**AMENDMENT
      NO. 1**




This
      Amendment No. 1 (this “ **Amendment** ”)
      is
      executed as of December ____, 2006, between **INDUSTRIAL
      PROPERTIES CORPORATION** ,
      a Texas
      corporation (“ **Landlord** ”),
      and **NANO-PROPRIETARY,
      INC.** ,
      a
      Delaware corporation (“ **Tenant** ”),
      for
      the purpose of amending the Lease Agreement between Landlord and Tenant dated
      February 6, 2004 (the “ **Lease** ”).
      Capitalized terms used herein but not defined shall be given the meanings
      assigned to them in the Lease.




**RECITALS:**




Pursuant
      to the terms of the Lease, Tenant is currently leasing Suites 105, 106, 107,
      108
      and 109 consisting of 16,111 square feet of space in the building located at
      3006 Longhorn Boulevard, Austin, Travis County, Texas, commonly known as 3006
      Longhorn Boulevard (the “ **Building** ”).
      Tenant desires to extend the Term for a period of 12 months, and Landlord has
      agreed to such extension on the terms and conditions contained
      herein.




**AGREEMENTS:**




For
      valuable consideration, whose receipt and sufficiency are acknowledged, Landlord
      and Tenant agree as follows:




1. **Extension
      of Term** .
      The
      Term is hereby extended such that it expires at 5:00 p.m., Austin, Texas time,
      on February 14, 2008, rather than February 14, 2007, on the terms and conditions
      of the Lease, as modified hereby.




2. **Rent** .




(a) **Base
      Rent** .
      Beginning February 15, 2007, the monthly installments of Base Rent shall be
      $8,378.00.




(b) **Additional
      Rent** .
      Beginning February 15, 2007, the monthly installments of Reimbursable Expenses
      shall be as follows:




Tenant’s
      Share of Taxes: $1,283.00


Tenant’s
      Share of Common Area Maintenance: $367.00


Tenant’s
      Share of Insurance Premiums: $86.00





Tenant
      acknowledges and agrees that the foregoing amounts are estimates only and that
      such amounts shall be adjusted in accordance with the terms of the Lease (as
      amended by this Amendment).






3. **Condition
      of Premises** .
      Tenant
      hereby accepts the Premises in their “ **AS-IS** ”
      condition, and Landlord shall have no obligation for any construction or
      finish-out allowance or providing to Tenant any other tenant
      inducement.




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4. **Limitation
      of Liability** .
      In
      addition to any other limitations of Landlord’s liability as contained in the
      Lease, as amended to date, the liability of Landlord (and its partners,
      shareholders or members) to Tenant (or any person or entity claiming by, through
      or under Tenant) for any default by Landlord under the terms of the Lease or
      any
      matter relating to or arising out of the occupancy or use of the Premises and/or
      other areas of the Building shall be limited to Tenant’s actual direct, but not
      consequential, damages therefor and shall be recoverable only from the interest
      of Landlord in the Building, and neither Landlord nor any principal or affiliate
      of Landlord shall be personally liable for any deficiency.




5. **Notices** .
      All
      notices and other communications given pursuant to the Lease shall be in writing
      and shall be 1) mailed
      by first class, United States mail, postage prepaid, certified, with return
      receipt requested, and addressed to the parties hereto at the address listed
      below, 2) hand
      delivered to the intended addressee, 3) sent
      by nationally recognized overnight courier, or 4) sent
      by facsimile transmission during the hours of 9:00 a.m. and 4:00 p.m. Dallas,
      Texas time on a business day, followed by a confirmatory letter. Notice sent
      by
      certified mail, postage prepaid, shall be effective three business days after
      being deposited in the United States mail; all other notices shall be effective
      upon delivery to the address of the addressee (even if such addressee refuses
      delivery thereof). The parties hereto may change their addresses by giving
      notice thereof to the other in conformity with this provision. Landlord and
      Tenant hereby agree not to conduct the transactions or communications
      contemplated by the Lease, as amended hereby, by electronic means, except by
      facsimile transmission as specifically set forth in this
      Section 5 ;
      nor
      shall the use of the phrase “in writing” or the word “written” be construed to
      include electronic communications except by facsimile transmissions as
      specifically set forth in this Section 5 .
      The
      addresses for notice set forth below shall supersede and replace any addresses
      for notice set forth in the Lease.




Landlord:
              Industrial
                  Properties Corporation
                100
                  McKinney Avenue, Suite 700
                Dallas,
                  Texas 75201
                Attention:
                  Lee Halford, Jr.
                Telecopy
                  No.: 214.661.1001
  with
                a copy to:
              Crow
                  Holdings
                2100
                  McKinney Avenue, Suite 700
                Dallas,
                  Texas 75201
                Attention:
                  Asset Manager - IPC - DASA
                Telecopy
                  No.: 214.661.8041
  Tenant:
              Nano-Proprietary,
                  Inc.
                3006
                  Longhorn Boulevard, Suite 106
                Austin,
                  Texas 78758
                Attention:
                  Thomas Bijou
                Telecopy
                  No.: 512.339.5021


6. **Brokerage** .
      Landlord and Tenant each warrant to the other that it has not dealt with any
      broker or agent in connection with the negotiation or execution of this
      Amendment other than DASA Management, L.P., whose commission shall be paid
      by
      Landlord pursuant to a separate written agreement. Tenant and Landlord shall
      each indemnify the other against all costs, expenses, attorneys’ fees, and other
      liability for commissions or other compensation claimed by any other broker
      or
      agent claiming the same by, through, or under the indemnifying
      party.




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7. **Determination
      of Charges** .
      Landlord and Tenant agree that each provision of the Lease (as amended by this
      Amendment) for determining charges and amounts payable by Tenant (including
      provisions regarding Additional Rent) is commercially reasonable and, as to
      each
      such charge or amount, constitutes a statement of the amount of the charge
      or a
      method by which the charge is to be computed for purposes of Section 93.012
      of the Texas Property Code.




8. **Prohibited
      Persons and Transactions** .
      Tenant
      represents and warrants to Landlord that Tenant is currently in compliance
      with,
      and shall at all times during the Term (including any extension thereof) remain
      in compliance with, the regulations of the Office of Foreign Asset Control
      (“ **OFAC** ”)
      of the
      Department of the Treasury (including those named on OFAC’s Specially Designated
      Nationals and Blocked Persons List) and any statute, executive order (including
      the September 24, 2001, Executive Order Blocking Property and Prohibiting
      Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism),
      or other governmental action relating thereto .




9. **Ratification** .
      Tenant
      hereby ratifies and confirms its obligations under the Lease, and represents
      and
      warrants to Landlord that Tenant has no defenses thereto. Additionally, Tenant
      further confirms and ratifies that, as of the date hereof, 5) the
      Lease is and remains in good standing and in full force and effect, 6) Tenant
      has no claims, counterclaims, set-offs or defenses against Landlord arising
      out
      of the Lease or in any way relating thereto or arising out of any other
      transaction between Landlord and Tenant, and 7) all
      tenant finish-work allowances provided to Tenant under the Lease or otherwise,
      if any, have been paid in full by Landlord to Tenant, and Landlord has no
      further obligations with respect thereto.




10. **Binding
      Effect; Governing Law** .
      Except
      as modified hereby, the Lease shall remain in full effect and this Amendment
      shall be binding upon Landlord and Tenant and their respective successors and
      assigns. If any inconsistency exists or arises between the terms of the Lease
      and the terms of this Amendment, the terms of this Amendment shall prevail.
      This
      Amendment shall be governed by the laws of the State of Texas.




11. **Counterparts** .
      This
      Amendment may be executed in multiple counterparts, each of which shall
      constitute an original, but all of which shall constitute one
      document.




[THE
      REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]




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Executed
      as of the date first written above.




**LANDLORD**:
            **INDUSTRIAL
                PROPERTIES CORPORATION**,
              a
                Texas corporation
              
              
              By:_______________________________
              Name:
                _____________________________
              Title:
                ______________________________**TENANT**:
            **NANO-PROPRIETARY,
                INC.,**
              a
                Delaware corporation
              
              
              By:_______________________________
              Name:
                _____________________________
              Title:
                ______________________________

























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