EXHIBIT 10.2
STOCK PURCHASE AGREEMENT
 
THIS STOCK PURCHASE AGREEMENT is made as of the 9th day 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.

2.1 Schedule 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”).

2.2 The 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.

3.1 Subject 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.

3.2 The 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.
 
3.3 At 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.
 
3.4 If 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:

4.1 Organization 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.

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

4.4 Authorized 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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4.5 Due 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.

4.6 No 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.

4.7 Investment 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.

4.8 Brokers. 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.

4.9 Books 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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4.10 Sole 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:

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

5.2 Due 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.

5.3 No 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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5.4 Nature 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.

5.5 Access 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.

5.5 Investment 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).
 
5.6 Sole 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. 

7.1 Registration 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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7.2 Covenants 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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7.3 Indemnification. 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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7.4 Information 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

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Name:  Kathleen A. Browne
Title:  Chief Financial Officer
 
 
SBI Brightline XIII, LLC
 
By:  /s/ Shelly Singhal

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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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