Exhibit 10.18


    
      

    

     

    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. 

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      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. 

                  


          

        
 

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      

        
          	
                	(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.