**EXHIBIT
        3(i).1**
 
 
 **RESTATED
        ARTICLES OF INCORPORATION**
 
 **OF**
 
 **NANO-PROPRIETARY,
        INC.**
 
 Pursuant
        to the provisions of Article 4.07 (B) of the Texas Business Corporation Act
        (the
        "TBCA"), Nano-Proprietary, Inc. (the "Corporation") adopts the following
        Restated Articles of Incorporation (the "Restated Articles"). The Restated
        Articles accurately copy the Amended and Restated Articles of Incorporation
        of
        the Corporation currently in effect, and all amendments thereto that are
        in
        effect to date, and contain no change in any provision thereof.
 
 **ARTICLE
        ONE**
 
 The
        name
        of the corporation is Nano-Proprietary, Inc.
 
 **ARTICLE
        TWO**
 
 The
        period of its duration is perpetual.
 
 **ARTICLE
        THREE**
 
 The
        objects and purposes for which the Corporation is organized, the nature of
        the
        business to be conducted by the Corporation, and the powers which may be
        exercised by the Corporation are stated and declared to be as follows:
 
 (a)
        To
        enter into and engage in any business activities that lawfully may be conducted
        by a Corporation organized and existing under the Texas Business Corporation
        Act
        (the "TBCA") either directly, or through affiliated or subsidiary companies
        which may be formed under the laws of any State or foreign nation where the
        conduct of such activities is lawful;
 
 (b)
        To
        enter into and engage in business activities either for its own account,
        or for
        the account of others, as agent, and either as agent or principal, to enter
        upon
        or engage in any kind of business of any nature whatsoever, in which
        corporations organized under the TBCA may engage; and to the extent not
        prohibited thereby to enter upon and engage in any kind of business of any
        nature whatsoever in any other state of the United States of America, any
        foreign nation, and any territory of any country to the extent permitted
        by the
        laws of such other state, nation or territory;
 
 (c)
        To
        acquire, organize and create subsidiary and affiliated companies under the
        laws
        of any state or foreign nation;
 
 (d)
        To
        engage in any other lawful act or activity for which a Corporation may be
        organized under the TBCA; and
 
 (e)
        Nothing in this Article shall be construed as authorizing the Corporation
        to
        transact any business in the State of Texas prohibited by any law of the
        State
        of Texas, or to engage in any activity in the State of Texas which lawfully
        cannot be engaged in without first obtaining a license under the laws of
        the
        State of Texas and such license cannot be granted to a corporation, or to
        transact any of the business referred to in Section (B)(3)(a) or Section
        (B)(4)
        of Article 2.01 of the TBCA.
 
 **ARTICLE
        FOUR**
 
 The
        Corporation is hereby authorized to issue a total of 122,000,000 shares of
        capital stock which shall be subdivided into classes as follows:
 
 **DIVISION
        A - COMMON STOCK**
 
 One
        Hundred Twenty Million (120,000,000) shares of the Corporation's capital
        stock
        shall be denominated as Common Stock, have a par value of $0.001 per share,
        and
        have the rights, powers and preferences set forth in this paragraph.
 
 (i)
        The
        holders of Common Stock shall share ratably, with all other classes of common
        equity, in any dividends that may, from time to time, be declared by the
        Board
        of Directors;
 
 (ii)
        No
        dividends may be paid with respect to the Corporation's Common Stock, however,
        until dividend distributions to the holders of Preferred Stock, if any, have
        been paid in accordance with the certificate or certificates of designation
        relating to such Preferred Stock;
 
  1
  
 
 
 (iii)
        The
        holders of Common Stock shall share ratably, with all other classes of common
        equity, in any assets of the Corporation that are available for distribution
        to
        the holders of common equity securities of the Corporation upon the dissolution
        or liquidation of the Corporation;
 
 (iv)
        The
        holders of Common Stock shall be entitled to cast one vote per share on all
        matters that are submitted for a vote of the shareholders;
 
 (v)
        There
        are no redemption or sinking fund provisions that are applicable to the Common
        Stock of the Corporation; and
 
 (vi)
        Subject only to the requirements of the TBCA and the foregoing limitations,
        the
        Board of Directors is expressly authorized to issue shares of Common Stock
        without stockholder approval, at any time and from time to time, to such
        persons
        and for such consideration as the Board of Directors shall deem appropriate
        under the circumstances.
 
 **DIVISION
        B - PREFERRED STOCK**
 
 Two
        Million (2,000,000) shares of the Corporation's authorized capital stock
        shall
        be denominated as Preferred Stock, par value of $1.00 per share. Shares of
        Preferred Stock may be issued from time to time in one or more series as
        the
        Board of Directors, by resolution or resolutions, may from time to time
        determine, each of said series to be distinctively designated. The voting
        powers, preferences and relative, participating, optional and other special
        rights, and the qualifications, limitations or restrictions thereof, if any,
        of
        each such series of Preferred Stock may differ from those of any and all
        other
        series of Preferred Stock at any time outstanding, and the Board of Directors
        is
        hereby expressly granted authority to fix or alter, by resolution or
        resolutions, the designation, number, voting powers, preferences and relative,
        participating, optional and other special rights, and the qualifications,
        limitations and restrictions thereof, of each such series of Preferred Stock,
        including, but without limiting the generality of the foregoing, the following:
 
 (i)
        The
        distinctive designation of, and the number of shares of Preferred Stock that
        shall constitute, each series of Preferred Stock, which number (except as
        otherwise provided by the Board of Directors in the resolution establishing
        such
        series) may be increased or decreased (but not below the number of shares
        of
        such series then outstanding) from time to time by the Board of Directors
        without prior approval of the holders of such series;
 
 (ii)
        The
        rights in respect of dividends, if any, of such series of Preferred Stock,
        the
        extent of the preference or relation, if any, of such dividends to the dividends
        payable on any other class or classes or any other series of the same or
        other
        class or classes of capital stock of the Corporation, and whether such dividends
        shall be cumulative or noncumulative;
 
 (iii)
        The
        right, if any, of the holders of such series of Preferred Stock to convert
        the
        same into, or exchange the same for, shares of any other class or classes
        or of
        any other series of the same or any other class or classes of capital stock
        of
        the Corporation and the terms and conditions of such conversion or exchange,
        including, without limitation, whether or not the number of shares of such
        other
        class or series into which shares of such series may be converted or exchanged
        shall be adjusted in the event of any stock split, stock dividend, subdivision,
        combination, reclassification or other transaction or series of transactions
        affecting the class or series into which such series of Preferred Stock may
        be
        converted or exchanged;
 
 (iv)
        Whether or not shares of such series of Preferred Stock shall be subject
        to
        redemption, and the redemption price or prices and the time or times at which,
        and the terms and conditions on which, shares of such series of Preferred
        Stock
        may be redeemed;
 
 (v)
        The
        rights, if any, of the holder of such series of Preferred Stock upon the
        voluntary or involuntary liquidation, dissolution or winding up of the
        Corporation or in the event of any merger or consolidation of or sale of
        assets
        by the Corporation;
  (vi)
        The
        terms of any sinking fund or redemption or repurchase amount, if any, to
        be
        provided for shares of such series of Preferred Stock;
 
 (vii)
        The
        voting owners, if any, of the holders of any series of Preferred Stock generally
        or with respect to any particular matter, which may be less than, equal to
        or
        greater than one vote per share, and which may, without limiting the generality
        of the foregoing, include the right, voting as a series by itself or together
        with the holders of any other series of Preferred Stock or all series of
        Preferred Stock as a class, to elect one or more Directors of the Corporation
        (which, without limiting the generality of the foregoing, may include a
        specified number or portion of the then-existing number of authorized
        Directorships of the Corporation, or a specified number or portion of
        Directorships in addition to the then existing number of authorized
        Directorships of the Corporation), generally or under such specific
        circumstances and on such conditions, as shall be provided in the resolution
        or
        resolutions of the Board of Directors adopted pursuant hereto; and
 
  2
  
 
 (viii)
        Such other powers, preferences and relative, participating, optional and
        other
        special rights, and the qualifications, limitations and restrictions thereof,
        as
        the Board of Directors shall determine.
 
 Notwithstanding
        the foregoing, and with the sole exception of shares issued pursuant to the
        duly
        adopted stock option plans of the Corporation, no shares of Preferred Stock
        shall be issued or sold to any officer or director of the Corporation, or
        any
        shareholder who directly or indirectly owns more than 5 % of the issued and
        outstanding voting stock of the Corporation, or any affiliate of such person,
        without the affirmative vote of a majority in interest of the disinterested
        shareholders of the Corporation. Upon the creation of any new class or series
        of
        Preferred Stock of the Corporation, the Board of Directors shall prepare
        and
        file with the records of the Corporation a certificate setting forth the
        rights
        and preferences of such class or series of Preferred Stock, which certificate
        shall be deemed an amendment to these Restated Articles and shall not require
        the consent of any shareholder.
 
 
 
 **DIVISION
        C - SERIES OF PREFERRED STOCK**
 
 **SERIES
        H JUNIOR PARTICIPATING PREFERRED STOCK**
 
 The
        designations, preferences, limitations and relative rights of the Series
        H
        Junior Participating Preferred Stock of the Corporation are as follows:
 
 1.
        Designation and Amount. There shall be a series of shares of preferred stock
        that shall be designated as "Series H Junior Participating Preferred Stock,"
        and
        the number of shares constituting such series shall be Six Hundred Thousand
        (600,000).
 
 2.
        Dividends and Distributions.
 
 (A)
        Subject to the prior and superior rights of the holders of any shares of
        any
        series of shares of preferred stock ranking prior and superior to the Series
        H
        Junior Participating Preferred Stock with respect to dividends, the holders
        of
        shares of Series H Junior Participating Preferred Stock, in preference to
        the
        holders of shares of any class or series of shares of the Corporation ranking
        prior to the Series H Junior Participating Preferred Stock, shall be entitled
        to
        receive, when, as and if declared by the Board of Directors out of funds
        legally
        available for the purpose, quarterly dividends payable in cash on the 15th
        day
        of January, April, July and October in each year (each such date being referred
        to herein as a "Quarterly Dividend Payment Date"), commencing on the first
        Quarterly Dividend Payment Date after the first issuance of a share or fraction
        of a share of Series H Junior Participating Preferred Stock, in an amount
        per
        share (rounded to the nearest cent) equal to the greater of (a) $1.00 or
        (b)
        subject to the provision for adjustment hereinafter set forth, the Adjustment
        Number (as defined below) times the aggregate per share amount of all cash
        dividends, and the Adjustment Number times the aggregate per share amount
        (payable in kind) of all non-cash dividends or other distributions other
        than a
        dividend payable in shares of common stock or a subdivision of the outstanding
        shares of common stock (by reclassification or otherwise), declared on the
        shares of common stock of the Corporation (the "Common Stock") since the
        immediately preceding Quarterly Dividend Payment Date, or, with respect to
        the
        first Quarterly Dividend Payment Date, since the first issuance of any share
        or
        fraction of a share of Series H Junior Participating Preferred Stock. The
        "Adjustment Number" shall initially be 100. In the event the Corporation
        shall
        at any time after June 18, 1998 (the "Rights Declaration Date") (i) declare
        any
        dividend on Common Stock payable in Common Stock, (ii) subdivide the outstanding
        Common Stock or (iii) combine the outstanding Common Stock into a smaller
        number
        of shares, then in each such case the Adjustment Number in effect immediately
        prior to such event shall be adjusted by multiplying such Adjustment Number
        by a
        fraction the numerator of which is the number of shares of Common Stock
        outstanding immediately after such event and the denominator of which is
        the
        number of shares of Common Stock that were outstanding immediately prior
        to such
        event.
 
 (B)
        The
        Corporation shall declare a dividend or distribution on the Series H Junior
        Participating Preferred Stock as provided in paragraph (A) above immediately
        after it declares a dividend or distribution on the Common Stock (other than
        a
        dividend payable in Common Stock); provided that, in the event no dividend
        or
        distribution shall have been declared on the Common Stock during the period
        between any Quarterly Dividend Payment Date and the next subsequent Quarterly
        Dividend Payment Date, a dividend of $1.00 per share on the Series H Junior
        Participating Preferred Stock shall nevertheless be payable on such subsequent
        Quarterly Dividend Payment Date.
 
 (C)
        Dividends shall begin to accrue and be cumulative on outstanding Series H
        Junior
        Participating Preferred Stock from the Quarterly Dividend Payment Date next
        preceding the date of issue of such Series H Junior Participating Preferred
        Stock, unless the date of issue of such shares is prior to the record date
        for
        the first Quarterly Dividend Payment Date, in which case dividends on such
        shares shall begin to accrue from the date of issue of such shares, or unless
        the date of issue is a Quarterly Dividend Payment Date or is a date after
        the
        record date for the determination of holders of Series H Junior Participating
        Preferred Stock entitled to receive a quarterly dividend and before such
        Quarterly Dividend Payment Date, in either of which events such dividends
        shall
        begin to accrue and be cumulative from such Quarterly Dividend Payment Date.
        Accrued but unpaid dividends shall not bear interest. Dividends paid on the
        Series H Junior Participating Preferred Stock in an
  3
  amount
        less than the total amount of such dividends at the time accrued and payable
        on
        such shares shall be allocated pro rata on a share by share basis among all
        such
        shares at the time outstanding. The Board of Directors may fix a record date
        for
        the determination of holders of Series H Junior Participating Preferred Stock
        entitled to receive payment of a dividend or distribution declared thereon,
        which record date shall be no more than 30 days prior to the date fixed for
        the
        payment thereof.
 
 3.
        Voting
        Rights. The holders of Series H Junior Participating Preferred Stock shall
        have
        the following voting rights:
 
 (A)
        Each
        share of Series H Junior Participating Preferred Stock shall entitle the
        holder
        thereof to a number of votes equal to the Adjustment Number on all matters
        submitted to a vote of the shareholders of the Corporation.
 
 (B)
        Except as otherwise provided herein or by law, the holders of Series H Junior
        Participating Preferred Stock and the holders of the Common Stock shall vote
        together as one class on all matters submitted to a vote of shareholders
        of the
        Corporation.
 
 (C)
              (i)
                  If at any time dividends on any Series H Junior Participating Preferred
                  Stock shall be in arrears in an amount equal to six (6) quarterly
                  dividends thereon, the occurrence of such contingency shall mark
                  the
                  beginning of a period (herein called a "default period") which
                  shall
                  extend until such time when all accrued and unpaid dividends for
                  all
                  previous quarterly dividend periods and for the current quarterly
                  dividend
                  period on all shares of Series H Junior Participating Preferred
                  Stock then
                  outstanding shall have been declared and paid or set apart for
                  payment.
                  During each default period, all holders of Preferred Stock (including
                  holders of the Series H Junior Participating Preferred Stock) with
                  dividends in arrears in an amount equal to six (6) quarterly dividends
                  thereon, voting as a class, irrespective of series, shall have
                  the right
                  to elect two (2) Directors.
 
 (ii)
        During any default period, such voting right of the holders of Series H Junior
        Participating Preferred Stock may be exercised initially at a special meeting
        called pursuant to subparagraph (iii) of this Section 3(C) or at any annual
        meeting of stockholders, and thereafter at annual meetings of stockholders,
        provided that such voting right shall not be exercised unless the holders
        of ten
        percent (10%) in number of shares of Preferred Stock outstanding shall be
        present in person or by proxy. The absence of a quorum of the holders of
        Common
        Stock shall not affect the exercise by the holders of Preferred Stock of
        such
        voting right. At any meeting at which the holders of Preferred Stock shall
        exercise such voting right initially during an existing default period, they
        shall have the right, voting as a class, to elect Directors to fill such
        vacancies, if any, in the Board of Directors as may then exist up to two
        (2)
        Directors or, if such right is exercised at an annual meeting, to elect two
        (2)
        Directors. If the number which may be so elected at any special meeting does
        not
        amount to the required number, the holders of Preferred Stock shall have
        the
        right to make such increase in the number of Directors as shall be necessary
        to
        permit the election by them of the required number. After the holders of
        the
        Preferred Stock shall have exercised their right to elect Directors in any
        default period and during the continuance of such period, the number of
        Directors in any default period and during the continuance of such period,
        the
        number of Directors shall not be increased or decreased except by vote of
        the
        holders of the Preferred Stock as herein provided or pursuant to the rights
        of
        any equity securities ranking senior to or pari passu with the Preferred
        Stock.
 
 (iii)
        Unless the holders of Preferred Stock shall, during an existing default period,
        have previously exercised their right to elect Directors, the Board of Directors
        may order, or any stockholder or stockholders owning in the aggregate not
        less
        than ten percent (10%) of the total number of shares of Preferred Stock
        outstanding, irrespective of series, may request, the calling of special
        meeting
        of the holders of Preferred Stock, which meeting shall thereupon be called
        by
        the President, a Vice President or the Secretary of the Corporation. Notice
        of
        such meeting and of any annual meeting at which holders of Preferred Stock
        are
        entitled to vote pursuant to this Paragraph (C)(iii) shall be given to each
        holder of record of Preferred Stock by mailing a copy of such notice to him
        or
        her at his or her last address as the same appears on the books of the
        Corporation. Such meeting shall be called for a time not earlier than 10
        days
        and not later than 50 days after such order or request or in default of the
        calling of such meeting within 50 days after such order or request, such
        meeting
        may be called on similar notice by any stockholder or stockholders owning
        in the
        aggregate not less than ten percent (10%) of the total number of shares of
        Preferred Stock outstanding. Notwithstanding the provisions of this Paragraph
        (C)(iii), no such special meeting shall be called during the period within
        50
        days immediately preceding the date fixed for the next annual meeting of
        the
        stockholders.
 
 (iv)
        In
        any default period, the holders of Common Stock, and other classes of stock
        of
        the Corporation if applicable, shall continue to be entitled to elect the
        whole
        number of Directors until the holders of Preferred Stock shall have exercised
        their right to elect two (2) Directors voting as a class, after the exercise
        of
        which right (x) the Directors so elected by the holders of Preferred Stock
        shall
        continue in office until their successors shall have been elected by such
        holders or until the expiration of the default period, and (y) any vacancy
        in
        the Board of Directors may (except as provided in Paragraph (C)(ii) of this
        Section 3) be filled by vote of a majority of the remaining Directors
        theretofore elected by the holders of the class of stock which elected the
        Director whose office shall have become vacant. References in this Paragraph
        (C)
        to Directors elected by the holders of a particular class of stock shall
        include
        Directors elected by such Directors to fill vacancies as provided in clause
        (y)
        of the foregoing sentence.
 
  4
  (v)
        Immediately upon the expiration of a default period, (x) the right of the
        holders of Preferred Stock as a class to elect Directors shall cease, (y)
        the
        term of any Directors elected by the holders of Preferred Stock as a class
        shall
        terminate, and (z) the number of Directors shall be such number as may be
        provided for in the certificate of incorporation or bylaws irrespective of
        any
        increase made pursuant to the provisions of Paragraph (C)(ii) of this Section
        3
        (such number being subject, however, to change thereafter in any manner provided
        by law or in the certificate of incorporation or bylaws). Any vacancies in
        the
        Board of Directors effected by the provisions of clauses (y) and (z) in the
        preceding sentence may be filled by a majority of the remaining Directors.
 
 
 (D)
        Except as set forth herein or as provided by law, holders of Series H Junior
        Participating Preferred Stock shall have no special voting rights and their
        consent shall not be required (except to the extent they are entitled to
        vote
        with holders of the Common Shares as set forth herein) for taking any corporate
        action.
 
 4.
        Certain Restrictions.
 
 (A)
        Whenever quarterly dividends or other dividends or distributions payable
        on the
        Series H Junior Participating Preferred Stock as provided in Section 2 are
        in
        arrears, thereafter and until all accrued and unpaid dividends and
        distributions, whether or not declared, on Series H Junior Participating
        Preferred Stock outstanding shall have been paid in full, the Corporation
        shall
        not:
 
 (i)
        declare or pay dividends on, make any other distributions on, or redeem or
        purchase or otherwise acquire for consideration any shares ranking junior
        (either as to dividends or upon liquidation, dissolution or winding up) to
        the
        Series H Junior Participating Preferred Stock;
 
 (ii)
        declare or pay dividends on or make any other distributions on any shares
        ranking on a parity (either as to dividends or upon liquidation, dissolution
        or
        winding up) with the Series H Junior Participating Preferred Stock, except
        dividends paid ratably on the Series H Junior Participating Preferred Stockand
        all such parity shares on which dividends are payable or in arrears in
        proportion to the total amounts to which the holders of all such shares are
        then
        entitled;
 
 (iii)
        redeem or purchase or otherwise acquire for consideration any shares ranking
        on
        a parity (either as to dividends or upon liquidation, dissolution or winding
        up)
        with the Series H Junior Participating Preferred Stock, provided that the
        Corporation may at any time redeem, purchase or otherwise acquire any such
        parity shares in exchange for any shares of the Corporation ranking junior
        (both
        as to dividends and upon dissolution, liquidation or winding up) to the Series
        H
        Junior Participating Preferred Stock; or
 
 (iv)
        purchase or otherwise acquire for consideration any shares of Series H Junior
        Participating Preferred Stock, or any shares ranking on a parity with the
        Series
        H Junior Participating Preferred Stock, except in accordance with a purchase
        offer made in writing or by publication (as determined by the Board of
        Directors) to all holders of such shares upon such terms as the Board of
        Directors, after consideration of the respective annual dividend rates and
        other
        relative rights and preferences of the respective series and classes, shall
        determine in good faith will result in fair and equitable treatment among
        the
        respective series or classes.
 
 (B)
        The
        Corporation shall not permit any subsidiary of the Corporation to purchase
        or
        otherwise acquire for consideration any shares of the Corporation unless
        the
        Corporation could, under paragraph (A) of this Section 4, purchase or otherwise
        acquire such shares at such time and in such manner.
 
 5.
        Reacquired Shares. Any Series H Junior Participating Preferred Stock purchased
        or otherwise acquired by the Corporation in any manner whatsoever shall be
        retired and canceled promptly after the acquisition thereof. All such shares
        shall upon their cancellation become authorized but unissued shares of preferred
        stock and may be reissued as part of a new series of shares of Preferred
        Stock.
 
 6.
        Liquidation, Dissolution or Winding Up.
 
 (A)
        Upon
        any liquidation (voluntary or otherwise), dissolution or winding up of the
        Corporation, no distribution shall be made to the holders of shares ranking
        junior (either as to dividends or upon liquidation or winding up) to the
        Series
        H Junior Participating Preferred Stock, unless, prior thereto, the holders
        of
        Series H Junior Participating Preferred Stock shall have received $1.00 per
        share, plus an amount equal to accrued and unpaid dividends and distributions
        thereon, whether or not declared, to the date of such payment (the "Series
        H
        Liquidation Preference"). Following the payment of the full amount of the
        Series
        H Liquidation Preference, no additional distributions shall be made to the
        holders of Series H Junior Participating Shares unless, prior thereto, the
        holders of Common Stock shall have received an amount per share (the "Common
        Adjustment") equal to the quotient obtained by dividing (i) the Series H
        Liquidation Preference by (ii) the Adjustment Number. Following the payment
        of
        the full amount of the Series H Liquidation Preference and the Common Adjustment
        in respect of all outstanding shares of Series H Junior Participating Preferred
        Stock and the Common Stock, respectively, holders of Series H Junior
        Participating Preferred Stock and holders of the Common Stock shall receive
        their ratable and proportionate share of the remaining assets to be distributed
        in the ratio of the Adjustment Number to 1 with respect to such Preferred
        Stock
        and the Common Stock, on a per share basis, respectively.
 
  5
  
 
 (B)
        In
        the event, however, that there are not sufficient assets to permit payment
        in
        full of the Series H Liquidation Preference and the liquidation preferences
        of
        all other series of shares of preferred stock, if any, that rank on a parity
        with the Series H Junior Participating Preferred Stock, then such remaining
        assets shall be distributed ratably to the holders of such parity shares
        in
        proportion to their respective liquidation preferences. In the event, however,
        that there are not sufficient assets available to permit payment in full
        of the
        Common Adjustment, then such remaining assets shall be distributed ratably
        to
        the holders of the Common Stock.
 
 7.
        Consolidation, Merger, etc. In case the Corporation shall enter into any
        consolidation, merger, or other transaction in which the Common Stock are
        exchanged for or changed into other shares or securities, cash and/or other
        property, then in any such case, the Series H Junior Participating Preferred
        Stock shall at the same time be similarly exchanged or changed in an amount
        per
        share equal to the Adjustment Number times the aggregate amount of shares,
        securities, cash and/or any other property (payable in kind), as the case
        may
        be, into which or for which each Common Share is changed or exchanged.
 
 8.
        No
        Redemption. The Series H Junior Participating Stocks shall not be redeemable.
        Notwithstanding the foregoing sentence of this Section, the Corporation may
        acquire Series H Junior Participating Preferred Stock in any other manner
        permitted by law.
 
 9.
        Ranking. The Series H Junior Participating Preferred Stock shall rank junior
        to
        all other series of the Corporation's preferred stock as to the payment of
        dividends and the distribution of assets, unless the terms of any such series
        shall provide otherwise.
 
 10.
        Amendment. At any time that any Series H Junior Participating Preferred Stock
        are outstanding, these Restated Articles shall not be amended in any manner
        which would materially alter or change the powers, preferences or special
        rights
        of the Series H Junior Participating Preferred Stock so as to affect them
        adversely without the affirmative vote of the holders of a majority or more
        of
        the outstanding Series H Junior Participating Preferred Stock, voting separately
        as a class.
 
 11.
        Fractional Shares. Series H Junior Participating Preferred Stock may be issued
        in fractions of a share that shall entitle the holder, in proportion to such
        holder's fractional shares, to exercise voting rights, receive dividends,
        participate in distributions and to have the benefit of all other rights
        of
        holders of Series H Junior Participating Preferred Stock.
 
 
 **DIVISION
        D - PROVISIONS APPLICABLE TO ALL CLASSES OF STOCK**
 
 No
        holder
        of any stock of the Corporation shall be entitled as of right to purchase
        or
        subscribe for any part of any unissued or treasury stock of the Corporation,
        or
        of any additional stock of any class, to be issued by reason of any increase
        of
        the authorized capital stock of the Corporation, or to be issued from any
        unissued or additionally authorized stock, or of bonds, certificates of
        indebtedness, debentures or other securities convertible into stock of the
        Corporation, but any such unissued or treasury stock, or any such additional
        authorized issue of new stock or securities convertible into stock, may be
        issued and disposed of by the Board of Directors to such persons, firms,
        corporations or associations, and upon such terms as the Board of Directors
        may,
        in its discretion, determine, without offering to the shareholders then of
        record, or any class of shareholders, any thereof, on the same terms or any
        terms.
 
 **ARTICLE
        FIVE**
 
 The
        Corporation will not commence business until it has received for the issuance
        of
        its shares consideration of the value of not less than $1000.00 consisting
        of
        money paid, labor done, or property actually received.
 
 **ARTICLE
        SIX**
 
 The
        address of the registered office and the name of its registered agent is
        as
        follows:
 
 C
        T
        Corporation
 811
        Dallas Avenue
 Houston,
        Texas 77002
 
 **ARTICLE
        SEVEN**
 
 (a)
        The
        business and affairs of the Corporation shall be conducted and managed by,
        or
        under the direction of, the Board of Directors. Except as otherwise provided
        for
        or fixed pursuant to the provisions of Article 4 of these Restated Articles
        relating to the rights of the holders of any series of Preferred Stock to
        elect
        additional directors, the total number of directors constituting the entire
        Board of Directors shall be not less than three (3) nor more than nine (9),
        with
        the then-authorized number of directors being fixed from time to time solely
        by
        or pursuant to a resolution passed by the Board of Directors.
 
  6
  
 
 (b)
        The
        Board of Directors shall have the power to make, adopt, alter, amend and
        repeal
        from time to time the By-Laws of this Corporation, subject to the right of
        the
        shareholders entitled to vote with respect thereto to adopt, alter, amend
        and
        repeal the By-Laws; provided, however, that By-Laws shall not be adopted,
        altered, amended or repealed by the stockholders of the Corporation except
        by
        the vote of the holders of not less than sixty percent (60%) of the outstanding
        shares of the capital stock of the Corporation entitled to vote generally
        in the
        election of directors, considered for this purpose as one class.
 
 (c)
        No
        director of the Corporation shall be liable to the Corporation or its
        shareholders for monetary damages for an act or omission (or an alleged act
        or
        omission) in a director's capacity as director, except that this Article
        Seven
        (c) does not eliminate or limit the liability of a director to the extent
        the
        director is found liable for:
 
 (1)
        a
        breach of a director's duty of loyalty to the Corporation or its shareholders;
 
 (2)
        an
        act or omission not in good faith which constitutes a breach of duty of the
        director to the Corporation, or an act or omission which involves intentional
        misconduct or a knowing violation of-the law;
 
 (3)
        a
        transaction from which a director received an improper benefit, whether or
        not
        the benefit resulted from an action taken within the scope of the director's
        office;
 
 (4)
        an
        act or omission for which the liability of a director is expressly provided
        for
        by an applicable statute; or
 
 (5)
        an
        act related to an unlawful stock repurchase or payment of a dividend.
 
 If
        the
        Texas Miscellaneous Corporation Laws Act or the TBCA or any other applicable
        law
        is amended or adopted to authorize action further eliminating or limiting
        the
        personal liability of directors, then the liability of a director of the
        Corporation shall be eliminated or limited to the fullest extent permitted
        by
        such law(s), as so amended or adopted. Any repeal or modification of the
        foregoing paragraph shall not adversely affect any right of protection of
        a
        director of the Corporation existing at the time of such repeal or modification.
 
 (d)
        The
        Board of Directors shall be divided into three classes, designated as Class
        I,
        Class II, and Class III. Each class shall consist, as nearly as may be possible,
        of one-third of the total number of directors constituting the entire Board
        of
        Directors. Initially, Class I directors shall be elected for a one-year term,
        Class II directors for a two year term and Class III directors for a three-year
        term. At the annual meeting of shareholders beginning in 1993, successors
        to the
        class of directors whose term expires at that annual meeting shall be elected
        for a three-year term. If the number of directors is changed, any increase
        or
        decrease shall be apportioned among the classes so as to maintain the number
        of
        directors in each class as nearly as possible, and any additional director
        of
        that class elected to fill a vacancy resulting from an increase in such class
        shall hold office for a term that shall coincide with the remaining term
        of that
        class, but in no case shall a decrease in the number of directors shorten
        the
        term of any incumbent director. A director shall hold office until the annual
        meeting for the year in which his term expires and until his successor shall
        be
        elected and shall qualify, subject, however, to prior death, resignation,
        retirement, disqualification or removal from office. Any vacancy on the Board
        of
        Directors that results from an increase in the number of directors may be
        filled
        only by action of majority of the Board of Directors then in office, provided
        that a quorum is present; any other vacancy occurring in the Board of Directors
        may be filled only by action of a majority of the directors then in office,
        even
        if less than a quorum, or by a sole remaining director. Any director elected
        to
        fill a vacancy not resulting from an increase in the number of directors
        shall
        have the same remaining term as that of his predecessor.
 
 (e)
        Notwithstanding the foregoing, whenever, pursuant to the provisions of Article
        4
        of these Restated Articles, the holders of any one or more series of Preferred
        Stock shall have the right, voting separately as a series or together with
        holders of other such series, to elect directors at an annual or special
        meeting
        of shareholders, the election, term of office, filling of vacancies and other
        features of such directorships shall be governed by the terms of these Restated
        Articles and such directors so elected shall not be divided into classes
        pursuant to this Article 7 (e) unless expressly provided by such terms.
 
 (f)
        Directors must be at least 21 years of age and need not be shareholders.
        There
        shall be no qualifications for directors of the Corporation other than as
        set
        forth in these Amended and Restated Articles.
 
  7
  
 
 (g)
        The
        number of directors presently constituting the Board of Directors of the
        Corporation is seven (7), and the names, addresses and class of the persons
        now
        serving as directors are as follows:
 
 **Name**
              **Address**
              **Class**Ronald
                  J. Berman
              Jupiter,
                  Florida
              IIIMarc
                  W. Eller
              Dallas,
                  Texas
              IIIEddie
                  Lee
              Dallas,
                  Texas
              IIDr.
                  Robert Ronstadt
              Boston,
                  Massachusetts
              IIDavid
                  R. Sincox
              Houston,
                  Texas
              IDr.
                  Zvi Yaniv
              Austin,
                  Texas
              IICharles
                  C. Bailey
              Austin,
                  Texas
              I
 
 
 
 **ARTICLE
        EIGHT**
 
 [Deleted
        pursuant to Article 4.07 (B) of the TBCA, as amended.]
 
 **ARTICLE
        NINE**
 
 (a)
        At an
        annual meeting of the shareholders, only such business shall be conducted
        as
        shall have been properly brought before the meeting. To be properly brought
        before an annual meeting, business must be otherwise properly brought before
        the
        meeting by a shareholder (i) specified in the notice of meeting (or any
        supplement thereto) given by or at the direction of the Board of Directors,
        (ii)
        otherwise properly brought before the meeting by or at the direction of the
        Board of Directors, or (iii) otherwise properly brought before the meeting
        by a
        shareholder. For business to be properly brought before an annual meeting
        by a
        shareholder, the shareholder must have given timely notice thereof in writing
        to
        the Secretary of the Corporation. To be timely, a shareholder's notice must
        be
        delivered to or mailed and received at the principal executive offices of
        the
        Corporation not less than 60 days nor more than 90 days prior to the meeting;
        provided, however, that in the event that less than 70 days' notice or prior
        to
        public disclosure of the date of the meeting is given or made to shareholders,
        notice by the shareholder to be timely must be so received not later than
        the
        close of business on the 10th day following the day on which such notice
        of the
        date of the annual meeting was mailed or such public disclosure was made.
        A
        shareholder's notice to the Secretary shall set forth as to each matter the
        shareholder proposes to bring before the annual meeting (i) a brief description
        of the business desired to be brought before the annual meeting and the reasons
        for conducting such business at the annual meeting, (ii) the name and address,
        as they appear on the Corporation's books, of the shareholder proposing such
        business, (iii) the class and number of shares of the Corporation which are
        beneficially owned by the shareholder, and (iv) any material interest of
        the
        shareholder in such business. The Chairman of the annual meeting shall, if
        the
        facts warrant, determine and declare to the meeting that business was not
        properly brought before the meeting in accordance with the provisions of
        this
        Article 9(a), and if he should so determine, he shall so declare to the meeting
        and any such business not properly brought before the meeting shall not be
        transacted.
 
 (b)
        Only
        persons who are nominated in accordance with the procedures set forth in
        this
        Article 9(b) shall be eligible for elections as Directors. Nominations of
        persons for election to the Board of Directors of the Corporation may be
        made at
        a meeting of shareholders by or at the direction of the Board of Directors
        or by
        any shareholder of the Corporation entitled to vote for the election of
        Directors at the meeting who complies with the notice procedures set forth
        in
        this Article 9(b). Such nominations, other than those made by or at the
        direction of the Board of Directors, shall be made pursuant to timely notice
        in
        writing to the Secretary of the Corporation. To be timely, a shareholder's
        notice shall be delivered to or mailed and received at the principal executive
        offices of the Corporation not less than 60 days nor more than 90 days prior
        to
        the meeting; provided, however, that in the event that less than 70 days'
        notice
        or prior public disclosure of the date of the meeting is given or made to
        shareholders, notice by the shareholder to be timely must be so received
        not
        later than the close of business on the 10th day following the date on which
        such notice of the date of the meeting was mailed or such public disclosure
        was
        made. Such shareholder's notice shall set forth (i) as to each person whom
        the
        shareholder proposes to nominate for election or re-election as a Director,
        (A)
        the name, age, business address and residence address of such person, (B)
        the
        principal occupation or employment of such person, (C) the class and number
        of
        shares of the Corporation which are beneficially owned by such person, and
        (D)
        any other information relating to such person that is required to be disclosed
        in solicitations of proxies for election of Directors, or is otherwise required,
        in each case pursuant to Regulation 14A under the Securities Exchange Act
        of
        1934, as amended (including without limitation such person's written consent
        to
        being named in the proxy statement as a nominee and to serving as a Director
        if
        elected); and (ii) as to the shareholder giving the notice, (1) the name
        and
        address, as they appear on the
  8
  
 
 Corporation's
        books, of such shareholder and (2) the class and number of shares of the
        Corporation which are beneficially owned by such shareholder. No person shall
        be
        eligible for election as a Director of the Corporation unless nominated in
        accordance with the procedures set forth in this Article 9(b). The Chairman
        of
        the meeting shall, if the facts warrant, determine and declare to the meeting
        that a nomination was not made in accordance with the procedures prescribed
        herein, and if he should so determine, he shall so declare to the meeting
        and
        the defective nomination shall be disregarded.
 
 **ARTICLE
        TEN**
 
 No
        shareholder of the corporation shall have the right of cumulative voting
        at any
        election of directors or upon any other matter.
 
 **ARTICLE
        ELEVEN**
 
 (a)
        With
        respect to any matter for which the affirmative vote of the holders of a
        specified portion of the shares entitled to vote is required by the TBCA,
        including, but not limited to, the amendment of these Restated Articles pursuant
        to Article 4.02 of the TBCA, the approval of any action or plan of merger
        or
        exchange pursuant to Article 5.03 of the TBCA or the disposition of assets
        requiring special authorization of shareholders pursuant to Article 5.10
        of the
        TBCA, the approval of those matters shall be the affirmative vote of the
        majority of the shares entitled to vote on those matters, rather than the
        affirmative vote otherwise required by the TBCA.
 
 (b)
        With
        respect to any matter for which the affirmative vote of the holders of a
        specified portion of the shares of any class or series is required by the
        TBCA,
        including, but not limited to, those matters identified in paragraph (a)
        of this
        Article Eleven, the approval of those matters shall be the affirmative vote
        of
        the holders of a majority of the shares of that class or series, rather than
        the
        affirmative vote of that class or series otherwise required by the TBCA.
 
 (c)
        If
        the TBCA or any other applicable law is amended or adopted with respect to
        a
        matter requiring the affirmative vote of the holders of a specified portion
        of
        the shares entitled to vote on that matter, then this Article Eleven shall
        also
        require a vote of a majority of the holders of the shares entitled to vote
        on
        that matter, rather than the affirmative vote otherwise required.
 
 
 IN
        WITNESS WHEREOF, the undersigned has executed these Restated Articles as
        of
        February 16, 2006.
 
 
 **NANO-PROPRIETARY,
                  INC.**/s/
                  Douglas P. BakerDouglas
                  P. BakerVice
                  President and ChiefFinancial
                  Officer
 
     9