8-K

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

Date of report (date of earliest event reported):

July 9, 2006

NaturalNano, Inc.

(Exact name of registrant as specified in its charter)

Nevada	000-49901	87-0646435
(State or other jurisdiction	(Commission File No.)	(I.R.S. Employer
of incorporation)		Identification No.)

150 Lucius Gordon Drive, Suite 115

West Henrietta, New York 14586

(Address of principal executive offices)

(585) 214-8005

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement.

On July 9, 2006, we entered into a Termination Agreement with SBI Brightline XIII, LLC (“SBI”) terminating the Stock Purchase Agreement dated March 30, 2006 between us and SBI and canceling the Warrant for the purchase of shares of our Common Stock which we had issued to SBI on March 30, 2006 in connection with the Stock Purchase Agreement.

Following execution of the Termination Agreement, on July 9, 2006 we entered into a new Stock Purchase Agreement with SBI. Pursuant to the new Stock Purchase Agreement, SBI is obligated to purchase, on the dates we elect, up to 15,321,154 shares of our Common Stock for an aggregate purchase price of $15,500,000. The shares are to be sold in eighteen tranches of various sizes at increasing per share purchase prices ranging from $0.75 to $1.30 (for a weighted average price of $1.01 per share). Except for the requirement to sell the tranches in order and the requirement that the resale of the shares be registered as described below, there is no limitation on when we may require SBI to purchase the shares included in any tranche. We are not required to sell any shares to SBI unless and until we make an election to do so. SBI is not obligated to purchase shares pursuant to the Stock Purchase Agreement unless the resale of the shares by SBI is covered by an effective registration statement under the Securities Act of 1933 and we are obligated under the Stock Purchase Agreement, as soon as practicable, but in any event within 120 days, to prepare and file with the Securities and Exchange Commission a registration statement on Form SB-2 or other applicable form for such purpose. The new Stock Purchase Agreement is identical in all material aspects to the March 30, 2006 Stock Purchase Agreement except that the new Stock Purchase Agreement increases from 10,500,000 to 15,321,154 the number of shares of our Common Stock that SBI is obligated to purchase and changes the weighted average purchase prices at which such shares will be issued (from $1.47 to $1.01 per share).

We expect to exercise our right to sell shares to SBI when and as we deem necessary to fund our ongoing business operations and development activities, based on our cash requirements, revenues from operations, third party research support, licenses and potential strategic investments, and the availability of debt or equity financing from other sources on more favorable terms. The shares will be issued and sold to SBI without registration under the Securities Act of 1933 pursuant to the exemption provided under Section 4(2) thereof and Rule 506 promulgated thereunder.

In connection with the new Stock Purchase Agreement, on July 9, 2006, we issued to SBI a Warrant for the purchase of up to 4,770,000 shares of our Common Stock at exercise prices ranging from $0.75 to $1.30. The material terms of the Warrant are described in Item 3.02 below.

The Termination Agreement is filed herewith as Exhibit 10.1 and the new Stock Purchase Agreement is filed herewith as Exhibit 10.2. The foregoing descriptions of the Termination Agreement and the new Stock Purchase Agreement are qualified in their entirety by reference to such Exhibits.

Item 3.02. Unregistered Sale of Equity Securities.

On July 9, 2006, in connection with the Stock Purchase Agreement described in Item 1.01 above, we issued to SBI a Warrant for the purchase of up to 4,770,000 shares of our Common Stock at exercise prices ranging from $0.75 to $1.30. The Warrant expires on March 30, 2009. The Warrant may not be exercised if, and to the extent that, immediately following such exercise the holder thereof would beneficially own 5% or more of our outstanding Common Stock. The Warrant may be exercised in cash or by cashless exercise (involving the surrender of a portion of the Warrant valued at the then-current market price of our Common Stock) in lieu of cash payment.

The Warrant was issued, and the shares issuable thereunder will be issued, without registration under the Securities Act of 1933 pursuant to the exemption provided under Section 4(2) thereof and Rule 506 promulgated thereunder.

The Warrant is filed herewith as Exhibit 4.1. The foregoing description of the Warrant is qualified in its entirety by reference to such Exhibit.

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Item 9.01. Financial Statements and Exhibits.

(c)   Exhibits.

Exhibit Number	Description of Exhibit
4.1	Warrant for 4,770,000 shares of Common Stock issued to SBI Brightline XIII, LLC
10.1	Termination Agreement dated July 9, 2006 between NaturalNano, Inc. and SBI Brightline XIII, LLC
10.2	Stock Purchase Agreement dated July 9, 2006 between NaturalNano, Inc. and SBI Brightline XIII, LLC

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	NATURALNANO, INC.
Date:  July 10, 2006	By:	/s/ KATHLEEN A. BROWNE
		Name:   Kathleen A. Browne Title:     Chief Financial Officer

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EX-4.1

EXHIBIT 4.1

NEITHER THESE WARRANTS NOR THE COMMON STOCK ISSUABLE UPON EXERCISE OF THESE WARRANTS HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, PLEDGED OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE ACT OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.

4,770,000 Warrants July 9, 2006

NATURALNANO INC.

WARRANTS

NaturalNano Inc., a Nevada corporation (“NaturalNano”), certifies that, for value received, SBI Brightline XIII LLC (“SBI”), or registered assigns (the “Holder”), is the owner of Four Million Seven Hundred Seventy Thousand (4,770,000 ) Warrants of NaturalNano (the “Warrants”). Each Warrant entitles the Holder to purchase from NaturalNano at any time prior to the Expiration Date (as defined below) one share of the common stock of NaturalNano (the “Common Stock”) for the per share prices set forth on Schedule I, which is attached hereto and made part hereof (the “Exercise Price”), on the terms and conditions hereinafter provided. The Exercise Price and the number of shares of Common Stock purchasable upon exercise of each Warrant are subject to adjustment as provided in this Certificate.

1.Expiration Date; Exercise

1.1Expiration Date. The Warrants shall expire on March 30, 2009 (the “Expiration Date”).

1.2Manner of Exercise. The Warrants are exercisable by delivery to NaturalNano of the following (the “Exercise Documents”): (a) this Certificate (b) a written notice of election to exercise the Warrants; and (c) payment of the Exercise Price by certified check, wire transfer of funds or cashless exercise. Within three business days following receipt of the foregoing, NaturalNano shall execute and deliver to the Holder: (a) a certificate or certificates representing the aggregate number of shares of Common Stock purchased by the Holder, and (b) if less than all of the Warrants evidenced by this Certificate are exercised, a new certificate evidencing the Warrants not so exercised.

1.3Warrant Exercise Limitation. Notwithstanding any other provision of this Agreement, if as of the date of exercise NaturalNano has a class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended, Holder may not exercise Warrants under this Section 1 to the extent that immediately following such exercise Holder would beneficially own 5% or more of the outstanding Common Stock of NaturalNano. For this purpose, a representation of the Holder that following such exercise it would not beneficially own 5% or more of the outstanding Common Stock of NaturalNano shall be conclusive and binding upon NaturalNano unless the number of shares of Common Stock for which the Holder seeks to exercise Warrants would themselves represent 5% or more of the outstanding Common Stock of NaturalNano following such exercise.

2.Adjustments of Exercise Price and Number and Kind of Conversion Shares

2.1In the event that NaturalNano shall at any time hereafter (a) pay a dividend in Common Stock or securities convertible into Common Stock; (b) subdivide or split its outstanding Common Stock; (c) combine its outstanding Common Stock into a smaller number of shares; then the number of shares to be issued immediately after the occurrence of any such event shall be adjusted so that the Holder thereafter may receive the number of shares of Common Stock it would have owned immediately following such action if it had exercised the Warrants immediately prior to such action and the Exercise Price shall be appropriately adjusted to reflect such proportionate increases or decreases in the number of shares.

2.2In case of any reclassification, capital reorganization, consolidation, merger, sale of all or substantially all of NaturalNano’s assets or any other change in the Common Stock of NaturalNano, other than as a result of a subdivision, combination, or stock dividend provided for in Section 2.1 (any of which, a “Change Event”), then, as a condition of such Change Event, lawful provision shall be made, and duly executed documents evidencing the same from NaturalNano or its successor shall be delivered to the Holder, so that the Holder shall have the right at any time prior to the expiration of the Warrants to purchase, at a total price equal to that payable upon the exercise of the Warrants, the kind and amount of shares of stock and other securities and property receivable in connection with such Change Event by a holder of the same number of shares of Common Stock as were purchasable by the Holder immediately prior to such Change Event. In any such case appropriate provisions shall be made with respect to the rights and interest of the Holder so that the provisions hereof shall thereafter be applicable with respect to any shares of stock or other securities and property deliverable upon exercise hereof, and appropriate adjustments shall be made to the Exercise Price per share payable hereunder, provided the Exercise Price for all the Warrants shall remain the same. The provisions of this Section 2.2 shall similarly apply to successive reclassifications, capital reorganizations, mergers, consolidations, sales or other transfers.

3.Reservation of Shares. NaturalNano shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, such number of shares of Common Stock as shall from time to time be issuable upon exercise of the Warrants. If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to permit the exercise of the Warrants, NaturalNano shall promptly seek such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose.

4.Certificate as to Adjustments. In each case of any adjustment in the Exercise Price, or number or type of shares issuable upon exercise of these Warrants, the Chief Financial Officer of NaturalNano shall compute such adjustment in accordance with the terms of these Warrants and prepare a certificate setting forth such adjustment and showing in detail the facts upon which such adjustment is based, including a statement of the adjusted Exercise Price. NaturalNano shall promptly send (by facsimile and by either first class mail, postage prepaid or overnight delivery) a copy of each such certificate to the Holder.

5.Loss or Mutilation. Upon receipt of evidence reasonably satisfactory to NaturalNano of the ownership of and the loss, theft, destruction or mutilation of this Certificate, and of indemnity reasonably satisfactory to it, and (in the case of mutilation) upon surrender and cancellation of these Warrants, NaturalNano will execute and deliver in lieu thereof a new Certificate of like tenor as the lost, stolen, destroyed or mutilated Certificate.

6.Representations and Warranties of NaturalNano. NaturalNano hereby represents and warrants to Holder that:

6.1Due Authorization. All corporate action on the part of NaturalNano, its officers, directors and shareholders necessary for (a) the authorization, execution and delivery of, and the performance of all obligations of NaturalNano under, these Warrants, and (b) the authorization, issuance, reservation for issuance and delivery of all of the Common Stock issuable upon exercise of these Warrants, has been duly taken. These Warrants constitute a valid and binding obligation of NaturalNano enforceable in accordance with their terms, subject, as to enforcement of remedies, to applicable bankruptcy, insolvency, moratorium, reorganization and similar laws affecting creditors’ rights generally and to general equitable principles.

6.2Organization. NaturalNano is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada and has all requisite corporate power to own, lease and operate its property and to carry on its business as now being conducted and as currently proposed to be conducted.

6.3Valid Issuance of Stock. Any shares of Common Stock issued upon exercise of the Warrants in accordance with their terms will be duly and validly issued, fully paid and non-assessable without any preemptive or similar rights relating or with respect thereto or resulting therefrom.

6.4Governmental Consents. All consents, approvals, orders, authorizations or registrations, qualifications, declarations or filings with any federal or state governmental authority on the part of NaturalNano required in connection with the issuance of the Warrants have been obtained.

7.Representations and Warranties of SBI. SBI, and any subsequent holder of Warrants, by its acceptance hereof, represents and warrants to NaturalNano that:

7.1It is acquiring the Warrants for its own account, for investment purposes only.

7.2It understands that an investment in the Warrants and in the shares of Common Stock issuable upon exercise of the Warrants involves a high degree of risk, and it has the financial ability to bear the economic risk of this investment in the Warrants and such shares, including a complete loss of such investment. It has adequate means for providing for its current financial needs and has no need for liquidity with respect to this investment.

7.3It has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of an investment in the Warrants and in the shares of Common Stock issuable upon exercise of the Warrants and in protecting its own interest in connection with such transactions.

7.4It understands that neither the Warrants nor the shares of Common Stock issuable upon exercise of the Warrants have been registered under the Securities Act of 1933, as amended (the “Securities Act”) or under any state securities laws. It is familiar with the provisions of the Securities Act and Rule 144 thereunder and understands that the restrictions on transfer on the Warrants and on the shares of Common Stock issuable upon exercise of the Warrants may result in it being required to hold the Warrants or such shares for an indefinite period of time.

7.5It agrees not to sell, transfer, assign, gift, create a security interest in, or otherwise dispose of, with or without consideration (collectively, “Transfer”) any of the Warrants or any of the shares of Common Stock issuable upon exercise of the Warrants except pursuant to an effective registration statement under the Securities Act or an exemption from registration. As a further condition to any such Transfer, except in the event that such Transfer is made pursuant to an effective registration statement under the Securities Act, if in the reasonable opinion of counsel to NaturalNano any such Transfer would not be exempt from the registration and prospectus delivery requirements of the Securities Act, NaturalNano may require the Holder and the contemplated transferee to furnish NaturalNano with letters setting forth such information and agreements as may be reasonably requested by NaturalNano to ensure compliance with the Securities Act.

8.Notices of Record Date

In the event:

8.1NaturalNano shall take a record of the holders of its Common Stock (or other stock or securities at the time receivable upon the exercise of these Warrants), for the purpose of entitling them to receive any dividend or other distribution, or any right to subscribe for or purchase any shares of stock of any class or any other securities or to receive any other right; or

8.2of any consolidation or merger of NaturalNano with or into another corporation, any capital reorganization of NaturalNano, any reclassification of the capital stock of NaturalNano, or any conveyance of all or substantially all of the assets of NaturalNano to another corporation in which holders of NaturalNano’s stock are to receive stock, securities or property of another corporation; or

8.3of any voluntary dissolution, liquidation or winding-up of NaturalNano; or

8.4of any redemption or conversion of all outstanding Common Stock;

then, and in each such case, NaturalNano will mail or cause to be mailed to the Holder a notice specifying, as the case may be, (a) the date on which a record is to be taken for the purpose of such dividend, distribution or right, or (b) the date on which such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation, winding-up, redemption or conversion is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such stock or securities as at the time are receivable upon the exercise of these Warrants), shall be entitled to exchange their shares of Common Stock (or such other stock or securities), for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up. NaturalNano shall use all reasonable efforts to ensure such notice shall be delivered at least five days prior to the date therein specified.

9.Cashless Exercise.

9.1Definitions. For purposes of this Section 9, the following term shall have the meanings set forth below:

9.1.1“Market Price” as of any date, (i) means the average of the last reported sale prices for the shares of Common Stock on the Over the Counter Bulletin Board (the "OTCBB") for the five (5) trading days immediately preceding such date as reported by Bloomberg Financial Markets or an equivalent reliable reporting service mutually acceptable to and hereafter designated by the holder of this Warrant and NaturalNano ("Bloomberg"), or (ii) if the OTCBB is not the principal trading market for the shares of Common Stock, the average of the last reported sale prices on the principal trading market for the Common Stock during the same period as reported by Bloomberg, or (iii) if market value cannot be calculated as of such date on any of the foregoing bases, the Market Price shall be the fair market value as reasonably determined in good faith by (a) the Board of Directors of the NaturalNano or, at the option of a majority-in-interest of the holders of the outstanding Warrants by (b) an independent investment bank of nationally recognized standing in the valuation of businesses similar to the business of the NaturalNano. The manner of determining the Market Price of the Common Stock set forth in the foregoing definition shall apply with respect to any other security in respect of which a determination as to market value must be made hereunder.

9.2 Cashless Exercise. Notwithstanding anything to the contrary contained in this Warrant, this Warrant may be exercised by presentation and surrender of this Warrant to NaturalNano at its principal executive offices with a written notice of the holder's intention to effect a cashless exercise, including a calculation of the number of shares of Common Stock to be issued upon such exercise in accordance with the terms hereof (a "Cashless Exercise"). In the event of a Cashless Exercise, in lieu of paying the Exercise Price in cash, the holder shall surrender this Warrant for that number of shares of Common Stock determined by multiplying the number of shares of common stock to which it would otherwise be entitled by a fraction, the numerator of which shall be the difference between the then current Market Price per share of the Common Stock and the Exercise Price, and the denominator of which shall be the then current Market Price per share of Common Stock.

10.Nontransferability. Without the consent of NaturalNano., SBI may not sell or transfer any Warrants to any person other than to a director, officer, employee, manager or affiliate of SBI (or a person controlled by one or more directors, officers, employees, managers or affiliates of SBI) or to a person or entity that assists SBI in providing services to NaturalNano.

11.Severability. If any term, provision, covenant or restriction of these Warrants is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of these Warrants shall remain in full force and effect and shall in no way be affected, impaired or invalidated.

12.Notices. All notices, requests, consents and other communications required hereunder shall be in writing and shall be effective when delivered or, if delivered by registered or certified mail, postage prepaid, return receipt requested, shall be effective on the third day following deposit in United States mail: to the Holder, at SBI Brightline XIII LLC, 610 Newport Center Drive, Newport Beach, CA 92660; and if addressed to NaturalNano, at NaturalNano Inc., 150 Lucius Gordon Drive, West Henrietta, NY 14586, or such other address as Holder or NaturalNano may designate in writing.

13.No Rights as Shareholder. The Holder shall have no rights as a shareholder of NaturalNano with respect to the shares issuable upon exercise of the Warrants until the receipt by NaturalNano of all of the Exercise Documents.

NaturalNano Inc.

By:   /s/ Kathleen A. Browne

Kathleen A. Browne, Chief Financial Officer

Agreed to and accepted by:

SBI Brightline XIII, LLC

By:  /s/ Shelly Singhal

Shelly Singhal, Manager

EXHIBIT “A”

NOTICE OF EXERCISE

(To be signed only upon exercise of the Warrants)

To:NaturalNano Inc.

The undersigned hereby elects to purchase shares of Common Stock (the “Warrant Shares”) of NaturalNano Inc. (“NaturalNano”), pursuant to the terms of the enclosed warrant certificate (the “Certificate”). The undersigned tenders herewith payment of the exercise price pursuant to the terms of the Certificate.

The undersigned hereby represents and warrants to, and agrees with, NaturalNano as follows:

1.Holder is acquiring the Warrant Shares for its own account, for investment purposes only and not with a view to distribution in violation of the Securities Act of 1933, as amended (the “Securities Act”).

2.Holder understands that an investment in the Warrant Shares involves a high degree of risk, and Holder has the financial ability to bear the economic risk of this investment in the Warrant Shares, including a complete loss of such investment. Holder has adequate means for providing for its current financial needs and has no need for liquidity with respect to this investment.

3.Holder has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of an investment in the Warrant Shares and in protecting its own interest in connection with this transaction.

4.Holder understands that the issuance of the Warrant Shares to Holder has not been registered under the Securities Act or under any state securities laws. Holder is familiar with the provisions of the Securities Act and Rule 144 thereunder and understands that the restrictions on transfer on the Warrant Shares may result in Holder being required to hold the Warrant Shares for an indefinite period of time unless the transfer by Holder is registered under the Securities Act.

5.Holder agrees not to sell, transfer, assign, gift, create a security interest in, or otherwise dispose of, with or without consideration (collectively, “Transfer”) any of the Warrant Shares except pursuant to an effective registration statement under the Securities Act or an exemption from registration. As a further condition to any such Transfer, except in the event that such Transfer is made pursuant to an effective registration statement under the Securities Act, if in the reasonable opinion of counsel to NaturalNano any Transfer of the Warrant Shares by the contemplated transferee thereof would not be exempt from the registration and prospectus delivery requirements of the Securities Act, NaturalNano may require the contemplated transferee to furnish NaturalNano with an investment letter setting forth such information and agreements as may be reasonably requested by NaturalNano to ensure compliance by such transferee with the Securities Act.

Each certificate evidencing the Warrant Shares will bear the following legend:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”) OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE EXERCISED, SOLD, PLEDGED OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE ACT OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.

6.Immediately following this exercise of Warrants, if as of the date of exercise NaturalNano has a class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended, the undersigned will not beneficially own five percent (5%) or more of the then outstanding Common Stock of NaturalNano (based on the number of shares outstanding set forth in the most recent periodic report filed by NaturalNano with the Securities and Exchange Commission and any additional shares which have been issued since that date of which Holder is aware have been issued).

Number of Warrants Exercised: ______________

Dated: ____________________

____________________________________

Schedule I

Number of Shares	Exercise Price
The first 1,200,000 shares	$.75
The next 895,000 shares	$.90
The next 895,000 shares	$1.05
The next 890,000 shares	$1.20
The next 890,000 shares	$1.30

EX-10.1

EXHIBIT 10.1

TERMINATION AGREEMENT

This Termination Agreement is made as of the 9^th day of July 2006 by and between SBI Brightline XIII, LLC, a California limited liability company (“SBI”) and NaturalNano, Inc., a Nevada corporation (the “Company”).

Reference is made to that certain Stock Purchase Agreement dated as of March 30, 2006 by and between SBI and the Company (the “Stock Purchase Agreement”) and to that certain warrant for the purchase of up to 3,300,000 shares of the Company’s Common Stock issued by the Company to SBI on March 30, 2006 (the “Warrant”).

For good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, SBI and the Company hereby agree as follows:

1.    As of the date hereof, the Stock Purchase Agreement is terminated and of no further force and effect. In amplification of, and not by way of limiting, the foregoing, from and after the date hereof, the Company shall have no right under the Stock Purchase Agreement to require SBI to purchase, and SBI shall have no obligation under the Stock Purchase Agreement to purchase, any shares of the Common Stock of the Company.

2.    As of the date hereof, the Warrant is cancelled and of no further force and effect, and all rights of SBI to acquire shares of the Company’s Common Stock by exercise of the Warrant shall be null and void.

3.    Each of SBI and the Company, for itself and its members, managers, stockholders, officers, and directors, hereby forever releases the other party from all obligations of every nature that such other party may have had to it under the Stock Purchase Agreement or the Warrant.

In witness whereof, SBI and the Company have executed this Termination Agreement as of the 9^th day of July 2006.

SBI Brightline XIII, LLC     By:   /s/ Shelly Singhal Shelly Singhal, Manager NaturalNano, Inc.     By:   /s/ Kathleen A. Browne Kathleen A. Browne, Chief Financial Officer

EX-10.2

EXHIBIT 10.2

STOCK PURCHASE AGREEMENT

THIS STOCK PURCHASE AGREEMENT is made as of the 9^thday of July 2006 by and between NaturalNano, Inc., a corporation organized under the laws of the State of Nevada, with its principal offices at 150 Lucius Gordon Drive, Suite 115, West Henrietta, New York 14586 (the “Company”), and SBI Brightline XIII, LLC, a California limited liability company with its principal offices at 610 Newport Center Drive, Suite 1205, Newport Beach, California 92660 (the “Purchaser”).

In consideration of the mutual covenants contained in this Stock Purchase Agreement, the Company and the Purchaser hereby agree as follows:

SECTION 1.Authorization of Sale of the Shares. Subject to the terms and conditions of this Agreement, the Company may issue and sell to the Purchaser and the Purchaser shall purchase from the Company up to 15,321,154 shares of the Company’s Common Stock (the “Shares”), par value $.001 per share (the “Common Stock”). The Company has authorized and has reserved and covenants to continue to reserve, free of preemptive rights and other similar contractual rights of stockholders, a sufficient number of its authorized but unissued shares of its Common Stock to cover the Shares which may be issued pursuant to the terms of this Agreement.

SECTION 2.Agreement to Purchase the Shares.

2.1Schedule 2.1 attached hereto defines eighteen (18) tranches of Shares that the Purchaser has agreed to purchase from the Company (each, a “Tranche”) and, with respect to each Tranche, sets forth the number of Shares constituting such Tranche (the “Tranche Shares”) and the purchase price per share for the Tranche Shares in such Tranche (the “Tranche Purchase Price”).

2.2The Company may, in its sole discretion, elect to sell the Tranche Shares of any Tranche to the Purchaser at any time after the date on which the Registration Statement (as defined in Section 7.1) of the Company covering the Shares is declared effective (the “Effective Date”); provided, however, (i) the Company must elect to sell all of the Tranche Shares included in a Tranche if it elects to sell any of the Tranche Shares in such Tranche; and (ii) the Company must elect to sell the Tranche Shares in the order that the Tranches are listed on Schedule 2.1. The Company may elect to sell Tranche Shares included in more than one Tranche at the same time. To effect its election to sell Shares, the Company must give written notice thereof (an “Election Notice”) to the Purchaser. The Election Notice shall specify the Tranche or Tranches with respect to which the election is being made and the date on which the closing of the sale and purchase of the Tranche Shares shall occur; provided, such date shall be a business day and shall not be earlier than five days after the date such Election Notice is given to the Purchaser. An Election Notice shall be irrevocable except as provided in Section 3.5.

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SECTION 3.Closing of the Purchase of the Shares.

3.1Subject to the satisfaction or waiver of the conditions precedent set forth in Sections 3.2 and 3.3, the closing of a purchase of Tranche Shares by the Purchaser pursuant to this Agreement (each, a “Closing”) shall occur at 10:00 a.m. on the date specified in the Election Notice delivered by the Company with respect to such Tranche Shares (the time and date of the Closing of a particular Tranche is referred to herein as the “Tranche Closing Date”). Unless otherwise agreed by the Company and the Purchaser, each Closing shall occur at the offices of SBI, Newport Beach, California.

3.2The obligation of the Purchaser to purchase Tranche Shares at a Closing shall be subject to the satisfaction of the following conditions, or the waiver of such conditions by the Purchaser, at or prior to the applicable Tranche Closing Date:

(a)the representations and warranties of the Company set forth in Section 4 of this Agreement shall be true and correct with the same force and effect as though expressly made on and as of such Tranche Closing Date, except for representations or warranties made as of a particular date which representations and warranties shall be true and correct as of such date;

(b)the Company shall have complied with all the agreements hereunder and satisfied all the conditions on its part to be performed or satisfied hereunder at or prior to such Tranche Closing Date;

(c)the Company shall have delivered to the Purchaser a certificate executed by the Chairman of the Board or President and the chief financial or accounting officer of the Company, dated the applicable Tranche Closing Date, to the effect that the conditions in clauses (a) and (b) have been satisfied;

(d)the Registration Statement shall have been declared effective and shall not have been withdrawn, no stop order suspending the effectiveness of the Registration Statement shall be in effect, and no proceedings for the suspension of the effectiveness of the Registration Statement shall have been instituted or threatened by the Securities and Exchange Commission (the “Commission”);

(e)Counsel to the Company shall have delivered its legal opinion to the Purchaser that the Tranche Shares being issued on such Tranche Closing Date will, upon issuance, be duly authorized, validly issued, fully paid and non-assessable.

3.3At each Closing, (i) the Purchaser shall pay to the Company, by wire transfer of immediately available funds to an account designated in writing by the Company at or prior to the Closing, the applicable Tranche Purchase Price for the Tranche Shares being purchased at the Closing, and (ii) the Company shall deliver to the Purchaser a stock certificate representing the Tranche Shares being purchased at the Closing or shall cause the Tranche Shares being purchased to be electronically issued to the Purchaser.

3.4If a Closing does not occur on a proposed Tranche Closing Date because the conditions specified in Sections 3.3 were not satisfied at the time of the applicable proposed Tranche Closing Date, the Election Notice with respect to the Tranche or Tranches proposed to be sold on such proposed Tranche Closing Date shall automatically be revoked; provided, however, such revocation shall not impair the right of the Company to give another Election Notice with respect to the Tranche or Tranches covered by the revoked Election Notice or to compel the Purchaser to purchase any Tranche Shares included in such Tranche or Tranches on a subsequent Tranche Closing Date on which the conditions specified in Section 3.2 are satisfied.

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SECTION 4.Representations and Warranties of the Company. The Company hereby represents and warrants to the Purchaser as follows:

4.1Organization and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and the Company is qualified to do business as a foreign corporation in each jurisdiction in which qualification is required, except where the failure to so qualify would not individually or in the aggregate have a material adverse effect on the financial condition, results of operations, properties or business of the Company taken as a whole.

4.2Subsidiaries. The Company has one wholly owned subsidiary, NaturalNano Research, Inc.

4.3Issuance, Sale and Delivery of the Shares. The Shares have been duly authorized and, when issued, delivered and paid for in the manner set forth in this Agreement, will be duly authorized, validly issued, fully paid and nonassessable. No preemptive rights or other rights to subscribe for or purchase exist with respect to the issuance and sale of the Shares by the Company pursuant to this Agreement. No further approval or authority of the stockholders or the Board of Directors of the Company will be required for the issuance and sale of the Shares to be sold by the Company as contemplated herein.

4.4Authorized and Outstanding Capital Stock. The Company has authorized the issuance of 200,000,000 shares of Common Stock, of which approximately 121,881,407 shares are issued and outstanding as of the date of this Agreement. The Company has 10,000,000 shares of preferred stock authorized, none of which are issued or outstanding. The Company’s stock option plan provides for the granting of options to the Company’s employees, directors, consultants and advisors, to purchase an aggregate of up to 14,000,000 shares of Common Stock, of which, as of the date of this Agreement, options to purchase an aggregate of 9,158,333 shares of Common Stock were outstanding. In addition, the Company has granted warrants to purchase an aggregate of 4,500,000 shares of Common Stock as of the date of this Agreement. Except for shares of Common Stock, options and warrants described in this Section 4.3, as of the date of this Agreement, there are no authorized or outstanding options, warrants, preemptive rights, rights of first refusal or other rights to purchase any capital stock of the Company or any equity or debt securities convertible into or exchangeable or exercisable for capital stock of the Company.

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4.5Due Execution, Delivery and Performance of the Agreements. The Company has full legal right, corporate power and authority to enter into this Agreement and to perform the transactions contemplated hereby. This Agreement has been duly authorized, executed and delivered by the Company. The execution, delivery and performance of this Agreement by the Company and the consummation of the transactions herein contemplated will not violate any provision of the organizational documents of the Company and will not result in the creation of any lien, charge, security interest or encumbrance upon any assets or property of the Company pursuant to the terms or provisions of, or will not conflict with, result in the breach or violation of, or constitute, either by itself or upon notice or the passage of time or both, a default under any agreement, mortgage, deed of trust, lease, franchise, license, indenture, permit or other instrument to which the Company is a party or by which the Company or any of its assets or properties may be bound or affected or any statute or any authorization, judgment, decree, order, rule or regulation of any court or any regulatory body, administrative agency or other governmental body applicable to the Company or any of its properties. No consent, approval, authorization or other order of any court, regulatory body, administrative agency or other governmental body is required for the execution, delivery and performance of this Agreement or the consummation by the Company of the transactions contemplated hereby, except for compliance with the Blue Sky laws and federal securities laws applicable to the offering of the Shares. Assuming the valid execution hereof by the Purchaser, this Agreement will constitute the legal, valid and binding obligation of the Company, enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and except as enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and except as the indemnification agreements of the Company in Section 7.3 hereof may be legally unenforceable.

4.6No Actions. There are no legal or governmental actions, suits or proceedings pending or, to the Company’s knowledge, threatened to which the Company is or may be a party which seeks to prevent or restrain the transactions contemplated by this Agreement or to recover damages as a result of the consummation of such transactions.

4.7Investment Company. The Company is not an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for an investment company, within the meaning of the Investment Company Act of 1940, as amended.

4.8Brokers. There is no broker, finder or other party that is entitled to receive from the Company any brokerage or finder’s fee or other fee or commission as a result of any transactions contemplated by this Agreement.

4.9Books and Records. The books, records and accounts of the Company accurately and fairly reflect, in reasonable detail, the transactions in, and dispositions of, the assets of, and the results of operations of, the Company, all to the extent required by generally accepted accounting principles. The Company maintains a system of internal accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

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4.10Sole Representations and Warranties. Except for the representations and warranties contained in this Section 4, the Company makes no representation or warranty to the Purchaser, express or implied, in connection with the transactions contemplated by this Agreement.

SECTION 5.Representations, Warranties and Covenants of the Purchaser. The Purchaser represents and warrants to the Company as follows:

5.1Organization and Qualification. The Purchaser is a company duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation.

5.2Due Execution, Delivery and Performance of the Agreements. The Purchaser has full legal right, power and authority to enter into this Agreement and to perform the transactions contemplated hereby. This Agreement has been duly authorized, executed and delivered by the Purchaser. The execution, delivery and performance of this Agreement by the Purchaser and the consummation of the transactions herein contemplated will not violate any provision of the organizational documents of the Purchaser and will not result in the creation of any lien, charge, security interest or encumbrance upon any assets or property of the Purchaser pursuant to the terms or provisions of, or will not conflict with, result in the breach or violation of, or constitute, either by itself or upon notice or the passage of time or both, a default under any agreement, mortgage, deed of trust, lease, franchise, license, indenture, permit or other instrument to which the Purchaser is a party or by which the Purchaser or any of its assets or properties may be bound or affected or any statute or any authorization, judgment, decree, order, rule or regulation of any court or any regulatory body, administrative agency or other governmental body applicable to the Purchaser or any of its properties. No consent, approval, authorization or other order of any court, regulatory body, administrative agency or other governmental body is required for the execution, delivery and performance of this Agreement or the consummation by the Purchaser of the transactions contemplated hereby. Assuming the valid execution hereof by the Company, this Agreement will constitute the legal, valid and binding obligation of the Purchaser, enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and except as enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and except as the indemnification agreements of the Purchaser in Section 7.3 hereof may be legally unenforceable.

5.3No Actions. There are no legal or governmental actions, suits or proceedings pending or, to the Purchaser’s knowledge, threatened to which the Purchaser is or may be a party which seeks to prevent or restrain the transactions contemplated by this Agreement or to recover damages as a result of the consummation of such transactions. The Purchaser has not been and is not currently the subject of an investigation or inquiry by the Securities and Exchange Commission, the NASD, or any state securities commission.

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5.4Nature of Purchaser. The Purchaser is knowledgeable, sophisticated and experienced in making, and is qualified to make, decisions with respect to investments in shares representing an investment decision like that involved in the purchase of the Shares, including investments in securities issued by the Company. The Purchaser is an “accredited investor” within the meaning of Rule 501(a) of Regulation D promulgated under the Securities Act and would be considered a large, institutional accredited investor. The Purchaser is not a “dealer” within the meaning of the Securities Act or a “broker” or “dealer” within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Purchaser is able to bear the economic risk of loss of the Purchaser’s entire investment in the Shares.

5.5Access to Information. The Purchaser has requested, received, reviewed and considered all information it deems relevant in making an informed decision to purchase the Shares. The Purchaser understands that the Company is still in the development stage and does not have operating revenues.

5.5Investment Intent. The Purchaser is acquiring the Shares in the ordinary course of its business and for its own account for investment only and with no present intention of distributing any of such Shares or entering into any arrangement or understanding with any other person regarding the distribution of such Shares (it being understood that the foregoing does not limit the Purchaser’s right to sell Shares pursuant to the Registration Statement).

5.6Sole Representations and Warranties. Except for the representations and warranties contained in this Section 5, the Purchaser makes no representation or warranty to the Company, express or implied, in connection with the transactions contemplated by this Agreement.

SECTION 6.Survival of Representations, Warranties and Agreements. Notwithstanding any investigation made by any party to this Agreement, all covenants, agreements, representations and warranties made by the Company and the Purchaser herein and in the certificates delivered pursuant hereto shall survive the execution of this Agreement, the delivery to the Purchaser of the Shares being purchased and the payment therefor.

SECTION 7. Covenants.

7.1Registration Procedures and Expenses.

(a)As soon as practicable, but in any event no later than one hundred twenty (120) days following the date of this Agreement, the Company shall prepare and file with the Commission a registration statement on Form SB-2 or other applicable form as determined by the Company (the “Registration Statement”) for the purpose of registering the sale of the Shares by the Purchaser from time to time on the facilities of any securities exchange or trading system on which the Common Stock is then traded or in privately-negotiated transactions, which Registration Statement shall contain all material non-public information disclosed to the Purchasers by the Company in connection with the issuance and sale of the Shares. For purposes of this Section 7.1, the term “Shares” shall include any other securities of the Company issued in exchange for the Shares, as a dividend on the Shares or in connection with a stock split or other reorganization transaction affecting the Shares. The Company shall use its commercially reasonable efforts to cause the Registration Statement to become effective as soon as practicable.

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(b)The Company shall prepare and file with the Commission such amendments and supplements to the Registration Statement and the prospectus forming a part thereof as may be necessary to keep the Registration Statement effective until the earliest date, after the date on which all of the Shares have been purchased pursuant to this Agreement or the obligation of the Purchaser to purchase the Shares pursuant to this Agreement has been terminated, on which (i) all the Shares have been disposed of pursuant to the Registration Statement, (ii) all of the Shares then held by the Purchaser may be sold under the provisions of Rule 144 without limitation as to volume, whether pursuant to Rule 144(k) or otherwise, or (iii) the Company has determined that all Shares then held by the Purchaser may be sold without restriction under the Securities Act and has removed any stop transfer instructions relating to such Shares and offered to cause to be removed any restrictive legends on the certificates, if any representing such Shares (the period between the Effective Date and the earliest of such dates is referred to herein as the “Registration Period”). At any time after the end of the Registration Period, the Company may withdraw the Registration Statement and its obligations under this Section 7 (other than its obligations under Section 7.3) shall automatically terminate.

(c)The Purchaser agrees to comply with all federal and state securities laws and the rules and regulations promulgated thereunder in connection with any sale by it of the Shares, whether or not such sale is pursuant to the Registration Statement. In connection with the sale of any Shares pursuant to the Registration Statement, but without limiting the generality of the foregoing sentence, the Purchaser shall (i) comply with the provisions of Regulation M promulgated under the Exchange Act, and (ii) deliver to the purchaser of Shares the prospectus forming a part of the Registration Statement and all relevant supplements thereto which have been provided by the Company to the Purchaser on or prior to the applicable delivery date.

(d)The Company shall not be obligated to prepare and file a post-effective amendment or supplement to the Registration Statement or the prospectus constituting a part thereof during the continuance of a Blackout Event. A “Blackout Event” means any of the following: (a) the possession by the Company of material information that is not ripe for disclosure in a registration statement or prospectus, as determined in good faith by the Chief Executive Officer or the Board of Directors of the Company or that disclosure of such information in the Registration Statement or the prospectus constituting a part thereof would be detrimental to the business and affairs of the Company; or (b) any material engagement or activity by the Company which would, in the good faith determination of the Chief Executive Officer or the Board of Directors of the Company, be adversely affected by disclosure in a registration statement or prospectus at such time.

(e)At least two (2) days prior to the filing with the Commission of the Registration Statement (or any amendment thereto) or the prospectus forming a part thereof (or any supplement thereto), the Company shall provide draft copies thereof to the Purchaser and shall consider incorporating into such documents such comments as the Purchaser (and its counsel) may propose to be incorporated therein. Notwithstanding the foregoing, no prospectus supplement, the form of which has previously been provided to the Purchaser, need be delivered in draft form to the Purchaser.

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(f)The Company shall promptly notify the Purchaser upon the occurrence of any of the following events in respect of the Registration Statement or the prospectus forming a part thereof: (i) receipt of any request for additional information from the Commission or any other federal or state governmental authority during the Registration Period, the response to which would require any amendments or supplements to the Registration Statement or related prospectus; (ii) the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; or (iii) receipt of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose.

(g)The Company shall furnish to the Purchaser with respect to the Shares registered under the Registration Statement (and to each underwriter, if any, of such Shares) such number of copies of prospectuses and such other documents as the Purchaser may reasonably request, in order to facilitate the public sale or other disposition of all or any of the Shares by the Purchaser pursuant to the Registration Statement.

(h)The Company shall file or cause to be filed such documents as are required to be filed by the Company for normal blue sky clearance in states specified in writing by the Purchaser; provided, however, that the Company shall not be required to qualify to do business or consent to service of process in any jurisdiction in which it is not now so qualified or has not so consented.

(i)Throughout the Registration Period and so long as the Purchaser owns Shares purchased pursuant to this Agreement, the Company shall:

(i)comply with the provisions of paragraph (c)(1) of Rule 144; and

(ii)file with the Commission in a timely manner all reports and other documents required to be filed by the Company pursuant to Section 13 or 15(d) under the Exchange Act; and, if at any time it is not required to file such reports but in the past had been required to or did file such reports, it will, upon the request of the Purchaser, make available other information as required by, and so long as necessary to permit resales of its Shares pursuant to, Rule 144.

Notwithstanding the foregoing, the Purchaser acknowledges that it may not be entitled to rely on Rule 144 in connection with the resale of its Shares.

(j)The Company shall bear all expenses incurred by it in connection with the procedures in paragraphs (a) through (i) of this Section 7.1 and the registration of the Shares pursuant to the Registration Statement. The Company shall not be responsible for any expenses incurred by the Purchaser in connection with its sale of the Shares or its participation in the procedures in paragraphs (a) through (i) of this Section 7.1 including, without limitation, any fees and expenses of counsel or other advisers to the Purchaser and any underwriting discounts, brokerage fees and commissions incurred by the Purchaser.

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7.2Covenants of the Purchaser.

(a)The Purchaser acknowledges and understands that the Shares are "restricted securities" as defined in Rule 144. The Purchaser hereby agrees not to offer or sell (as such terms are defined in the Securities Act and the rules and regulations promulgated thereunder) any Shares unless such offer or sale is made (a) pursuant to an effective registration of the Shares under the Securities Act, or (b) pursuant to an available exemption from the registration requirements of the Securities Act. The Purchaser agrees that it will not engage in hedging transactions with regard to the Shares other than in compliance with the Securities Act. A proposed transfer shall be deemed to comply with this Section 7.2(a) if the Purchaser delivers to the Company a legal opinion in form and substance satisfactory to the Purchaser from counsel satisfactory to the Purchaser to the effect that such transfer complies with this Section 7.2(a).

(b)If at any time or from time to time after the Effective Date, the Company notifies the Purchaser in writing that the Registration Statement or the prospectus forming a part thereof (taking into account any prior amendments or supplements thereto) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in light of the circumstances under which they are made, not misleading, the Purchaser shall not offer or sell any Shares or engage in any other transaction involving or relating to the Shares (other than purchases of Shares pursuant to this Agreement), from the time of the giving of notice with respect to such untrue statement or omission until the Purchaser receives written notice from the Company that such untrue statement or omission no longer exists or has been corrected or disclosed in an effective post-effective amendment to the Registration Statement or a valid prospectus supplement to the prospectus forming a part thereof.

(c)In connection with the sale of any Shares pursuant to the Registration Statement, the Purchaser shall deliver to the purchaser thereof the prospectus forming a part of the Registration Statement and all relevant supplements thereto which have been provided by the Company to the Purchaser on or prior to the applicable delivery date, all in accordance with the requirements of the Securities Act and the rules and regulations promulgated thereunder and any applicable blue sky laws.

(d)The Company may refuse to register (or permit its transfer agent to register) any transfer of any Shares not made in accordance with this Section 7.2 and for such purpose may place stop order instructions with its transfer agent with respect to the Shares.

(e)The Purchaser will cooperate with the Company in all respects in connection with the performance by the Company of its obligations under Section 7.1, including timely supplying all information reasonably requested by the Company (which shall include all information regarding the Purchaser, and any person who beneficially owns Shares held by the Purchaser within the meaning of Rule 13d-3 promulgated under the Exchange Act, and the proposed manner of sale of the Shares required to be disclosed in the Registration Statement) and executing and returning all documents reasonably requested in connection with the registration and sale of the Shares. The Purchaser hereby consents to be named as an underwriter in the Registration Statement, if applicable, in accordance with current Commission policy and, if necessary, to join in the request of the Company for the acceleration of the effectiveness of the Registration Statement.

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7.3Indemnification. For the purpose of this Section 7.3:

(i) the term “Purchaser Affiliate” shall mean any person who controls the Purchaser within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act; and

(ii) the term “Registration Statement” shall include any final prospectus, exhibit, supplement or amendment included in or relating to the Registration Statement referred to in Section 7.1.

(a)The Company agrees to indemnify and hold harmless the Purchaser and each Purchaser Affiliate, against any losses, claims, damages, liabilities or expenses, joint or several, to which such Purchaser or such Purchaser Affiliate may become subject, under the Securities Act, the Exchange Act, or any other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of the Company), insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof as contemplated below) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, as amended as of the Effective Date, including any information deemed to be a part thereof as of the time of effectiveness pursuant to paragraph (b) of Rule 430A, or pursuant to Rule 434 promulgated under the Securities Act, or the prospectus, in the form first filed with the Commission pursuant to Rule 424(b) of the Regulations, or filed as part of the Registration Statement at the time of effectiveness if no Rule 424(b) filing is required (the “Prospectus”), or any amendment or supplement thereto, (ii) the omission or alleged omission to state in the Registration Statement as of the Effective Date a material fact required to be stated therein or necessary to make the statements in the Registration Statement or any post-effective amendment or supplement thereto, or in the Prospectus or any amendment or supplement thereto, not misleading, in each case in the light of the circumstances under which the statements contained therein were made, or (iii) any inaccuracy in the representations and warranties of the Company contained in this Agreement, or any failure of the Company to perform its obligations hereunder, and will reimburse the Purchaser and each such Purchaser Affiliate for any legal and other expenses as such expenses which are reasonably incurred by the Purchaser or such Purchaser Affiliate in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage, liability or expense arises out of or is based upon (i) an untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement, the Prospectus or any amendment or supplement thereto in reliance upon and in conformity with written information furnished to the Company by the Purchaser expressly for use therein, or (ii) the failure of the Purchaser to comply with the covenants and agreements contained in Section 7.2 hereof respecting the sale of the Shares, or (iii) the inaccuracy of any representations made by the Purchaser herein or (iv) any statement or omission in any Prospectus that is corrected or disclosed in any subsequent Prospectus that was delivered to the Purchaser prior to the pertinent sale or sales by the Purchaser.

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(b)The Purchaser will indemnify and hold harmless the Company, each of its directors, each of its officers who signed the Registration Statement and each person, if any, who controls the Company within the meaning of the Securities Act and the Exchange Act, against any losses, claims, damages, liabilities or expenses to which the Company, each of its directors, each of its officers who signed the Registration Statement or controlling person may become subject, under the Securities Act, the Exchange Act, or any other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of such Purchaser) insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof as contemplated below) arise out of or are based upon (i) any failure to comply with the covenants and agreements contained in Section 7.2 hereof respecting the sale of the Shares, (ii) the inaccuracy of any representation made by the Purchaser herein, or (iii) any (x) untrue or alleged untrue statement of any material fact contained in the Registration Statement, the Prospectus, or any amendment or supplement thereto, or (y) omission or alleged omission to state in the Registration Statement, the Prospectus or any amendment or supplement thereto a material fact required to be stated therein or necessary to make the statements in the Registration Statement or any amendment or supplement thereto, or in the Prospectus or any amendment or supplement thereto, not misleading, in each case in the light of the circumstances under which they were made; provided, that the Purchaser’s indemnification obligation under this clause (iii) shall apply to the extent, and only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration Statement, the Prospectus, or any amendment or supplement thereto, in reliance upon and in conformity with written information furnished to the Company by the Purchaser expressly for use therein, and will reimburse the Company, each of its directors, each of its officers who signed the Registration Statement or controlling person for any legal and other expense reasonably incurred by the Company, each of its directors, each of its officers who signed the Registration Statement or controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action.

(c)Promptly after receipt by an indemnified party under this Section 7.3 of notice of the threat or commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under this Section 7.3, promptly notify the indemnifying party in writing thereof; provided, the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party for contribution (except as provided in paragraph (d)) or otherwise than under the indemnity agreement contained in this Section 7.3 or to the extent it is not prejudiced as a result of such failure. In case any such action is brought against any indemnified party and such indemnified party seeks or intends to seek indemnity from an indemnifying party, the indemnifying party will be entitled to participate in, and, to the extent that it may wish, jointly with all other indemnifying parties similarly notified, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party. Upon receipt of notice from the indemnifying party to such indemnified party of its election so to assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party will not be liable to such indemnified party under this Section 7.3 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless the indemnified party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of action, in which case the reasonable fees and expenses of counsel shall be at the expense of the indemnifying party.

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(d)If the indemnification provided for in this Section 7.3 is required by its terms but is for any reason held to be unavailable to or otherwise insufficient to hold harmless an indemnified party under paragraphs (a) or (b) of this Section 7.3 in respect to any losses, claims, damages, liabilities or expenses referred to herein (subject to the limitation of paragraph (c) of this Section 7.3), then each applicable indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of any losses, claims, damages, liabilities or expenses referred to herein (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Purchaser from the placement of the Common Stock contemplated by this Agreement or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but the relative fault of the Company and the Purchaser in connection with the statements or omissions or inaccuracies in the representations and warranties in this Agreement that resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Purchaser on the other shall be deemed to be in the same proportion as the amount paid by the Purchaser to the Company pursuant to this Agreement for the Shares purchased by the Purchaser that were sold pursuant to the Registration Statement bears to the difference (the “Difference”) between the amount such Purchaser paid for the Shares that were sold pursuant to the Registration Statement and the amount received by such Purchaser from such sale. The relative fault of the Company on the one hand and the Purchaser on the other shall be determined by reference to, among other things, whether the untrue or alleged statement of a material fact or the omission or alleged omission to state a material fact or the inaccurate or the alleged inaccurate representation and/or warranty relates to information supplied by the Company or by the Purchaser and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement, omission or inaccuracy. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in paragraph (c) of this Section 7.3, any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The provisions set forth in paragraph (c) of this Section 7.3 with respect to the notice of the threat or commencement of any threat or action shall apply if a claim for contribution is to be made under this paragraph (d); provided, however, that no additional notice shall be required with respect to any threat or action for which notice has been given under paragraph (c) for purposes of indemnification. The Company and each Purchaser agree that it would not be just and equitable if contribution pursuant to this Section 7.3 were determined solely by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in this paragraph. Notwithstanding the provisions of this Section 7.3, the Purchaser shall not be required to contribute any amount in excess of the amount by which the Difference exceeds the amount of any damages that such Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

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7.4Information Available. So long as the Registration Statement is effective covering the resale of Shares then still owned by the Purchaser, the Company will furnish to the Purchaser:

(a)as soon as practicable after available, one copy of (i) its Annual Report to Stockholders (which Annual Report shall contain financial statements audited in accordance with generally accepted accounting principles by a firm of certified public accountants), (ii) upon written request, its Annual Report on Form 10-KSB, (iii) upon written request, its Quarterly Reports on Form 10-QSB, (iv) upon written request, its Current Reports on Form 8-K, and (v) a full copy of the Registration Statement (the foregoing, in each case, excluding exhibits); and

(b)upon the written request of the Purchaser, all exhibits excluded by the parenthetical to subparagraph (a)(v) of this Section 7.4.

SECTION 8.Notices. All notices, requests, consents and other communications hereunder shall be in writing, shall be mailed by first-class registered or certified airmail, confirmed facsimile or nationally recognized overnight express courier postage prepaid, and shall be deemed given when so mailed and shall be delivered as addressed as follows:

(a)if to the Company, to:

NaturalNano, Inc.

150 Lucius Gordon Drive

Suite 115

West Henrietta, New York 14586

Phone: 585.214.8005

Facsimile:585.214.8182

Attn: Michael D. Riedlinger

or to such other person at such other place as the Company shall designate to the Purchaser in writing; and

(b)if to the Purchaser, at its address as set forth above or at such other address or addresses as may have been furnished to the Company in writing.

SECTION 9.Assignment. Neither party hereto may assign or delegate any of such party’s rights or obligations under or in connection with this Agreement, and any attempted assignment or delegation of such rights or obligations shall be void. Except as expressly provided in Section 7.3 with respect to Purchaser Affiliates, directors and controlling persons of the Company and officers of the Company who signed the Registration Statement, no person, including without limitation any person who purchases or otherwise acquires or receives any Shares from the Purchaser, is an intended third party beneficiary of this Agreement, and no party to this Agreement shall have any obligation arising under this Agreement to any person other than the other party hereto and, to the extent expressly provided in Section 7.3, Purchaser Affiliates, directors and controlling persons of the Company and officers of the Company who signed the Registration Statement.

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SECTION 10.Changes. This Agreement may not be modified or amended except pursuant to an instrument in writing signed by the Company and the Purchaser.

SECTION 11.Headings. The headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be part of this Agreement.

SECTION 12.Severability. In case any provision contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.

SECTION 13.Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to its conflicts of law principles and the federal law of the United States of America.

SECTION 14.Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute but one instrument, and shall become effective when one or more counterparts have been signed by each party hereto and delivered to the other parties.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the day and year first above written.

NaturalNano, Inc.

By:   /s/ Kathleen A. Browne

Name:  Kathleen A. Browne

Title:  Chief Financial Officer

SBI Brightline XIII, LLC

By:  /s/ Shelly Singhal

Name: Shelly Singhal

Title:  Managing Member

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SCHEDULE 2.1

TRANCHES

Tranche No.	Number of Tranche Shares Included in Tranche	Tranche Purchase Price per Tranche Share (U.S. Dollars)
1	625,000	$ 0.75
2	625,000	$ 0.75
3	625,000	$ 0.75
4	625,000	$ 0.75
5	625,000	$ 0.85
6	625,000	$ 0.85
7	625,000	$ 0.85
8	625,000	$ 0.85
9	1,250,000	$ 0.95
10	1,250,000	$ 0.95
11	1,125,000	$ 1.05
12	1,125,000	$ 1.05
13	1,000,000	$ 1.15
14	1,000,000	$ 1.15
15	900,000	$ 1.20
16	900,000	$ 1.20
17	885,577	$ 1.30
18	885,577	$ 1.30

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