JOINT DEVELOPMENT AGREEMENT DATED MARCH 23, 2004

Exhibit 10.29

JOINT DEVELOPMENT AGREEMENT

THIS AGREEMENT, effective this 23 day of March, 2004 (“Effective Date”), between

Nanophase Technologies Corporation

1319 Marquette Drive

Romeoville, Illinois 60446

(hereinafter “NTC”)

and

Altana Chemie AG

Abelstrasse 45

46483 Wesel

Germany

(hereinafter “Altana”)

WHEREAS, Altana develops, produces and sells additives for paints and plastics in the coatings and plastics industry, products for coatings and sealants for the packaging and coil industry, and compounds and varnishes in the electrical insulation business, and Altana has an interest in developing improvements and new products related thereto; and

WHEREAS, NTC has manufacturing and technical capabilities for the production of nanocrystalline metal oxide particles, coated and dispersed nanocrystalline metal oxides and surface treated nanocrystalline metal oxide particles; and

WHEREAS, concurrently with this Agreement, Altana has entered into a Stock Purchase Agreement with NTC under which Altana has purchased for $10 million an equity ownership position in NTC in support of Altana’s strategic objective of obtaining exclusive access to emerging nanotechnologies and commercial supply of Nanomaterials important to Altana’s growth; and

WHEREAS, NTC and Altana wish both to engage in a program to develop improvements and new products involving application of nanomaterials in the Field of Application (as defined in Article 1.3 below), and to enter into exclusive supply arrangements for Altana’s purchase of such nanomaterials from NTC, as described below.

NOW THEREFORE, in consideration of the mutual covenants herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Altana and NTC agree as follows:

Article 1. Definitions

As used in this Agreement, the following terms shall have the meanings set forth below:

(a) paints, coatings and inks (for example, general industrial coatings, architectural coatings, coil coatings, printing inks, automotive OEM and refinish coatings, wood coatings, consumer goods packaging coatings and coatings for electrical insulation applications; such paints, coatings and inks being based on any technology, including without limitation solvent-based coatings, water-based coatings, powder coatings, UV/EB curable coatings, one-component coatings and two-component coatings);

(b) polymers and plastics (for example, thermoset applications, PVC, and other thermoplastics);

(c) overprint varnishes, closure compounds and can end sealants for packaging applications; and

(d) varnishes, compounds and sealants for electrical insulation applications.

The Field of Application does not include:

(w) applications involving thermal spray, cosmetics, personal care, antimicrobials in pressure-treated wood, applications for dielectrics and other electronic applications other than industrial permanent coatings;

(x) NTC’s future sale to any customer (and its affiliates) of one hundred (100) kilograms or less during any twelve (12) month period of Nanomaterials for use in the Field of Application with specifications the same as or similar to those products depicted in the product catalogues posted on NTC’s website at www.nanophase.com ;

(y) for a transition period of one hundred twenty (120) days after the Effective Date of this Agreement (the “Transition Period”), NTC’s sales to, or on-going work with, any customer to whom NTC has supplied Nanomaterials for potential uses within the Field of Application before the Effective Date of this Agreement (together with its affiliates, a “Pre-Existing Customer”), provided that NTC and Altana will jointly formulate a transition plan for each Pre-Existing Customer identifying the party primarily responsible for managing and communications with each such Pre-Existing Customer within the Field of Application; or

(z) after the Transition Period, NTC may continue to sell Nanomaterials for use in the Field of Application (i) having an aggregate sales price of not more than Thirty Thousand Dollars ($30,000) to any Pre-Existing Customer during any twelve (12) month period and not more than Two Hundred Fifty Thousand Dollars. ($250,000) in the aggregate to all such Pre-Existing Customers during any such period, provided that NTC has used during the Transition Period and uses after the Transition Period reasonable efforts to transition such Pre-Existing Customers to Altana; and (ii) to one (1) Pre-Existing Customer (a paint company whose identity NTC will make reasonable efforts to obtain the customer’s consent to disclose to Altana), with such sales limited to Nanomaterials consisting of water-based dispersions of zinc oxide for use only in paint to be sold to the discount retail home do-it-yourself market in the U.S., provided that, despite NTC’s reasonable efforts, such Pre-Existing Customer declines any transition to Altana.

The customers to which NTC may sell Nanomaterials under Article 1.3(z) shall not, in any event, (i) be known by NTC to be competitors of Altana or (ii) based outside the United States. As to sales made pursuant to Article 1.3(x)-(z), NTC shall, except to the extent prohibited by a confidentiality agreement in effect on the Effective Date, disclose quarterly to Altana in writing

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such sales by amount, purchaser, Nanomaterial and the application to which NTC anticipates the customer will put the Nanomaterials within the Field of Application.

The parties further agree that, if any potential commercial use of Nanomaterials within the Field of Application arises in which NTC has an opportunity to participate, including business that NTC offers to transition to Altana pursuant to Article 1.3(y) or 1.3(z), but in which Altana expresses no interest within sixty (60) days after NTC notifies Altana of the potential use, that potential use shall be deemed to be outside the Field of Application.

(a) United States Patent Nos. 6,669,823; 6,416,818; 6,033,781; 5,993,967; 5,460,701; 5,514,349; 5,874,684; 5,128,081; 5,320,800; and any patents and/or applications which are continuations, continuations in part, divisionals, re-examinations or reissues of these U.S. Patents, including any related patents issued by governments other than the United States;

(b) pending United States Patent Applications Nos. 09/726,686; 10/174,955; 10/287,144; 10/047,552; 10/357,941; 10/368,941; 10/452,736; 10/658,178; and any subsequently issued patent and/or applications which are continuations, continuations in part, divisionals, re-examinations or reissues of those U.S. Patent Applications, including any related patents issued by governments other than the United States; and

(c) any other patent applications for uses within the Field of Application that NTC files before or after the Effective Date of the Agreement.

The foregoing patents and any enhancements or improvements thereof are intellectual property as defined by U.S. Code Title 11, Section 101 et seq. and shall be treated as such.

Article 2. Scope of Development Program

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(a) the goals and objectives of the Specific Development Project;

(b) the milestones by which progress in achieving the goals and objectives will be measured;

(c) the anticipated timing of both each milestone and the parties’ periodic mutual assessment of the Project;

(d) the Target Price;

(e) the resources each party will provide to the Project (e.g., personnel, equipment, materials, etc.); and

(f) the reasonably negotiated allocation between Altana and NTC of the cost of the respective resources each party provides to the Project and funding for the Project; whereby the parties expect that each party shall bear its own costs and only in the following circumstances will Altana be requested to bear more than the cost of its own employees, their travel expenses and its other internal costs, such as laboratory costs: (i) where the duration of the Project is expected to be greater than twelve (12) months; (ii) where NTC has to purchase additional equipment to carry out the Project; or (iii) where NTC has to hire additional personnel to carry out the Project.

The parties contemplate that, in connection with each Specific Development Project, NTC will provide Altana with certain samples and other information, and Altana will evaluate those samples and information. Altana shall report to NTC on the results of Altana’s evaluations. Upon achieving the technical features sought through the Project, NTC will notify Altana whether NTC expects to be able to produce the Nanomaterials resulting from the Specific Development Project for a sales price at or within ten percent (10%) of the Target Price.

(a) communicating clearly and openly about contemplated applications and expected commercial acceptance and results;

(b) forming joint teams to formulate specific goals and milestones for customer-focused product solutions;

(c) exchanging quarterly written reports setting forth each party’s progress to date, including in relation to the initial milestones, estimated time necessary to conclude the Specific Development Project, an estimate of the likelihood of success and any modification of the sales price in relation to the Target Price;

(d) holding quarterly meetings, shortly after each party’s receipt of the other party’s report described in Article 2.3(c); and

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(e) integrating each party’s resources and capabilities (e.g. personnel) to achieve customer acceptance of the resulting products in the Field of Application.

Article 3. Future Supply

If any Specific Development Project undertaken in connection with the Development Program results in the development of one or more commercially viable Nanomaterials, the parties will enter into a supply agreement (the “Supply Agreement”) having an initial term of at least three (3) years and a price at or within ten percent (10%) of the Target Price and customary terms, including those set forth in Exhibit B hereto.

Article 4. Ownership of Technology and Technology Developments

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Nothing herein shall give Altana any ownership rights with respect to any technology or know-how disclosed in NTC’s Patents.