr. Freed's base salary for 26 weeks. 9 13 On June 25, 1999, the Company entered into a consulting agreement with Dennis J. Nowak. Under the terms of this agreement, Mr. Nowak's employment with the Company was terminated on June 25, 1999, at which time Mr. Nowak received severance payments of (i) $30,403.85 representing accrued vacation time, (ii) $4,250 of out-placement services, (iii) $1,000 for attorneys fees in negotiating the consulting agreement, (iv) COBRA payments for 12 months (v) certain equipment. From June 25, 1999 through June 25, 2000, Mr. Nowak will serve as an independent consultant to the Company. During such period, the Company will pay Mr. Nowak a consulting fee equal $170,000 payable in 26 equal bi-weekly installments. REPORT OF THE COMPENSATION AND GOVERNANCE COMMITTEE OF THE BOARD OF DIRECTORS The objectives of the Compensation and Governance Committee in determining the levels and components of executive compensation are to (1) attract, motivate and retain talented and dedicated executive officers, (2) provide executive officers with both cash and equity incentives to further the interests of the Company and its stockholders, and (3) compensate executive officers at levels comparable to those of executive officers at other comparable high technology companies. In setting compensation, the Compensation and Governance Committee reviews the achievement of corporate goals and individual contributions of particular executives. Generally, the compensation of the Company's executive officers is composed of base annual compensation, in the form of salary and other benefits, incentives in the form of fiscal year-end bonuses, and long-term compensation consisting of options awarded under the Company's stock option plan. BASE SALARIES In determining the base salaries of the executive officers in 1999, the Compensation and Governance Committee considered the performance of each executive, the nature of the executive's responsibilities, the salary levels of executives at comparable high technology companies, including other publicly-held advanced materials and advanced technologies companies, and the Company's general compensation practices. CASH BONUSES Discretionary cash bonuses for executive officers are directly tied to achievement of specified goals of the Company and are a function of the criteria which the Compensation and Governance Committee believes appropriately take into account the specific areas of responsibility of the particular officer. STOCK OPTIONS Periodically, the Compensation and Governance Committee also grants stock options to executive officers in order to provide a long-term incentive which is directly tied to the performance of the Company's stock. These options provide an incentive to maximize stockholder value because they reward option holders only if stockholders also benefit. The exercise price of these stock options is the fair market of the Common Stock on the date of grant. In general, the options vest in equal annual installments over a five-year period beginning one year after the date of grant, in certain instances the Board (or the Compensation and Governance Committee) can reduce the vesting period for performance-based options. Vesting periods are used to retain key employees and to emphasize the long-term aspect of contribution and performance. In making stock option grants to executives, the Compensation and Governance Committee considered a number of factors, including the performance of such persons, the Company's performance in 1998, achievement of specific delineated goals, the responsibilities and the relative position of such persons within the Company, the compensation of executives in comparable high technology companies and the number of stock options each such person currently possesses. COMPLIANCE WITH SECTION 162(M) The Compensation and Governance Committee currently intends for all compensation paid to the Named Officers to be tax deductible to the Company pursuant to Section 162(m) of the Internal Revenue 10 14 Code of 1986, as amended ("Section 162(m)"). Section 162(m) provides that compensation paid to the Named Officers in excess of $1,000,000 cannot be deducted by the Company for Federal income tax purposes unless, in general, (1) such compensation is performance-based, established by a committee of outside directors and objective, and (2) 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 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 162(m) if in its judgment, after considering the additional costs of not satisfying Section 162(m), such program is appropriate. COMPENSATION AND GOVERNANCE COMMITTEE Jerry K. Pearlman Edward E. Hagenlocker, Ph.D. Donald S. Perkins COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Pursuant to a consulting agreement effective as of October 29, 1998, and prior to his appointment as Chairman of the Board of Directors, Donald S. Perkins was engaged by the Company to provide additional services in connection with the Company's organizational restructuring and refocusing. In consideration for such services, Mr. Perkins was granted options to purchase 25,000 shares of Common Stock at an exercise price of $3.50 per share. Such options vest in five equal annual installments beginning on October 29, 1999; provided, however, that unvested options will expire upon Mr. Perkins no longer providing such services to the Company. 11 15 PERFORMANCE GRAPH The following graph shows a comparison of cumulative total returns for the Company, the Nasdaq Market Composite Index and an index of peer companies selected by the Company during the period commencing on November 26, 1997, the date of the Company's initial public offering, and ending on December 31, 1999. The comparison assumes $100 was invested on November 26, 1997 in the Common Stock, the Nasdaq Market Composite Index and the peer companies selected by the Company and assumes the reinvestment of all dividends, if any. The performance graph must begin with the closing price of the Common Stock on the date of the initial public offering, which was $8.00 (this was also the price at which the Common Stock was offered in the initial public offering.) COMPARISON OF CUMULATIVE TOTAL RETURNS [PERFORMANCE GRAPH]
-------------------------------------------------------------------------------------------- 11/26/97 12/31/97 12/31/98 12/31/99 -------------------------------------------------------------------------------------------- Nanophase Technologies Corporation 100.00 158.59 28.13 60.94 Nasdaq 100.00 98.49 137.52 255.21 Peer Group 100.00 87.80 98.04 97.03
The companies in the peer group, all of which are advanced materials or advanced technologies companies, are: Alyn Corporation, Delta & Pine Land Company and Landec Corporation. The above graph shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act or under the Exchange Act, except to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts. 12 16 SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS The following table sets forth, as of March 31, 2000 certain information with respect to the beneficial ownership of the Common Stock by (i) each person known by the Company to own beneficially more than 5% of the outstanding shares of Common Stock, (ii) each Company director, (iii) each of the Named Officers and (iv) all Company executive officers and directors as a group.
NUMBER OF PERCENT OF SHARES SHARES BENEFICIALLY BENEFICIALLY NAME AND ADDRESS OWNED(1) OWNED ---------------- ------------ ------------ Spurgeon Corporation........................................ 1,882,343(2) 14.0% Bradford T. Whitmore........................................ 1,882,343(3) 14.0% Grace Investments, Ltd...................................... 1,069,750(4) 8.0% Grace Brothers, Ltd......................................... 812,593(5) 6.0% Harris & Harris Group, Inc.(6).............................. 672,916 5.0% Joseph E. Cross............................................. 54,500(7) * Edward E. Hagenlocker, Ph.D................................. 3,333(8) * Richard W. Siegel, Ph.D..................................... 246,034(9) 1.8% James A. McClung, Ph.D...................................... 15,000 * Jerry Pearlman.............................................. 13,333(10) * Donald S. Perkins........................................... 42,332(11) * Gina R. Kritchevsky, Ph.D................................... 18,000(12) * Daniel S. Bilicki........................................... 30,000(13) * Donald J. Freed, Ph.D....................................... 200(14) * Richard W. Brotzman, Ph.D................................... 107,333(15) * All executive officers and directors as a group (11 persons).................................................. 539,877(16) 4.0%
- ------------ * Denotes beneficial ownership less than one percent. (1) Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission (the "Commission"). 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. (2) Includes 812,593 shares of Common Stock held by Grace Brothers, Ltd. and 1,069,750 shares of Common Stock held by Grace Investments, Ltd. Spurgeon Corporation is a general partner of 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 Schedule 13G/A dated February 4, 2000 filed with the Commission by Spurgeon Corporation. The address of the stockholder is 290 South County Farm Road, Third Floor, Wheaton, Illinois 60187. (3) Includes 812,593 shares of Common Stock held by Grace Brothers, Ltd. and 1,069,750 shares of Common Stock held by Grace Investments, Ltd. Mr. Whitmore is a general partner of Grace Brothers, Ltd. and is the sole owner of an entity which is a general partner of Grace Investments, Ltd. In such capacities, Mr. 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 Schedule 13G/A dated February 4, 2000 filed with the Commission by Mr. Whitmore. The address of the stockholder is 1560 Sherman Avenue, Suite 900, Evanston, Illinois 60201. (4) This number of shares is based on information reported on Schedule 13G/A's dated February 4, 2000 filed with the Commission by Spurgeon Corporation and Bradford T. Whitmore. The address of the stockholder is 1560 Sherman Avenue, Suite 900, Evanston, Illinois 60201. (5) This number of shares is based on information reported on Schedule 13G/A's dated February 4, 2000 filed with the Commission by Spurgeon Corporation and Bradford T. Whitmore. The address of the stockholder is 1560 Sherman Avenue, Suite 900, Evanston, Illinois 60201. (6) The address of the stockholder is One Rockefeller Plaza, Suite 1430, New York, New York 13 17 (7) Includes 30,000 shares of Common Stock issuable upon exercise of options exercisable currently or within 60 days of March 31, 2000. (8) Consists of 3,333 shares of Common Stock issuable upon exercise of options exercisable currently or within 60 days of March 31, 2000. (9) Includes 28,950 shares of Common Stock issuable upon exercise of warrants presently exercisable and 60,350 shares of Common Stock issuable upon exercise of options exercisable currently or within 60 days of March 31, 2000. (10) Includes 3,333 shares of Common Stock issuable upon exercise of options exercisable currently or within 60 days of March 31, 2000. (11) Includes 12,332 shares of Common Stock issuable upon exercise of options exercisable currently or within 60 days of March 31, 2000. (12) Includes 15,000 shares of Common Stock issuable upon exercise of options exercisable currently or within 60 days of March 31, 2000. (13) Includes 10,000 shares of Common Stock issuable upon exercise of options exercisable currently or within 60 days of March 31, 2000. (14) Consists of 200 shares of Common Stock issuable upon exercise of options exercisable currently or within 60 days of March 31, 2000. (15) Consists of 107,333 shares of Common Stock issuable upon exercise of options exercisable currently or within 60 days of March 31, 2000. (16) Includes 28,950 shares of Common Stock issuable upon exercise of warrants presently exercisable and 251,393 shares of Common Stock issuable upon exercise of options exercisable currently or within 60 days of March 31, 2000. 14 18 PROPOSAL 2 RATIFICATION OF APPOINTMENT OF AUDITORS The Board of Directors, upon the recommendation of the Audit and Finance Committee, has appointed Ernst & Young LLP, independent certified public accountants, as auditors of the Company's financial statements for the year ended December 31, 1999. Ernst & Young LLP has acted as auditors for the Company since 1993. The Board of Directors has determined to afford stockholders the opportunity to express their opinions on the matter of auditors and, accordingly, is submitting to the stockholders at the Annual Meeting a proposal to ratify the Board of Directors' appointment of Ernst & Young 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 Ernst & Young LLP, the Board of Directors will interpret this as an instruction to seek other auditors. It is expected that representatives of Ernst & Young 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. THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE INDEPENDENT AUDITORS OF THE COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2000. MISCELLANEOUS AND OTHER MATTERS SOLICITATION -- 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'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. PROPOSALS OF STOCKHOLDERS -- Proposals of stockholders (1) intended to be considered at the Company's 2001 Annual Meeting of Stockholders (the "2001 Annual Meeting") and (2) to be considered for inclusion in the Company's proxy statement and proxy for the 2001 Annual Meeting, must be received by the Secretary of the Company on or before December 22, 2000. OTHER BUSINESS -- 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'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. ADDITIONAL INFORMATION -- The Company will furnish without charge a copy of its Annual Report on Form 10-K for its year ended December 31, 1999, 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 10-K upon payment of a reasonable fee which shall not exceed the Company's reasonable expenses in connection therewith. Requests for such materials should be directed to Nanophase Technologies Corporation, 453 Commerce Street, Burr Ridge, Illinois 60521, Attention: Marianne Steimle, Manager of Investor Relations. By Order of the Board of Directors JESS JANKOWSKI Secretary Burr Ridge, Illinois April 21, 2000 ALL STOCKHOLDERS ARE REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY. 15 19 PROXY PROXY NANOPHASE TECHNOLOGIES CORPORATION 453 COMMERCE STREET BURR RIDGE, ILLINOIS 60521 PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 25, 2000 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned stockholder(s) hereby appoints Joseph E. Cross and Jess Jankowski and each of them, with full power of substitution, as attorneys and proxies for, and in the name and place of, the undersigned, and hereby authorizes each of them 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 Ashton Place, 341 West 75th Street, Willowbrook, Illinois, on Thursday, May 25, 2000, at 9:00 a.m., local 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. 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 ALL NOMINEES LISTED IN PROPOSAL 1, FOR PROPOSAL 2, 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. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. (continued, and to be signed and dated, on reverse side) - ------------------------------------------------------------------------------- FOLD AND DETACH HERE 20 NANOPHASE TECHNOLOGIES CORPORATION PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X] THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR ALL NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2. 1. ELECTION OF CLASS III DIRECTORS. For all nominees listed below [ ] Withhold authority to vote [ ] (except as marked to the contrary below) for all nominees listed below
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH THE NOMINEE'S NAME BELOW) Jerry Pearlman Donald S. Perkins 2. PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP.AS THE INDEPENDENT AUDITORS OF THE COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER FOR AGAINST ABSTAIN 31, 1999. [ ] [ ] [ ] 3. EACH OF THE PERSONS NAMED AS PROXIES HEREIN ARE AUTHORIZED, IN SUCH PERSON'S DISCRETION, TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING, OR ANY ADJOURNMENTS THEREOF.
Date: --------------------------------- 2000 --------------------------------- Signature --------------------------------- Signature (if held jointly) Please date this Proxy and sign it exactly as your name(s) appears hereon. 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. If you sign for a partnership, please print full partnership name and indicate capacity of duly authorized person executing on behalf of the partnership. - -------------------------------------------------------------------------------- FOLD AND DETACH HERE PLEASE VOTE, SIGN EXACTLY AS NAME APPEARS ABOVE, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE -----END PRIVACY-ENHANCED MESSAGE-----