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Exhibit 10.18
 
 

CHARTER OF THE COMPENSATION COMMITTEE
 
NANO-PROPRIETARY, INC.
 
1.
PURPOSE

 
The purpose of the Compensation Committee (the "Committee") of NANO-PROPRIETARY,
INC. (the "Company") is to help to ensure that the executive officers of the
Company and its subsidiaries are compensated in a manner consistent with the
compensation strategy of the Company as determined by the Board of Directors
(the "Board"), the treatment of all executive officers in an equitable and
consistent manner, the Company's need to compete in recruiting and retaining
qualified executive officers and the requirements of all appropriate regulatory
bodies. The Committee shall also communicate to the stockholders the
compensation policies of the Company and the method for establishing
compensation for the Chief Executive Officer ("CEO") and the other executive
officers of the Company.
 
To carry out this purpose, the Committee shall:

(1)
 Review and approve corporate goals and objectives relevant to compensation of
the executive officers.
(2)
 Evaluate the performance of the executive officers in light of those goals and
objectives.
(3)
 Determine and approve the compensation level of the executive officers based on
this evaluation.
(4)
 Determine and approve awards under the Company’s incentive compensation plans.
(5)
 Make recommendations to the Board with respect to new or amended incentive
compensation plans and equity based plans.

 
2.
COMMITTEE MEMBERSHIP AND ORGANIZATION

 
The Committee shall be comprised of no fewer than two members. Each member of
the Committee shall be "independent" as defined by the rules of the National
Association of Securities Dealers ("NASD") and the Securities and Exchange
Commission ("SEC"). In addition, each member shall be a "Non-employee Director"
for purposes of Rule 16b-3 under the Securities Exchange Act of 1934 and shall
satisfy the requirements of an "outside director" for purposes of Section 162(m)
of the Internal Revenue Code. Each member shall be free of any relationship
that, in the opinion of the Board, would interfere with his or her individual
exercise of independent judgment. The members of the Committee shall be
appointed and replaced by the Board. The Board shall appoint one of the members
as Chair.
 
This Committee shall communicate with and work closely with the Board. To foster
such communication, the Chairman of the Board, the CEO and CFO of the Company
may be invited to attend meetings on a non-voting basis, provided the CEO and
CFO each may not be present during voting on or discussion of his or her
compensation, unless the committee requests the CEO or CFO to be present for a
portion of the discussion so that the committee can clarify any questions that
it has or obtain any information that it may need.
 
 
 
 

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3.    COMMITTEE RESPONSIBILITIES AND AUTHORITY
 
To carry out the purpose expressed in Paragraph 1 above, the Committee shall
have the responsibilities and authority set forth below:

 

(1)
Review from time to time and approve the Company's compensation strategy to
ensure that management is rewarded appropriately for its contributions to
Company growth and profitability and that the executive compensation strategy
supports Company objectives and stockholder interests.

(2)
Determination of all elements of compensation for the Company’s executive
officers. The CEO and the CFO each may not be present during voting on or
discussion of his or her compensation unless the committee requests the CEO or
CFO to be present for a portion of the discussion so that the committee can
clarify any questions that it has or obtain any information that it may need.  

(3)
Determine the long-term incentive component of compensation for the executive
officers based on the considerations adopted by the Board.

(4)
Annually review the performance of the CEO and, with the assistance of the CEO,
the executive officers of the Company, and report on the Committee's review to
the Board, if requested.

(5)
Produce the annual Board Compensation Committee Report to Stockholders, if
required, on the factors and criteria on which the compensation for the CEO and
other executive officers in the last year was based, to be included in the
Company's proxy statement for its annual meeting or Annual Report on Form 10-K
filed with the SEC.

(6)
Develop the Company's incentive compensation strategy with respect to the total
number of incentive awards to be granted, the relative participation of senior
management and other employees, and the types of awards to be granted.

(7)
Recommend and approve, subject to submission to stockholders when appropriate,
all new equity-related incentive plans.

(8)
Determine eligibility for awards under the Company's incentive compensation
plans and the terms under which awards are granted.

(9)
Allocate awards under the Company's incentive compensation plans, provided that
the Committee may delegate to the CEO or another executive officer the authority
to allocate Stock options or other equity instruments allowed by the Company’s
plans among employees who are not executive officers, subject to applicable law
and the limits and guidelines established by the Committee.

(10)
Assure that the Company's executive incentive compensation program, including
the annual and long-term incentive plans, is administered in a manner consistent
with the Company's incentive compensation strategy.

(11)
Approve annual retainer and meeting fees for directors and members of Board
committees, including expense reimbursement limits and per diem allowances, and
fix the terms and awards of stock compensation for members of the Board.

(12)
Review with the CEO matters relating to management succession, including
identifying and hiring potential candidates for executive office, consulting on
hiring any executive officers as well as overseeing any termination of any
executive officers.

(13)
Obtain advice, assistance, reports or opinions from internal or external legal,
accounting or other advisors, including consulting firms, to assist in the
evaluation of director, CEO or senior executive compensation, as necessary.

(14)
Form and delegate authority to subcommittees, or delegate authority to members,
when appropriate, provided that such subcommittees will be composed exclusively
of members of this Committee and will operate pursuant to a written charter.

 
 
 
 
 

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(15)
Review and re-examine this Charter at least annually and make recommendations to
the Board with respect to any proposed changes.

(16)
Annually report to the full Board regarding its own performance against the
responsibilities outlined in this Charter and as otherwise established by the
Board.

(17)
Such other duties and responsibilities as may be assigned to the Committee, from
time to time, by the Board or the Chairman, or as designated in compensation
plan documents.

 
Delegation by the Board of responsibilities to the Committee shall not preclude
the Board from taking any action permitted to be taken under governing law,
rules or regulations applicable to the Company, provided that the Committee
shall have sole authority to retain and terminate any consulting firm used to
assist in the evaluation of director, CEO or senior executive compensation,
including sole authority to approve the consulting firm's fees and other
retention terms.
 
4.
MEETING AND MINUTES

 
 

(1)
The Committee will meet at least twice annually and will also meet, as required,
in response to the needs of the Board and as necessary to fulfill their
responsibilities. 

(2)
The Committee will maintain written minutes of its meetings, which minutes will
be filed with the minutes of the meetings of the Board.

* * * *
 
This Charter was duly adopted and approved by the Board on February 16, 2006.