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**CHARTER        OF THE COMPENSATION COMMITTEE **

**NANO-PROPRIETARY,        INC. **

| **1.** | **PURPOSE** |
|--------|-------------|

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

| **2.** | **COMMITTEE                  MEMBERSHIP AND ORGANIZATION** |
|--------|------------------------------------------------------------|

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**3.    **
**COMMITTEE        RESPONSIBILITIES AND AUTHORITY **

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

| **4.** | **MEETING                  AND MINUTES** |
|--------|------------------------------------------|

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

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