NANOPHASE TECHNOLOGIES Corp

On August 9, 2022, BASF Corporation (“BASF”) filed a complaint against the Company (the “New Jersey Complaint”) in the Superior Court of New Jersey (“SCNJ”) alleging that the Company breached the Zinc Oxide Supply Agreement dated as of September 16, 1999 between the Company and BASF, as assignee, as amended through January 1, 2019 (the “Agreement”). The New Jersey Complaint specifically alleged that the Company had breached the exclusivity provision of the Agreement by selling zinc oxide to entities other than BASF, including sales to the Company’s subsidiary Solésence, LLC (“Solésence”), in markets designated as being in the field of use (the “Field”) under the Agreement. In late February 2023, the Company answered the New Jersey Complaint, denying all wrongdoing and filed counterclaims, including a request for a declaration that contrary to BASF’s views, the exclusivity provision of the Agreement does not apply to all products containing zinc oxide for uses in the Field nor does the exclusivity provision prohibit the Company’s sales through Solésence of products containing zinc oxide as an ingredient.

Following certain discovery, rulings on several motions, and the parties’ extensive negotiations, the Company and BASF entered into a Settlement Agreement and General Release on April 10, 2024 (the “Settlement Agreement”), providing for settlement of the New Jersey Complaint and resolution of the parties’ disputes. Under the Settlement Agreement, the Company and BASF agreed to enter into the Amendment (defined below) in exchange for (i) a mutual release of all claims related to the New Jersey Complaint and any claims based on similar facts or legal theories (collectively, the “Claims”), (ii) the filing of a Stipulation of Dismissal with the SCNJ voluntarily dismissing the New Jersey Complaint with prejudice, (iii) mutual covenants by the Company and BASF not to sue the other party for the Claims, (iv) the Company and BASF entering into the Modified Product MOU (defined below), (v) mutual indemnification as to certain claims arising out of the making, use, purchase, sale, or development of products in connection with the Modified Product MOU, and (vi) provisions regarding confidentiality of settlement terms and other customary settlement terms. The Stipulation of Dismissal was filed with the SCNJ on April 11, 2024, thereby concluding the New Jersey Complaint.

In connection with the Settlement Agreement, the Company and BASF entered into an Amendment No. 5 (the “Amendment”) to the Agreement, and a Binding Memorandum of Understanding regarding the Company using its commercially reasonable efforts to develop a modified zinc oxide product for BASF’s exclusive purchase under the Agreement (the “Modified Product MOU”). The Amendment includes provisions (a) amending the exclusivity section of the Agreement to provide that (i) BASF has the exclusive right to use zinc oxide materials that the Company develops, makes, or sells to BASF as an ingredient for uses in the Field, and (ii) the Company or its affiliates, including Solésence, can supply and sell both certain finished products containing zinc oxide for use in the Field to customers anywhere in the world and certain zinc oxide dispersions that the Company developed or develops for a particular customer, and (b) amending the provisions of the Agreement concerning order forecasting and procedures, operational planning, inventory and capacity requirements, and periodic facility shutdown arrangements, to more effective serve each party’s business needs with respect to all product that BASF purchases from the Company under the Agreement.