Exhibit 10.27

 

EMPLOYMENT AGREEMENT

 

Employment Agreement dated and effective as of September 26, 2001 (this
“Agreement”), between NANOPHASE TECHNOLOGIES CORPORATION, a Delaware corporation
(with its successors and assigns, referred to as the “Company”), and Dr. Richard
W. Brotzman, Jr. (referred to as “Executive”).

 

Preliminary Statement

 

The Company desires to continue employing Executive, and Executive wishes to
continue to be employed by the Company, upon the terms and subject to the
conditions set forth in this Agreement. The Company and Executive also wish to
enter into the other covenants set forth in this Agreement, all of which are
related to Executive’s employment with the Company. In consideration of the
mutual promises and covenants stated below, Executive and the Company therefore
agree as follows:

 

Agreement

 

1. Employment for Term. The Company employs Executive, and Executive hereby
accepts employment with the Company, beginning on September 26, 2001, and
renewing automatically on an annual basis until terminated pursuant to Section 7
below (the “Term”).

 

2. Position and Duties. During the Term, Executive shall serve as the
Vice-President of Research & Development and shall report to the Vice President
of Technology & Engineering or such other person as designated by the President
of the Company. During the Term, Executive shall also hold such additional
positions and titles as the President or the Board of Directors of the Company
(the “Board”) may determine from time to time. During the Term, Executive shall
devote substantially all of Executive’s business time and best efforts to
Executive’s duties as an executive of the Company.

 

3. Signing Benefits. In consideration of and in reliance upon Executive’s
execution of this Agreement, and based entirely upon Executive’s acceptance of
the duties and obligations to the Company under this Agreement (specifically
including, without limitation, Executive’s obligations under the covenants in
Section 9, and the restrictions in Sections 10 and 11 of the Agreement), the
Company shall provide Executive with the following Severance Benefits if the
Company ends the Term for reasons other than Cause (as defined in Section 8):
(i) the Company shall pay Executive a sum equal in annual amount to Executive’s
base salary in effect at the time of termination during the period (the
“Severance Period”) of 26 full weeks after the effective date of termination,
payable in proportionate amounts on the Company’s regular pay cycle for
professional employees and (if the last day of the Severance Period is not the
last day of a pay period) on the last day of the Severance Period, and (ii) all
stock options granted to Executive prior to termination shall become fully
vested, and shall become exercisable (by Executive, or upon his death or
disability, by his heirs, beneficiaries and personal representatives) in
accordance with the applicable option grant agreement and the Company’s Equity
Compensation Plan (the “Plan”) or such predecessor stock option plan as may
govern any particular option grant agreement.

 

4. Compensation.

 

(a) Base Salary. The Company shall pay Executive a base salary, beginning on the
first day of the Term and ending on the last day of the Term, of not less than
$146,250 per annum, payable on the Company’s regular pay cycle for professional
employees.

 

(b) Bonus Payment. Executive will be eligible for bonuses for services to be
performed as an employee of the Company in calendar year 2001 and subsequent
years based on performance milestones agreed upon by Executive and the Vice
President of Operations of the Company and approved by the Board.

--------------------------------------------------------------------------------

(c) Stock Options. Subject to the provisions of the Company’s Plan, and as
determined by the Board in its sole discretion, Executive shall be eligible for
such stock options as the Board deems appropriate.

 

(d) Other and Additional Compensation. Sections 4(a) and 4(b) establish minimum
salary and bonus levels for Executive during the Term, and shall not preclude
the Board from awarding Executive a higher salary at any time, nor shall they
preclude the Board from awarding Executive additional bonuses or other
compensation in the discretion of the Board.

 

5. Employee Benefits. During the Term, Executive shall be entitled to the
employee benefits made available by the Company generally to all other employees
of the Company, and shall be entitled to five (5) weeks of vacation in accord
with the Company’s vacation policy in effect from time to time.

 

6. Expenses. The Company shall reimburse Executive for actual out-of-pocket
expenses reasonably incurred by Executive in performing services as an employee
of the Company in accord with the Company’s policy for such reimbursements
applicable to employees generally, and upon receipt by the Company of
appropriate documentation and receipts for such expenses.

 

7. Termination.

 

(a) General. The Term shall end (i) immediately upon Executive’ death, or (ii)
upon Executive becoming disabled (within the meaning of the Americans With
Disabilities Act of 1991, as amended) and unable to perform fully all essential
functions of his job, with or without reasonable accommodation, for a period of
150 calendar days. Either Executive or the Company may end the Term at any time
for any reason or no reason, with or without Cause, in the absolute discretion
of Executive or the Board (but subject to each party’s obligations under this
Agreement), provided that Executive will provide the Company with at least
thirty (30) days’ prior written notice of Executive’s resignation from
Executive’s position as an employee with the Company. Upon receipt of such
written notice, the Company, in its sole discretion, may accelerate the
effective date of the resignation to such date as the Company deems appropriate,
provided that Executive shall receive the compensation required under Section
4(a) of this Agreement for a full thirty (30) day period.

 

(b) Notice of Termination. If the Company ends the Term, it shall give Executive
at least thirty (30) days prior written notice of the termination, including a
statement of whether the termination was for “Cause” (as defined in Section 8(a)
below). Upon delivery of such written notice, the Company, in its sole
discretion, may accelerate the effective date of such termination to such date
as the Company deems appropriate, provided that Executive shall receive the
compensation required under Section 4(a) of this Agreement for a full thirty
(30) day period. The Company’s failure to give notice under this Section 7(b)
shall not, however, affect the validity of the Company’s termination of the Term
or Executive’s employment, nor shall the lack of such notice entitle Executive
to any rights or claims against the Company other than those arising from
Executive’s right to receive the compensation required under Section 4(a) of
this Agreement for a full thirty (30) day period.

 

8. Severance Benefits.

 

(a) “Cause” Defined. “Cause” means (i) willful or gross malfeasance or
misconduct by Executive in connection with Executive’s employment; (ii)
Executive’ gross negligence in performing any of Executive’s duties under this
Agreement; (iii) Executive’s conviction of, or entry of a plea of guilty or nolo
contendere with respect to, any felony or misdemeanor reflecting upon
Executive’s honesty; (iv) Executive’s breach of any written policy applicable to
all employees adopted by the Company concerning conflicts of interest, political
contributions, standards of business conduct or fair employment practices,

--------------------------------------------------------------------------------

procedures with respect to compliance with securities laws or any similar
matters, or adopted pursuant to the requirements of any government contract or
regulation; or (v) breach by Executive of any of the material terms and
conditions of this Agreement.

 

(b) Termination without Cause. If the Company ends the Term other than for
Cause, Executive shall receive the benefits provided under Section 3 of this
Agreement.

 

(c) Termination for Any Other Reason. If the Company ends the Term for Cause, or
if Executive resigns as an employee of the Company, then the Company shall have
no obligation to pay Executive any amount, whether for salary, benefits,
bonuses, or other compensation or expense reimbursements of any kind, accruing
after the end of the Term, and such rights shall, except as otherwise required
by law (or, with respect to the Options, as set forth in the Plan or the
applicable option grant agreements), be forfeited immediately upon the end of
the Term.

 

9. Additional Covenants.

 

(a) Confidentiality. Executive confirms his continued acceptance of all his
obligations under that certain Confidential Information and Proprietary Rights
Agreement between Executive and the Company dated as of September 2, 1994.

 

(b) “Non-Competition Period” Defined. “Non-Competition Period” means the period
beginning at the end of the Term and ending two years thereafter.

 

(c) Covenants of Non-Competition and Non-Solicitation. Executive acknowledges
that his services pursuant to this Agreement are unique and extraordinary, that
the Company relies upon Executive for the development and growth of its business
and related functions. Executive also acknowledges that he will develop personal
relationships with significant customers and suppliers of the Company and have
control of confidential information concerning the Company’s secret processes
and methods for producing nanocrystalline powders, coatings for nanocrystalline
materials, applications for such powders and coatings, and lists of customers,
employees and contractors of the Company. For the foregoing reasons, and in
consideration of the benefits available to Executive under Sections 3, 7(a) and
8(b) of this Agreement, Executive covenants and agrees that both during the Term
of this Agreement and the subsequent Non-Competition Period, Executive shall
not, in any manner, directly or indirectly, engage in, be financially interested
in, represent, render any advice or services to, or be employed by or otherwise
affiliated with, any other business (conducted for profit or not for profit)
which is principally or materially engaged in or is competitive with the
Company’s business of developing, producing, coating, refining, forming,
marketing, supplying or selling nanocrystalline and ultrafine powders. For the
reasons acknowledged by Executive at the beginning of this Section 9(c),
Executive additionally covenants and agrees that during the Non-Competition
Period, Executive shall not, directly or indirectly, whether on Executive’s own
behalf or in behalf of any other person or entity, in any manner (A) contact,
solicit or accept the business of any person or entity that was a customer,
prospective customer, supplier or contractor of the Company for the purpose of
obtaining business of the type performed by the Company, or (B) contact, accept
or solicit, or attempt to solicit for employment or engagement any persons who
were officers or employees of the Company upon the date of termination of his
employment or at any time within a 180 day period before the date of termination
or to aid any person or entity in any attempt to hire or engage any such
officers or employees of the Company. The foregoing restrictions shall not
preclude Executive from owning not more than three percent (3%) of the voting
securities of any corporation whose voting securities are registered under
Section 12(g) of the Securities Exchange Act of 1934, even if its business
competes with that of the Company.

 

(d) Remedies.

 

(i) Injunctions. In view of Executive’s access to the Company’s confidential
information, and in consideration of the value of such property to the Company,
Executive agrees that the covenants in

--------------------------------------------------------------------------------

this Section 9 are necessary to protect the Company’s interests in its
proprietary information and trade secrets, and to protect and maintain customer
and supplier relationships, both actual and potential, which Executive would not
have had access to or involvement in but for his employment with the Company.
Executive confirms that enforcement of the covenants in this Section 9 will not
prevent him from earning a livelihood. Executive further agrees that in the
event of his actual or threatened breach of any covenant in this Section 9, the
Company would be irreparably harmed and the full extent of injury resulting
therefrom would be impossible to calculate, and the Company therefore will not
have an adequate remedy at law. Accordingly, Executive agrees that temporary and
permanent injunctive relief are appropriate remedies against such breach,
without bond or security; provided, however, that nothing herein shall be
construed as limiting any other legal or equitable remedies available to the
Company.

 

(ii) Enforcement. Executive shall pay all costs and expenses (including, without
limitation, court costs, investigation costs, expert witness and attorneys’
fees) incurred by the Company in connection with its successfully enforcing its
rights under this Agreement. The Company shall have the right to disclose the
contents of this Agreement or to deliver a copy of it to any person or entity
whom the Company believes the Executive has solicited in violation of this
Agreement.

 

(iii) Arbitration. No dispute arising from Executive’s actual or threatened
breach of any covenant in this Section 9 shall be subject to arbitration.
However, any other dispute or claim arising from any other provision of this
Agreement, or relating to Executive’s employment (whether based on statute,
ordinance, regulation, contract, tort or otherwise), shall be submitted to
arbitration before a single arbitrator pursuant to the Employment Arbitration
Rules of the American Arbitration Association. Any such arbitration shall be
conducted in Chicago, Illinois. An arbitration award rendered under this Section
9(d)(iii) shall be final and binding on the parties and may be submitted to any
court of competent jurisdiction for entry of a judgment thereon in accord with
the Federal Arbitration Act or the Illinois Arbitration Act.

 

10. Limitation On Claims. EXECUTIVE AGREES THAT HE WILL NOT COMMENCE ANY ACTION
OR SUIT RELATING TO MATTERS ARISING OUT OF HIS EMPLOYMENT WITH THE COMPANY
(IRRESPECTIVE OF WHETHER SUCH ACTION OR SUIT ARISES OUT OF THE PROVISIONS OF
THIS AGREEMENT) LATER THAN SIX MONTHS AFTER THE FIRST TO OCCUR OF (A) THE DATE
SUCH CLAIM INITIALLY ARISES, OR (B) THE DATE EXECUTIVE’S EMPLOYMENT TERMINATES
FOR ANY REASON WHATSOEVER. EXECUTIVE EXPRESSLY WAIVES ANY APPLICABLE STATUTE OF
LIMITATION TO THE CONTRARY.

 

11. Successors and Assigns.

 

(a) Executive. This Agreement is a personal contract, and the rights and
interests that this Agreement accords to Executive may not be sold, transferred,
assigned, pledged, encumbered, or hypothecated by Executive. Except to the
extent contemplated in Section 3 above, Executive shall not have any power of
anticipation, alienation or assignment of the payments contemplated by this
Agreement, all rights and benefits of Executive shall be for the sole personal
benefit of Executive, and no other person shall acquire any right, title or
interest under this Agreement by reason of any sale, assignment, transfer, claim
or judgment or bankruptcy proceedings against Executive. Except as so provided,
this Agreement shall inure to the benefit of and be binding upon Executive and
Executive’s personal representatives, distributees and legatees.

 

(b) The Company. This Agreement shall be binding upon the Company and inure to
the benefit of the Company and its successors and assigns, including but not
limited to any person or entity that may acquire all or substantially all of the
Company’s assets or business or with which the Company may be consolidated or
merged. This Agreement shall continue in full force and effect in the event the
Company sells all or substantially all of its assets, merges or consolidates,
otherwise combines or affiliates with another business, dissolves and
liquidates, or otherwise sells or disposes of substantially all of its assets.
The Company’s obligations under this Agreement shall cease, however, if the
successor to the Company, the purchaser or acquirer either of the Company or of
all or substantially all of its assets, or the

--------------------------------------------------------------------------------

entity with which the Company has affiliated, shall assume in writing the
Company’s obligations under this Agreement (and deliver an executed copy of such
assumption to Executive), in which case such successor or purchaser, but not the
Company, shall thereafter be the only party obligated to perform the obligations
that remain to be performed on the part of the Company under this Agreement.

 

12. Entire Agreement. This Agreement and the other agreements referenced herein
represent the entire agreement between the parties concerning Executive’s
employment with the Company and supersedes all prior negotiations, discussions,
understandings and agreements, whether written or oral, between Executive and
the Company relating to the subject matter of this Agreement.

 

13. Amendment or Modification, Waiver. No provision of this Agreement may be
amended or waived unless such amendment or waiver is agreed to in writing signed
by Executive and by a duly authorized officer of the Company other than
Executive. No waiver by any party to this Agreement of any breach by another
party of any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of a similar or dissimilar condition or
provision at the same time, any prior time or any subsequent time.

 

14. Notices. Any notice provided for in this Agreement must be in writing and
must be either personally delivered, mailed by first class mail (postage prepaid
and return receipt requested), sent by reputable overnight courier service
(charges prepaid), or by facsimile to the recipient at the address below
indicated:

 

To the Company:    Nanophase Technologies Corporation      1319 Marquette Drive
     Romeoville, IL 60446      Attn: Chief Executive Officer      Facsimile:
(630) 771-0825 To Executive:    Dr. Richard Brotzman      318 Kent Court     
Naperville, IL 60540-5711

 

or such other address or facsimile number, or to the attention of such other
person as the recipient shall have specified by prior written notice to the
sending party. Any notice under this Agreement shall be deemed to have been
given when so personally delivered, or one day after deposit, if sent by
courier, when confirmed received if sent by facsimile, or if mailed, five days
after deposit in the U.S. first-class mail, postage prepaid.

 

15. Severability. If any provision of this Agreement shall be determined by any
court of competent jurisdiction to be unenforceable to any extent, the remainder
of this Agreement shall not be affected, but shall remain in full force and
effect If any provision of this Agreement containing restrictions is held to
cover an area or to be for a length of time that is unreasonable or in any other
way is construed to be invalid, such provision shall not be determined to be
entirely of no effect; instead, it is the intention and desire of both the
Company and Executive that any court of competent jurisdiction shall interpret
or reform this Agreement to provide for a restriction having the maximum
enforceable area, time period and such other constraints or conditions as shall
be enforceable under the applicable law.

 

16. Survivorship. The respective rights and obligations of the parties hereunder
shall survive any termination of this Agreement to the extent necessary to the
intended preservation of such rights and obligations.

 

17. Headings. All descriptive headings of sections and paragraphs in this
Agreement are intended solely for convenience of reference, and no provision of
this Agreement is to be construed by reference to the heading of any section or
paragraph.

--------------------------------------------------------------------------------

18. Withholding Taxes. All salary, benefits, reimbursements and any other
payments to Executive under this Agreement shall be subject to all applicable
payroll and withholding taxes and deductions required by any law, rule or
regulation of any federal, state or local authority.

 

19. Applicable Law: Jurisdiction. The laws of the State of Illinois shall govern
the interpretation of the terms of this Agreement, without reference to rules
relating to conflicts of law.

 

IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement
as of the date first written above.

 

NANOPHASE TECHNOLOGIES CORPORATION By:   /s/    JOSEPH CROSS            

--------------------------------------------------------------------------------

Its:

  Chief Executive Officer

 

/s/    DR. RICHARD W. BROTZMAN, JR.        

--------------------------------------------------------------------------------

Dr. Richard W. Brotzman, Jr.