**Exhibit
        3(ii).1**
  **AMENDED
        AND RESTATED BYLAWS**
  **OF**
  **NANO-PROPRIETARY,
        INC.**
  (Adopted
        by Resolution of the Board of Directors on February 16, 2006)
  **ARTICLE
        I.**
  **CAPITAL
        STOCK**
   Section
        1. Form of Certificates .
        The
        Company shall deliver certificates representing shares to which shareholders
        are
        entitled. Such certificates shall be signed by (i) the Chairman of the Board,
        the President or a Vice President and (ii) either the Secretary or an Assistant
        Secretary and (iii) shall be sealed with the seal of the Company or a facsimile
        thereof. The signatures of such officers upon a certificate may be facsimiles.
        In case any officer who has signed or whose facsimile signature has been
        placed
        upon such certificate shall have ceased to be such officer before such
        certificate is issued, it may be issued by the Company with the same effect
        as
        if he were such officer at the date of its issuance.
  Section
        2. Shareholders of Record .
        The
        Board of Directors of the Company may appoint one or more transfer agents
        or
        registrars of any class of stock of the Company. The Company shall be entitled
        to treat the holder of record of any shares of the Company as the owner thereof
        for all purposes, and shall not be bound to recognize any equitable or other
        claim to, or interest in, such shares or any rights deriving from such shares,
        on the part of any other person, including (but without limitation) a purchaser,
        assignee or transferee, unless and until such other person becomes the holder
        of
        record of such shares, whether or not the Company shall have either actual
        or
        constructive notice of the interest of such other person.
  Section
        3. Transfer of Shares .
        The
        shares of the Company shall be transferable on the stock certificate books
        of
        the Company by the holder of record thereof, or his duly authorized attorney
        or
        legal representative, upon surrender for cancellation of the certificate
        for
        such shares. All certificates surrendered for transfer shall be canceled
        and no
        new certificate shall be issued until a former certificate or certificates
        for a
        like number of shares shall have been surrendered and canceled except that
        in
        the case of a lost, destroyed or mutilated certificate, a new certificate
        may be
        issued therefor upon such conditions for the protection of the Company and
        any
        transfer agent or registrar as the Board of Directors or the Secretary may
        prescribe.
  Section
        4. Lost Certificates .
        The
        Board of Directors may direct a new certificate to be issued in place of
        any
        certificate theretofore issued by the Company alleged to have been
   
   lost,
        stolen or destroyed, upon the making of an affidavit of the fact by the person
        claiming the certificate of stock to be lost, stolen or destroyed. When
        authorizing such issue of a new certificate, the Board of Directors may,
        in its
        discretion and as a condition precedent to the issuance
        thereof, require the owner of such lost, stolen or destroyed certificate,
        or
        such owner's legal representative, to advertise the same in such manner as
        the
        Board of Directors shall require and/or to give the Company a bond in such
        sum
        as it may direct as indemnity against any claim that may be made against
        the
        Company with respect to the certificate alleged to have been lost, stolen
        or
        destroyed.
  Section
        5. Voting Securities Owned by the Company .
        Powers
        of attorney, proxies, waivers of notice of meeting, consents and other
        instruments relating to securities owned by the Company may be executed in
        the
        name of and on behalf of the Company by the Chairman of the Board, the
        President, any Vice President or the Secretary, and any such officer may,
        in the
        name of and on behalf of the Company, take all such action as any such officer
        may deem advisable to vote in person or by proxy at any meeting of security
        holders of any corporation in which the Company may own securities, and at
        any
        such meeting shall possess and may exercise any and all rights and powers
        incident to the ownership of such securities and which, as the owner thereof,
        the Company might have exercised and possessed if present. The Board of
        Directors may, by resolution, from time to time confer like powers upon any
        other person or persons.
  **ARTICLE
        II.**
  **MEETINGS
        OF SHAREHOLDERS**
  Section
        1. Place of Meetings .
        All
        meetings of shareholders shall be held at the registered office of the Company,
        in the City of Austin, Texas, or at such other place within or without the
        State
        of Texas as may be designated by the Board of Directors or officer calling
        the
        meeting.
  Section
        2. Annual Meetings .
        The
        Annual Meetings of shareholders shall be held on such date and at such time
        as
        shall be designated from time to time by the Board of Directors and stated
        in
        the notice of the meeting, at which meetings the shareholders shall elect
        by a
        plurality vote a Board of Directors, and transact such other business as
        may
        properly be brought before the meeting.
  Section
        3. Special Meetings .
        Special
        Meetings of the shareholders may only be called by the Board of Directors,
        the
        Chairman of the Board, the President or the holders of not less than ten
        percent
        (10%) of all shares outstanding and entitled to vote at such meeting. Only
        business related to the purposes set forth in the notice of the meeting may
        be
        transacted at a special meeting.
  Section
        4. Notice of Meeting .
        Written
        or printed notice of all meetings stating the place, day and hour of the
        meeting
        and, in case of a special meeting, the purpose or purposes for which the
        meeting
        is called, shall be delivered to each shareholder of record entitled to vote
        at
        such meetings not less than ten (10) nor more than sixty (60) days before
        the
        date
   
   of
        the
        meeting, either personally or by mail, by or at the direction of the Chairman
        of
        the Board, the President,
        the Secretary or the officer or person calling the meeting. If mailed, such
        notice shall be deemed to be delivered when deposited in the United States
        mail
        addressed to the shareholder at his address as it appears on the stock transfer
        books of the Company, with postage thereon prepaid.
  Section
        5. Closing of Transfer Books and Fixing Record Date .
        For the
        purpose of determining shareholders entitled to notice of or to vote at any
        meeting of shareholders or any adjournment thereof, the Board of Directors
        may
        either provide that the stock transfer books shall be closed for a stated
        period
        of not less than ten (10) nor more than sixty (60) days before the meeting,
        or
        it may fix in advance a record date for any such determination of shareholders,
        such date to be not less than ten (10) days nor more than sixty (60) days
        prior
        to the meeting. If the stock transfer books are not closed and no record
        date is
        fixed for the determination of shareholders entitled to notice of or to vote
        at
        a meeting of shareholders, then the date on which the notice of the meeting
        is
        mailed shall be the record date for such determination of shareholders. When
        a
        determination of shareholders entitled to vote at any meeting of shareholders
        has been made as herein provided, such determination shall apply to any
        adjournment thereof except where the determination has been made through
        the
        closing of the stock transfer books and the stated period of closing has
        expired.
  Section
        6. Voting List .
        The
        officer or agent having charge of the stock transfer books for shares of
        the
        Company shall make, at least ten days before each meeting of shareholders,
        a
        complete list of the shareholders entitled to vote at such meeting or any
        adjournment thereof, arranged in alphabetical order, with the address of
        and the
        number of shares held by each, which list, for a period of ten days prior
        to
        such meeting, shall be kept on file at the registered office of the Company
        and
        shall be subject to inspection by any shareholder at any time during usual
        business hours. Such list shall also be produced and kept open at the time
        and
        place of the meeting and shall be subject to the inspection of any shareholder
        during the whole time of the meeting. The original stock transfer books shall
        be
        prima facie evidence as to who are the shareholders entitled to examine such
        list or to vote at any meeting of shareholders. Failure to comply with any
        requirements of this Section 6 shall not affect the validity of any action
        taken
        at such meeting.
  Section
        7. Voting at Meetings .
        Except
        as otherwise provided in the Restated Articles of Incorporation of the Company,
        as amended to date (the "Articles of Incorporation"), each holder of shares
        of
        capital stock of the Company entitled to vote shall be entitled to one vote
        for
        each share of such stock, either in person or by proxy executed in writing
        by
        him or by his duly authorized attorney-in-fact. No proxy shall be valid after
        eleven months from the date of its execution unless otherwise provided in
        the
        proxy. A proxy shall be revocable unless expressly provided therein to be
        irrevocable and unless otherwise made irrevocable by law. At each election
        for
        Directors, every holder of shares of the Company entitled to vote shall have
        the
        right to vote, in person or by proxy, the number of shares owned by him for
        as
        many persons as there are Directors to be elected, and for whose election
        he has
        a right to vote, but in no event shall he be permitted to cumulate his votes
        for
        one or more Directors.
   
   All
        voting, including on the election of Directors but except where otherwise
        provided herein or required by law or the Articles of Incorporation, may
        be by a
        voice vote, provided, however, that upon demand therefor by a shareholder
        entitled to vote or such shareholder's proxy, a stock vote shall be taken.
        Every
        stock vote shall be taken by ballots, each of which shall state the name
        of the
        shareholder or proxy voting and such other information as may be required
        under
        the procedure established for the meeting.
  All
        elections of Directors shall be determined by a plurality of the votes cast,
        and
        except as otherwise required by applicable law or the Articles of Incorporation,
        all other matters shall be determined by a majority of the votes cast.
  Section
        8. Quorum; Adjournment .
        Except
        as otherwise provided in the Articles of Incorporation of the Company, the
        holders of a majority of shares entitled to vote, represented in person or
        by
        proxy, shall constitute a quorum at a meeting of shareholders. Except as
        otherwise provided by law, the Articles of Incorporation or these Bylaws,
        the
        affirmative vote of the holders of a majority of the shares entitled to vote
        and
        thus represented at a meeting at which a quorum is present shall be the act
        of
        the shareholders' meeting. If a quorum shall fail to attend any meeting,
        the
        chairman of the meeting or the holders of the majority of the shares of stock
        entitled to vote who are present, in person or by proxy, may adjourn the
        meeting
        to another place, date or time without notice other than announcement at
        the
        meeting, until a quorum shall be present or represented.
  When
        a
        meeting is adjourned to another place, date or time, written notice need
        not be
        given of the adjourned meeting if the place, date and time thereof are announced
        at the meeting at which the adjournment is taken; provided, however, that
        if the
        date of any adjourned meeting is more than thirty (30) days after the date
        for
        which the meeting was originally noticed, or if a new record date is fixed
        for
        the adjourned meeting, written notice of the place, date and time of the
        adjourned meeting shall be given in conformity herewith. At any adjourned
        meeting, any business may be transacted which might have been transacted
        at the
        original meeting.
  Section
        9. Officers .
        The
        Chairman of the Board shall preside at, and the Secretary shall keep the
        records
        of, each meeting of shareholders. In the absence of either such officer,
        his
        duties shall be performed by another officer of the Company appointed at
        the
        meeting.
  Section
        10. Inspectors of Election .
        In
        advance of any meeting of shareholders, the Board of Directors may appoint
        inspectors of election, who need not be shareholders, to act at such meeting
        or
        any adjournment thereof. If inspectors of election are not so appointed,
        the
        person presiding at any such meeting may, and on the request of any shareholder
        entitled to vote at the meeting and before voting begins shall, appoint
        inspectors of election. If any person who is appointed fails to appear or
        act,
        the vacancy may be filled by appointment made by the Board of Directors in
        advance of the meeting, or at the meeting by the person presiding at the
        meeting. Each inspector, before entering upon the discharge of his duties,
        shall
        take an oath faithfully to execute the duties of inspector at such meeting.
   
   If
        inspectors of election are appointed as aforesaid, they shall determine from
        the
        lists referred to in Section 6 of this Article II the number of shares
        outstanding, the shares represented at the meeting, the existence of a quorum
        and the voting power of shares represented at the meeting, determine the
        authenticity, validity and effect of proxies, receive votes or ballots, hear
        and
        determine all challenges and questions in any way arising in connection with
        the
        right to vote or the number of votes which may be cast, count and tabulate
        all
        votes or ballots, determine the results, and do such acts as are proper to
        conduct the election or vote with fairness to all shareholders entitled to
        vote
        thereat.
  The
        inspectors shall make a report in writing of any challenge or question matter
        which is determined by them, and execute a sworn certificate of any facts
        found
        by them.
  **ARTICLE
        III.**
  **DIRECTORS**
  Section
        1. Number and Classification of Board of Directors .
        The
        business and affairs of the Company shall be managed by or under the direction
        of the Board of Directors which may exercise all such powers of the Company
        and
        do all such lawful acts and things as are not by law or by the Articles of
        Incorporation or by these Bylaws directed or required to be exercised or
        done by
        the shareholders of the Company. Pursuant to Article Seven of the Company's
        Articles of Incorporation, the total number of Directors constituting the
        entire
        Board of Directors shall not be 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. The Directors
        shall be divided into three classes, Class I, Class II and Class III. Such
        classes shall be as nearly equal in number of Directors as possible.
  Directors
        need not be shareholders of the Company. All Directors shall be elected in
        accordance with the procedures specified in the Company's Articles of
        Incorporation, and each Director so elected shall hold office for a term
        of
        three years and until his or her successor is duly elected and qualified,
        or
        until his or her earlier resignation or removal.
  At
        each
        annual election, the Directors chosen to succeed those whose terms then expire
        shall be of the same class as the Directors they succeed, unless, by reason
        of
        any intervening changes in the authorized number of Directors, the Board
        of
        Directors shall designate one or more Directorships whose term then expires
        as
        Directorships of another class in order more nearly to achieve equality of
        number of Directors among the classes.
   
   Notwithstanding
        the rule that the three classes shall be as nearly equal in number of Directors
        as possible, in the event of any change in the authorized number of Directors,
        each Director then continuing to serve as such shall nevertheless continue
        as a
        Director of the class of which he is a member until the expiration of his
        current term, or his prior death, resignation, disqualification or removal.
        No
        decrease in the number of Directors constituting the Board of Directors shall
        shorten the term of any incumbent Director.
  Section
        2. Newly Created Directorships and Vacancies .
        Newly
        created Directorships resulting from any increase in the number of Directors
        may
        be filled by the affirmative vote of a majority of the Directors then in
        office
        for a term of office continuing only until the next election of one or more
        Directors by the shareholders entitled to vote thereon; provided, however,
        that
        the Board of Directors shall not fill more than two such Directorships during
        the period between two successive annual meetings of shareholders. Except
        as
        provided in Section 1 of this Article III, any vacancies on the Board of
        Directors resulting from death, resignation, disqualification, removal or
        other
        cause shall be filled by the affirmative vote of a majority of the remaining
        Directors then in office, even though less than a quorum of the Board of
        Directors. Any Director elected to fill any such vacancy shall hold office
        for
        the remainder of the full term of the Director whose departure from the Board
        of
        Directors created the vacancy and until such newly elected Director's successor
        shall have been duly elected and qualified.
  Section
        3. Nomination of Directors .
        Nominations for the election of Directors may be made by the Board of Directors
        or a committee appointed by the Board of Directors or by any shareholder
        (a
        "Nominator") entitled to vote in the election of Directors. Such nominations,
        other than those made by the Board of Directors or a committee appointed
        by the
        Board of Directors, shall be made in writing pursuant to timely notice delivered
        to or mailed and received by the Secretary of the Company as set forth in
        Article Nine (b) of the Company's Articles of Incorporation.
  Section
        4. Place of Meetings and Meetings by Telephone .
        Meetings of the Board of Directors may be held either within or without the
        State of Texas, at whatever place is specified by the officer calling the
        meeting. Meetings of the Board of Directors may also be held by means of
        conference telephone or similar communications equipment by means of which
        all
        persons participating in the meeting can hear each other. Participation in
        such
        a meeting by means of conference telephone or similar communications equipment
        shall constitute a presence in person at such meeting, except where a Director
        participates in a meeting for the express purpose of objecting to the
        transaction of any business on the ground that the meeting is not lawfully
        called or convened. In the absence of specific designation by the officer
        calling the meeting, the meetings shall be held at the registered office
        of the
        Company in the City of Austin, Texas.
  Section
        5. Regular Meetings .
        The
        Board of Directors shall meet each year immediately following the annual
        meeting
        of the shareholders at the place of such meeting, for the transaction of
        such
        business as may properly be brought before the meeting. Regular meetings
        of the
        Board of Directors may be held without notice at such time and at such place
        as
        may from time to time be determined by the Board of Directors. No notice
        of any
        kind to either old or new members of the Board of Directors for such annual
        or
        regular meetings shall be necessary.
   
   Section
        6. Special Meetings .
        Special
        meetings of the Board of Directors may be held at any time upon the call
        of the
        Chairman of the Board, the Chief Executive Officer, the Secretary of the
        Company, or a majority of the Directors then in office. Notice shall be sent
        by
        mail or telegram to the last known address of the Director at least three
        days
        before the meeting. Notice of the time, place and purpose of such meeting
        may be
        waived in writing before or after such meeting, and shall be equivalent to
        the
        giving of notice. Attendance of a Director at such meeting shall also constitute
        a waiver of notice thereof, except where he attends for the announced purpose
        of
        objecting to the transaction of any business on the ground that the meeting
        is
        not lawfully called or convened. Except as otherwise provided by these Bylaws,
        neither the business to be transacted at, nor the purpose of, any regular
        or
        special meeting of the Board of Directors need be specified in the notice
        or
        waiver of notice of such meeting.
  Section
        7. Quorum and Voting .
        Except
        as otherwise provided by law, the Articles of Incorporation of the Company
        or
        these Bylaws, a majority of the number of Directors fixed in the manner provided
        in these Bylaws as from time to time amended shall constitute a quorum for
        the
        transaction of business. Except as otherwise provided by law, the Articles
        of
        Incorporation of the Company or these Bylaws, the affirmative vote of a majority
        of the Directors present at any meeting at which there is a quorum shall
        be the
        act of the Board of Directors. Any regular or special Directors' meeting
        may be
        adjourned from time to time by those present, whether or not a quorum is
        present.
  Section
        8. Compensation .
        Unless
        otherwise restricted by the Articles of Incorporation or these Bylaws, the
        Board
        of Directors shall have the authority to fix the compensation of Directors.
        The
        Directors may be paid their expenses, if any, of attendance at each meeting
        of
        the Board of Directors and may be paid a fixed sum for attendance at each
        meeting of the Board of Directors or a stated salary as Director. No such
        payment shall preclude any Director from serving the Company in any other
        capacity and receiving compensation therefore. Members of special or standing
        committees may be allowed like compensation for attending committee meetings.
  Section
        9. Removal; Resignation .
        No
        Director of the Company shall be removed from his office as a Director by
        vote
        or other action of the shareholders or otherwise except (a) with cause, as
        defined below, by the affirmative vote of the holders of at least a majority
        of
        the voting power of all outstanding shares of capital stock of the Company
        entitled to vote in the election of Directors, voting together as a single
        class, or (b) without cause by (i) the affirmative vote of at least 60% of
        all
        Directors then in office at any regular or special meeting of the Board of
        Directors called for that purpose or (ii) the affirmative vote of the holders
        of
        at least 60% of the voting power of all outstanding shares of capital stock
        of
        the Company entitled to vote in the election of Directors, voting together
        as a
        single class.
   
   Except
        as
        may otherwise be provided by law, cause for removal of a Director shall be
        construed to exist only if: (a) the Director whose removal is proposed has
        been
        convicted, or where a Director is granted immunity to testify where another
        has
        been convicted, of a felony by a court of competent jurisdiction and such
        conviction is no longer subject to direct appeal; (b) such Director has been
        found by the affirmative vote of at least 60% of all Directors then in office
        at
        any regular or special meeting of the Board of Directors called for that
        purpose
        or by a court of competent jurisdiction to have been negligent or guilty
        of
        misconduct in the performance of his duties to the Company in a matter of
        substantial importance to the Company; or (c) such Director has been adjudicated
        by a court of competent jurisdiction to be mentally incompetent, which mental
        incompetency directly affects his ability as a Director of the Company.
  No
        proposal by a shareholder to remove a Director of the Company shall be voted
        upon at a meeting of the shareholders unless such shareholder shall have
        delivered or mailed in a timely manner (as set forth in this Section 9) and
        in
        writing to the Secretary of the Company (a) notice of such proposal, (b)
        a
        statement of the grounds, if any, on which such Director is proposed to be
        removed, (c) evidence, reasonably satisfactory to the Secretary of the Company,
        of such shareholder's status as such and of the number of shares of each
        class
        of the capital stock of the Company beneficially owned by such shareholder,
        (d)
        a list of the names and addresses of other beneficial owners of shares of
        the
        capital stock of the Company, if any, with whom such shareholder is acting
        in
        concert, and of the number of shares of each class of the capital stock of
        the
        Company beneficially owned by each such beneficial owner, and (e) an opinion
        of
        counsel, which counsel and the form and substance of which opinion shall
        be
        reasonably satisfactory to the Board of Directors of the Company (excluding
        the
        Director proposed to be removed), to the effect that, if adopted at a duly
        called special or annual meeting of the shareholders of the Company by the
        required vote as set forth in the first paragraph of this Section 9, such
        removal would not be in conflict with the laws of the State of Texas, the
        Articles of Incorporation of the Company or these Bylaws. To be timely in
        connection with an annual meeting of shareholders, a shareholder's notice
        and
        other aforesaid items shall be delivered to or mailed and received at the
        principal executive offices of the Company not less than ninety nor more
        than
        180 days prior to the date on which the immediately preceding year's annual
        meeting of shareholders was held. To be timely in connection with the removal
        of
        any Director at a special meeting of the shareholders, a shareholder's notice
        and other aforesaid items shall be delivered to or mailed and received at
        the
        principal executive offices of the Company not less than forty days nor more
        than sixty days prior to the date of such meeting; provided, however, that
        in
        the event that less than fifty days' notice or prior public disclosure of
        the
        date of the special meeting of shareholders is given or made to the
        shareholders, the shareholder's notice and other aforesaid items to be timely
        must be so received not later than the close of business on the seventh day
        following the day on which such notice of date of the meeting was mailed
        or such
        public disclosure was made. Within thirty days (or such shorter period that
        may
        exist prior to the date of the meeting) after such shareholder shall have
        delivered the aforesaid items to the Secretary of the Company, the Secretary
        and
        the Board of Directors of the Company shall respectively determine whether
        the
        items to be ruled upon by them are reasonably satisfactory and shall notify
        such
        shareholder in writing of
   
   their
        respective determinations. If such shareholder fails to submit a required
        item
        in the form or within the time indicated, or if the Secretary or the Board
        of
        Directors of the Company determines that the items to be ruled upon by them
        are
        not reasonably satisfactory, then such proposal by such shareholder may not
        be
        voted upon by the shareholders of the Company at such meeting of shareholders.
        The presiding person at each meeting of shareholders shall, if the facts
        warrant, determine and declare to the meeting that a proposal to remove a
        Director of the Company was not made in accordance with the procedures
        prescribed by these Bylaws, and if he should so determine, he shall so declare
        to the meeting and the defective proposal shall be disregarded. Beneficial
        ownership shall be determined as specified in Section 6 of Article VIII of
        these
        Bylaws.
  Any
        Director of the Company may resign at any time by giving written notice to
        the
        Chairman of the Board or the Secretary. Such resignation shall take effect
        at
        the date of the receipt of such notice or at any later time specified therein
        and, unless otherwise specified therein, the acceptance of such resignation
        shall not be necessary to make it effective.
  Section
        10. Executive and Other Committees .
        The
        Board of Directors, by resolution adopted by a majority of the full Board
        of
        Directors, may designate from among its members an executive committee and
        other
        committees, each of which shall be comprised of two or more members and,
        to the
        extent provided in such resolution, shall have and may exercise all of the
        authority of the Board of Directors.
  Notwithstanding
        the foregoing paragraph of this Section 10, no such committee shall have
        the
        authority of the Board of Directors to:
  a.
              amend
                  the Articles of Incorporation of the Company;
  b.
              amend,
                  alter or repeal the Bylaws of the Company or adopt new Bylaws for
                  the
                  Company;
  c.
              alter
                  or repeal any resolution of the Board of Directors;
  d.
              approve
                  a plan of merger or consolidation;
  e.
              take
                  definitive action on any reclassification or exchange of securities,
                  or
                  repurchase by the Company of any of its equity securities;
  f.
              declare
                  a dividend on the capital stock of the Company;
  g.
              call
                  a special meeting of the shareholders;
  h.
              recommend
                  any proposal to the shareholders for action by the shareholders;
  i.
              fill
                  vacancies in the Board of Directors or any such committee;
   
  j.
              fill
                  any Directorship to be filled by reason of an increase in the number
                  of
                  Directors;
 k.
              elect
                  or remove officers or members of any such committee; or
 l.
              fix
                  the compensation of any member of such committee.
  The
        designation of any such committee and the delegation thereto of authority
        shall
        not operate to relieve the Board of Directors, or any member thereof, of
        any
        responsibility imposed upon it or him by law, nor shall such committee function
        where action of the Board of Directors is required under applicable law.
        The
        Board of Directors shall have the power at any time to change the membership
        of
        any such committee and to fill vacancies in it. A majority of the members
        of any
        such committee shall constitute a quorum. Each such committee may elect a
        chairman and appoint such subcommittees and assistants as it may deem necessary.
        Except as otherwise provided by the Board of Directors, meetings of any
        committee shall be conducted in accordance with the provisions of Sections
        4 and
        6 of this Article III as the same shall from time to time be amended. Any
        member
        of any such committee elected or appointed by the Board of Directors may
        be
        removed by the Board of Directors whenever in its judgment the best interests
        of
        the Company will be served thereby, but such removal shall be without prejudice
        to the contract rights, if any, of the person so removed. Election or
        appointment of a member of a committee shall not of itself create contract
        rights.
  **ARTICLE
        IV.**
  **OFFICERS**
  Section
        1. General .
        The
        officers of the Company shall be appointed by the Board of Directors and
        shall
        consist of a Chairman of the Board, a Chief Executive Officer or President,
        or
        both, one or more Vice Presidents, a Chief Financial Officer and a Secretary.
        The Board of Directors may also choose such other officers and agents as
        the
        Board of Directors, in its sole and absolute discretion, shall deem necessary
        or
        appropriate. Any number of offices may be held by the same person, unless
        the
        Articles of Incorporation or these By-laws provide otherwise.
  Section
        2. Election; Term of Office .
        The
        Board of Directors, at its first meeting held after each Annual Meeting of
        Shareholders, shall elect a Chairman of the Board, a Chief Executive Officer
        or
        a President, or both, one or more Vice Presidents, a Secretary and a Chief
        Financial Officer, and may also elect at that meeting or any other meeting,
        such
        other officers and agents as it shall deem necessary or appropriate. Each
        officer of the Company shall exercise such powers and perform such duties
        as
        shall be determined from time to time by the Board of Directors together
        with
        the powers and duties which are customarily exercised by such officer; and
        each
        officer of the Company shall hold office until such officer's successor is
        elected and qualified or until such officer's earlier resignation or removal.
        Any officer may resign at any time upon written notice to the
   
   Company.
        The Board of Directors may at any time, with or without cause, by the
        affirmative vote of a majority of Directors then in office, remove an officer.
  Section
        3. Chairman of the Board .
        The
        Chairman of the Board shall preside at all meetings of the shareholders and
        the
        Board of Directors, and shall have such other duties and powers as may be
        prescribed by the Board of Directors from time to time.
  Section
        4. Chief Executive Officer. The
        Chief Executive Officer shall be the chief executive officer of the Company,
        shall have general and active management of the business of the Company,
        and
        shall see that all orders and resolutions of the Board of Directors are carried
        into effect. The Chief Executive Officer shall have and exercise such further
        powers and duties as may be specifically delegated to or vested in the Chief
        Executive Officer from time to time by these By-laws or the Board of Directors.
        In the absence of the Chairman of the Board or in the event of his inability
        or
        refusal to act, or if the Board has not designated a Chairman, the Chief
        Executive Officer shall perform the duties of the Chairman of the Board,
        and
        when so acting, shall have all the powers and be subject to all of the
        restrictions upon the Chairman of the Board.
  Section
        5. Vice President .
        In the
        absence of the Chief Executive Officer or in the event of his inability or
        refusal to act, the Vice President (or in the event that there be more than
        one
        vice president, the vice presidents in the order designated by the Board
        of
        Directors, or in the absence of any designation, then in the order of their
        election) shall perform the duties of the President, and when so acting,
        shall
        have all the powers of and be subject to all the restrictions upon the
        President. The vice presidents shall perform such other duties and have such
        other powers as the Board of Directors or the President may from time to
        time
        prescribe.
  Section
        6. Secretary .
        The
        Secretary shall attend all meetings of the Board of Directors and all meetings
        of the shareholders, and record all the proceedings thereat in a book or
        books
        to be kept for that purpose; the Secretary shall also perform like duties
        for
        the standing committees when required. The Secretary shall give, or cause
        to be
        given notice of meetings of shareholders and special meetings of the Board
        of
        Directors, and shall perform such other duties as may be prescribed by the
        Board
        of Directors or the President. If the Secretary shall be unable or shall
        refuse
        to cause to be given notice of all meetings of the shareholders and special
        meetings of the board of Directors, and if there be no assistant secretary,
        then
        either the Board of Directors or the President may choose another officer
        to
        cause such notice to be given. The Secretary shall have custody of the seal
        of
        the Company and the Secretary or any assistant secretary, if there be one,
        shall
        have authority to affix same to any instrument requiring it and when so affixed,
        it may be attested to by the signature of the Secretary or by the signature
        of
        any such assistant secretary. The Board of Directors may give general authority
        to any other officer to affix the seal of the Company and to attest to the
        affixing by his or her signature. The Secretary shall see that all books,
        reports, statements, certificates and other documents and records required
        by
        law to be kept or filed are properly kept or filed, as the case may be.
   
   Section
        7. Chief Financial Officer .
        The
        Chief Financial Officer shall have the custody of the corporate funds and
        securities and shall keep complete and accurate accounts of all receipts
        and
        disbursements of the Company, and shall deposit all moneys and other valuable
        effects of the Company in its name and to its credit in such banks and other
        depositories as may be designated from time to time by the Board of Directors.
        The Chief Financial Officer shall disburse the funds of the Company, taking
        proper vouchers and receipts for such disbursements, and shall render to
        the
        Board of Directors, at its regular meetings, or when the Board of Directors
        so
        requires, an account of all his or her transactions as Chief Financial Officer
        and of the financial condition of the Company. The Chief Financial Officer
        shall, when and if required by the Board of Directors, give and file with
        the
        Company a bond, in such form and amount and with such surety or sureties
        as
        shall be satisfactory to the Board of Directors, for the faithful performance
        of
        his or her duties as Chief Financial Officer. The Chief Financial Officer
        shall
        have such other powers and perform such other duties as the Board of Directors
        or the Chief Executive Officer shall from time to time prescribe.
  Section
        8. Other Officers .
        Such
        other officers as the Board of Directors may choose shall perform such duties
        and have such powers as from time to time may be assigned to them by the
        Board
        of Directors. The Board of Directors may delegate to any other officer of
        the
        Company the power to choose such other officers and to prescribe their
        respective duties and powers.
  Section
        9. Resignations .
        Any
        officer may resign at any time by giving written notice to the Board of
        Directors, the Chairman of the Board, the President or the Secretary which
        shall
        be deemed to constitute notice to the Company. Such resignation shall take
        effect upon receipt of such notice or at any later time specified therein;
        and,
        unless otherwise specified therein, the acceptance of such resignation shall
        not
        be necessary to make it effective.
  Section
        10. Removal .
        Any
        officer or agent may be removed, either with or without cause, at any time,
        by
        the Board of Directors at any meeting called for that purpose; provided,
        however, that the President may remove any agent appointed by him.
  Section
        11. Vacancies .
        Whenever any vacancies shall occur in any office by death, resignation, increase
        in the number of offices of the Company, or otherwise, the officer so elected
        shall hold office until his successor is chosen and qualified. The Board
        of
        Directors may at any time remove any officer of the company, whenever in
        its
        judgment the best interests of the Company will be served thereby, but such
        removal shall be without prejudice to the contract rights, if any, of the
        person
        so removed. Election or appointment of an officer or agent shall not of itself
        create contract rights.
   
   **ARTICLE
        V**
  **INDEMNIFICATION**
  Section
        1. Indemnification of Directors and Officers in Third Party
        Proceedings .
        The
        Company may indemnify any Director or officer of the Company who was or is
        an
        "authorized representative" of the Company (which shall mean for the purposes
        of
        this Article V a Director or officer of the Company, or a person serving
        at the
        request of the Company as a Director, officer, partner or trustee of another
        corporation, partnership, joint venture, trust or other enterprise) and who
        was
        or is a "party" (which shall include for purposes of this Article V the giving
        of testimony or similar involvement) or is threatened to be made a party
        to any
        "third party proceeding" (which shall mean for purposes of this Article V
        any
        threatened, pending or completed action, suit or proceeding, whether civil,
        criminal, administrative or investigative, other than an action by or in
        the
        right of the Company) by reason of the fact that such person was or is an
        authorized representative of the Company, against expenses (which shall include
        for purposes of this Article V attorney's fees and disbursements), judgments,
        penalties, fines and amounts paid in settlement actually and reasonably incurred
        by such person in connection with such third party proceeding if such person
        acted in good faith and in a manner such person reasonably believed to be
        in, or
        not opposed to, the best interests of the Company, or with respect to a criminal
        third party proceeding (which shall include for purposes of this Article
        any
        investigation which could or does lead to a criminal third party proceeding)
        if
        such person had not reasonable cause to believe such conduct was unlawful.
        The
        termination of any third party proceeding by judgment, order, settlement,
        indictment, conviction or upon a plea of no contest or its equivalent, shall
        not, of itself, create a presumption that the authorized representative did
        not
        act in good faith and in a manner which such person reasonably believed to
        be in
        or not opposed to the best interests of the Company, and, with respect to
        any
        criminal third party proceeding, had reasonable cause to believe that such
        conduct was unlawful.
  Section
        2. Indemnification of Directors and Officers in Corporate
        Proceedings .
        The
        Company may indemnify any Director or officer of the Company who was or is
        an
        authorized representative of the Company and who was or is a party or is
        threatened to be made a party to any "corporate proceeding" (which shall
        mean
        for purposes of this Article V any threatened, pending or completed action
        or
        suit by or in the right of the Company to procure a judgment in its favor
        or any
        investigative proceeding by or on behalf of the Company) by reason of the
        fact
        that such person was or is an authorized representative of the Company, against
        expenses (including attorneys' fees and disbursements) actually and reasonably
        incurred by such person in connection with the defense or settlement of such
        corporate proceeding if such person acted in good faith and in a manner such
        person reasonably believed to be in, or not opposed to, the best interests
        of
        the Company, except that no indemnification shall be made in the performance
        of
        such person's duty to the Company unless and only to the extent that the
        court
        in which such corporate proceeding was pending shall determine upon application
        that, despite the adjudication of liability but in view of all the circumstances
        of the case, such authorized representative is fairly and reasonably entitled
        to
        indemnity for such expenses which the court shall deem proper.
   
   
   Section
        3. Indemnification of Authorized Representatives .
        To the
        extent that an authorized representative of the Company who neither was nor
        is a
        Director or officer of the Company has been successful on the merits or
        otherwise in defense of any third party or corporate proceeding or in defense
        of
        any claim, issue or matter therein, such person shall be indemnified against
        expenses actually and reasonably incurred by such person in connection
        therewith. Such an authorized representative may, at the discretion of the
        Company, be indemnified by the Company in any other circumstance to any extent
        if the Company would be required by Section 1 or 2 of this Article V to
        indemnify such person in such circumstances to such extent as if such person
        were or had been a Director or officer of the Company.
  Section
        4. General Terms .
        Any
        indemnification under Section 1 and Section 2 of this Article V (unless ordered
        by a court) shall be made by the Company only as authorized in the specific
        case
        upon a determination that indemnification of the Director, officer, employee
        or
        agent is proper under the circumstances because he had met the applicable
        standard of conduct set forth in Section 1 and Section 2 of this Article
        V. Such
        determination shall be made (i) by the Board of Directors by a majority vote
        of
        a quorum consisting of Directors who were not parties to such action, suit
        or
        proceeding, or (ii) if such a quorum of disinterested Directors so directs,
        by
        independent legal counsel in written opinion, or (iii) by the shareholders.
  Section
        5. Amendment .
        Any
        amendment to Article V shall not apply to any liability of a Director, officer,
        employee or agent arising out of a transaction or omission occurring prior
        to
        the adoption of such amendment, but any such liability based on a transaction
        or
        omission occurring prior to the adoption of such amendment shall be governed
        by
        Article V of these By-laws, as in effect at the time of such transaction
        or
        omission.
  Section
        6. Insurance and Trust Fund .
        In
        furtherance and not in limitation of the powers conferred by statute:
   a.
        the
        Company may purchase and maintain insurance on behalf of any person who is
        or
        was a Director, officer, employee or agent of the Company, or is serving
        at the
        request of another corporation as a Director, officer, employee or agent
        of
        another corporation, partnership, joint venture, trust or other enterprise,
        against any liability asserted against him and incurred by him in any such
        capacity, or arising out of his power to indemnify him against such liability
        under the provisions of law; and
  b.
        the
        Company may create a trust fund, grant a security interest and/or use other
        means (including without limitation, letters of credit, surety bonds, and/or
        other similar arrangements), as well as enter into contracts providing
        indemnification to the fullest extent permitted by law and including as part
        thereof provisions with respect to any or all of the foregoing, to ensure
        the
        payment of such amount as may become necessary to effect indemnification
        as
        provided therein, or elsewhere.
   
   
   Section
        7. Indemnification of Employees and Agents of the Company .
        The
        Company may, to the extent authorized from time to time by the Board of
        Directors, grant rights to indemnification, including the right to be paid
        by
        the Company the expenses incurred in defending any proceeding in advance
        of its
        final disposition, to any employee or agent of the Company to the fullest
        extent
        of the provisions of the Section or otherwise with respect to the
        indemnification and advancement of expenses of Directors and officers of
        the
        Company. Notwithstanding any other provision of these by-laws, no officer,
        Director, agent or employee of the Company shall receive indemnification
        payments under this section in advance of the final disposition of any action
        or
        proceeding against such officer, Director, agent or employee unless the Company
        shall have received, prior to the date of such payment, a written undertaking
        to
        repay the amounts advanced by the Company if it shall subsequently be determined
        that the officer, Director, agent or employee was not entitled to
        indemnification for such costs under the terms of these By-Laws.
  **ARTICLE
        VI.**
  **CONTRACTS
        AND TRANSACTIONS WITH DIRECTORS AND OFFICERS**
  Section
        1. General Procedure .
        No
        contract or transaction between the Company and one or more of its Directors
        or
        officers, or between the Company and any other corporation, partnership,
        association or other organization in which one or more of the Company's
        Directors or officers are Directors or officers or have a financial interest,
        shall be void or voidable solely for this reason, solely because the Director
        or
        officer is present at or participates in the meeting of the Company's Board
        of
        Directors or committee which authorizes the contract or transaction, or solely
        because his or their votes are counted for such purpose, if:
  a.
        The
        material facts as to his relationship or interest and as to the contract
        or
        transaction are disclosed or are known to the Board of Directors or the
        committee, and the Board of Directors or committee in good faith authorizes
        the
        contract or transaction by the affirmative vote of a majority of the
        disinterested Directors, even though the disinterested Directors constitute
        less
        than a quorum; or
  b.
        The
        material facts as to his relationship or interest and as to the contract
        or
        transaction are disclosed or are known to the shareholders entitled to vote
        thereon, and the contract or transaction is specifically approved in good
        faith
        by vote of the shareholders; or
  c.
        The
        contract or transaction is fair to the Company as of the time it is authorized,
        approved or ratified by the Board of Directors, the committee thereof, or
        the
        shareholders.
   
   
   Section
        2. Determination of Quorum .
        Common
        or interested Directors may be counted in determining the presence of a quorum
        at a meeting of the Board of Directors or of a committee which authorizes
        the
        contract or transaction as provided in Section 1 of this Article VI.
  **ARTICLE
        VII.**
  **NOTICES**
   Section
        1. Notice .
        Whenever, under the provisions of the laws of Texas or the Articles of
        Incorporation or these By-laws, any notice, request, demand or other
        communication is required to be or may be given or made to any officer,
        Director, or registered shareholder, it shall be construed to mean that such
        notice, request, demand or other communication must be given or made in person,
        but the same may be given or made by mail, telegraph, cablegram, telex, or
        telecopier to such officer, Director or registered shareholder. Any such
        notice,
        request, demand or other communication shall be considered to have been properly
        given or made, in the case of mail, when deposited in the mail or delivered
        to
        the appropriate office for telegraph or cable transmission, and in other
        cases
        when transmitted by the party giving or making the same, directed to the
        officer
        or Director at his address as it appears on the record of shareholders, or,
        if
        the shareholder shall have filed with the Secretary of the Company a written
        request that notices to him be mailed to some other address, then directed
        to
        the shareholder at such other address. Notice to Directors may also be given
        in
        accordance with Section 6 of Article III hereof.
  Whenever,
        under the provisions of the laws of this state or the Articles of Incorporation
        or these By-laws, any notice, request, demand or other communication is required
        to be or may be given or made to the Company, it shall also not be construed
        to
        mean that such notice, request, demand or other communication must be given
        or
        made in person, but that the same may be given or made to the Company by
        mail,
        telegraph, cablegram, telex or telecopier. Any such notice, request, demand
        or
        other communication shall be considered to have been properly given or made,
        in
        the case of mail, telegram or cable, when deposited in the mail or delivered
        to
        the appropriate office for telegraph or cable transmission.
  Section
        2. Waivers of Notice .
        Whenever any written notice is required to be given under the provisions
        of the
        Articles of Incorporation, these By-laws or a statute, a waiver thereof in
        writing, signed by the person or persons entitled to such notice, whether
        before
        or after the time stated therein, shall be deemed equivalent to the giving
        of
        such notice. Neither the business to be transacted at, nor the purpose of,
        any
        regular or special meeting of the shareholders, Directors, or members of
        a
        committee of Directors need be specified in any written waiver of notice
        of such
        meeting.
  Attendance
        of a person, either in person or by proxy at any meeting, without protesting
        prior to the conclusion of the meeting the lack of notice of such meeting,
        shall
        constitute a waiver of notice of such meeting.
   
 
   **ARTICLE
        VIII.**
  **MISCELLANEOUS
        PROVISIONS**
   Section
        1. Offices .
        The
        principal office of the Company shall be located in Austin, Texas, unless
        and
        until changed by resolution of the Board of Directors. The Company may also
        have
        offices at such other places as the Board of Directors may designate from
        time
        to time, or as the business of the Company may require. The principal office
        and
        registered office may be, but need not be, the same.
  Section
        2. Resignations .
        Any
        Director or officer may resign at any time. Such resignations shall be made
        in
        writing and shall take effect at the time specified therein, or, if no time
        be
        specified, at the time of its receipt by the President or Secretary. The
        acceptance of a resignation shall not be necessary to make it effective,
        unless
        expressly so provided in the resignation.
  Section
        3. Fixing Record Dates for Payment of Dividends and Other
        Purposes .
        For the
        purpose of determining shareholders entitled to receive payment of any dividend
        or in order to make a determination of shareholders for any other proper
        purpose, the Board of Directors of the Company may provide that the stock
        transfer books shall be closed for a stated period but not to exceed, in
        any
        case, sixty days. In lieu of closing the stock transfer books, the Board
        of
        Directors may fix in advance a date as the record date for any such
        determination of shareholders, such date to be not more than sixty days prior
        to
        the date on which the particular action requiring such determination of
        shareholders is to be taken. If the stock transfer books are not closed and
        no
        record date is fixed for the determination of shareholders entitled to receive
        payment of a dividend, then the date on which the resolution of the Board
        of
        Directors declaring such dividend is adopted shall be the record date for
        such
        determination of shareholders.
  Section
        4. Corporate Seal .
        The
        corporate seal, if the Company shall have a corporate seal, shall have inscribed
        thereon the name of the Company. The seal may be used by causing it or a
        facsimile thereof to be impressed or affixed or otherwise reproduced.
  Section
        5. Separability .
        If one
        or more of the provisions of these Bylaws shall be held to be invalid, illegal
        or unenforceable, such invalidity, illegality or unenforceability shall not
        affect any other provision hereof and these Bylaws shall be construed as
        if such
        invalid, illegal or unenforceable provision or provisions had never been
        contained herein.
  Section
        6. Beneficial Owners .
        The
        Company shall be entitled to recognize the exclusive right of a person
        registered on its books as the owner of shares to receive dividends, and
        to vote
        as such owner, and to hold liable for calls and assessments a person registered
        on its books as the owner of shares, and shall not be bound to recognize
        any
        equitable or other claim to or interest in such share or shares on the part
        of
        any other person, whether or not it shall have express or other notice thereof,
        except as otherwise provided by law. "Beneficial Owner" as used in these
        Bylaws
        means any of the following:
   
   
   a.
        a
        person who individually or with any of his affiliates or associates beneficially
        owns (within the meaning of Rule 13d-3 under the Securities Exchange Act
        of
        1934, as amended) any capital stock of the Company, directly or indirectly;
  b.
        a
        person who individually or with any of his affiliates or associates has either
        of the following rights:
  (i)
        to
        acquire capital stock of the Company, whether such right is exercisable
        immediately or only after the passage of time, pursuant to any agreement,
        arrangement or understanding, or upon the exercise of conversion rights,
        exchange rights, warrants or options, or otherwise;
  (ii)
        to
        vote capital stock of the Company pursuant to any agreement, arrangement
        or
        understanding; or
  c.
        a
        person who has any agreement, arrangement or understanding for the purpose
        of
        acquiring, holding, voting or disposing of capital stock of the Company with
        any
        other person who beneficially owns or whose affiliates beneficially own (within
        the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as
        amended), directly or indirectly, such shares of capital stock.
  Section
        7. Dividends .
        Dividends upon the capital stock of the Company, subject to the provisions
        of
        the Articles of Incorporation, if any, may be declared by the Board of Directors
        at any regular or special meeting or by any Committee of the Board of Directors
        having such authority at any meeting thereof, and may be paid in cash, in
        property, in shares of capital stock, or in any combination thereof. Before
        payment of any dividend, there may be set aside out of any funds of the Company
        available for dividends such sum or sums as the Board of Directors from time
        to
        time, in its absolute discretion, deems proper as a reserve or reserves to
        meet
        contingencies, or for equalizing dividends, or for any proper purpose, and
        the
        Board of Directors may modify or abolish any such reserve.
  Section
        8. Disbursements .
        All
        notes, checks, drafts, and orders for the payment of money issued by the
        Company
        shall be signed in the name of the Company by such officers or such other
        persons as the Board of Directors may from time to time designate.
  **ARTICLE
        IX.**
  **AMENDMENT
        OF BYLAWS**
  Section
        1. Vote Requirements .
        The
        Board of Directors shall have the power to make, adopt, alter, amend and
        repeal
        from time to time the Bylaws of this Company, subject to the right of the
        shareholders entitled to vote with respect thereto to adopt, alter, amend
        and
        repeal the Bylaws; provided, however, that Bylaws shall not be adopted, altered,
        amended or repealed by the shareholders of the Company, except by the vote
        of
        the holders of not less than sixty percent (60%) of the outstanding shares
        of
        the capital stock of the Company entitled to vote generally in the election
        of
        Directors, considered for this purpose as one class.
   **[Remainder
        of This Page is Blank]**
   
   **CERTIFICATE
        OF CORPORATE SECRETARY**
   The
        undersigned, acting in his capacity as Corporate Secretary of Nano-Proprietary,
        Inc. (the "Company") attests that the foregoing Amended and Restated Bylaws
        were
        duly adopted and approved by the Board of Directors of the Company at a meeting
        which was duly called and held on February 16, 2006.
   NANO-PROPRIETARY,
                  INC.
                
                
                By:
                  /s/ Douglas P.
                  Baker
                
                Douglas
                  P. Baker,
                Corporate
                  Secretary