Exhibit 10.01

SETTLEMENT AGREEMENT, dated as of December 31, 2007, (“the Agreement”), by and
among SBI BRIGHTLINE XIII, LLC, a Delaware limited liability company (“SBIB13”)
with executive offices located at 610 Newport Center Drive, Suite 1205, Newport
Beach, California 92660, and NATURALNANO, INC., a Nevada corporation (“NNAN”)
with offices located at 150 Lucius Gordon Drive, Suite 215, West Henrietta, New
York 14586.

 

INTRODUCTION

 

NNAN and SBIB13 are party to the Stock Purchase Agreement, dated as of July 9,
2006 (the “NNAN SPA”) and Warrant Agreement, dated as of July 9, 2006 (the
“Warrants”), both relating to the acquisition of shares of common stock of NNAN
by SBIB13.

 

NNAN on the one hand and SBIB13 on the other now desire to settle all claims,
causes of action and disputes between them arising prior to this Agreement
whether such claims, causes of action and disputes are known or unknown, and to
release each other from any and all claims, causes of action and disputes known
or unknown relating thereto, which do or may exist between them.

 

NOW THEREFORE, for good and valuable consideration as set forth below, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:

 

Section 1          Termination of Securities Purchase and Warrants. NNAN and
SBIB13 agree that the Securities Purchase and Warrant Agreement are hereby
terminated and of no further force or effect. Upon execution and delivery
hereof, SBIB13 will return the Warrants to NNAN and further agrees that the
Warrants are terminated and authorizes NNAN to mark the Warrants terminated.
                       

 

 

Section 2

Mutual General and Special Releases.

 

(a)         Except for the obligations created hereunder, SBIB13 on the one hand
and NNAN on the other, each for itself and its successors and assigns, forever
releases, relieves and discharges the other party and its predecessors,
successors, assigns, attorneys, partners, employees, agents, directors,
officers, representatives, related entities and affiliates, from any and all
claims, demands, actions, cause or causes of action, suits, debts, sums of
money, controversies, damages, obligations and liabilities of every kind and
nature, whether known or unknown, suspected or unsuspected, vested or
contingent, and whether or not concealed or hidden, in law, equity or otherwise,
that have existed or may have existed, or that do exist as of the date this
Agreement is entered into as set forth above.

 

(b)        Each party hereto acknowledges and agrees that the facts in respect
to which this release is given may turn out to be other than or different than
expected, and expressly, knowingly and voluntarily waives any and all benefits
and rights granted pursuant to Section 1542 of the Civil Code of the State of
California with which section it is familiar and which section reads as follows:

 

 

 

 

“A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him, must have materially affected his settlement with the debtor.”

 

(c)         Each party hereto understands and realizes that there may exist at
this time claims herein released, the nature of which has not yet been
discovered. It is expressly understood and agreed that the possibility that such
claims exist has been explicitly taken into account in determining the
consideration to be given for this release and that a portion of that
consideration, having been bargained for in full knowledge of the possibility of
such unknown claims, was given in exchange for this release.

 

(d)        Each party hereto represents and warrants that no claim or right that
is released or dismissed under this Agreement has been transferred,
hypothecated, assigned or given away by that party prior to the date of this
Agreement.

 

Section 3          Covenant Not to Sue. Without limiting in any way the releases
set forth above, and subject to the performance of the terms, conditions,
obligations and promises herein contained, each party hereto hereby covenants
and warrants that it will not sue or otherwise commence or prosecute, or cause
to be commenced or prosecuted, any action or proceeding, civil, criminal,
administrative, or otherwise, related in any way to any matter released by this
Agreement.

 

Section 4        Disputed Claims. It is expressly understood and agreed that
this Agreement is being made solely for the purpose of avoiding the expense and
inconvenience of litigation and that it is not to be construed as an admission
on the part of any party hereto of any unlawful wrongful or improper conduct or
of any liability to any other party, all of which is expressly denied.

 

Section 5          Further Acts.               The parties agree to cooperate in
the implementation of the terms of this Agreement and to execute such documents
as may reasonably be necessary to carry out same within three (3) days of
receipt of a written request therefor.                

 

Section 6          Representations of the Parties. Each of the parties
represents, warrants and agrees as follows:

 

(a)         Such party has received independent legal advice from attorneys of
its choice with respect to the advisability of making this settlement and of
entering into this Agreement. Prior to the execution of this Agreement the
attorneys for each party reviewed this Agreement at length and had an
opportunity to make any desired changes.

 

 

(b)

Such party has made such investigation of the facts pertaining to this
Agreement,

 

2

 

 

and of all other matters related thereto, as such party deems necessary.

 

(c)         This Agreement has been carefully read by, the contents hereof are
known and understood by, and it is signed voluntarily by, each person executing
this Agreement.

 

(d)      Each person executing this Agreement on behalf of a party warrants and
represents that he is fully authorized to do so and that his signature on this
Agreement shall bind said party to the terms and provisions of this Agreement.

 

(e)         This Agreement is intended to be final and binding and to be
effective as a full and final accord and satisfaction of any and all disputes
between the parties. Each party is relying upon the said finality of this
Agreement as a material factor inducing said party's decision to settle said
disputes.

 

 

Section 7

Miscellaneous.

 

(a)         All the terms of this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the successors, assigns and heirs of the
parties hereto.

 

(b)        This Agreement constitutes the whole and only existing and binding
agreement between the parties hereto concerning the releases granted between and
among them and supersedes all prior understandings on that subject, whether
written or oral. Other than the representations and warranties expressly stated
as such in this Agreement, there are no warranties, promises or representations
of any kind, express or implied, upon which any party has relied in entering
into this Agreement.

 

(c)          This Agreement may be modified or amended only by a writing signed
by the party to be charged.

 

(d)        This Agreement may be executed in one or more counterparts or by
counterpart signature pages, which may be facsimile copies, and which shall be
attached to the original. Upon such execution and/or attachment, this Agreement
shall have the same effect as if all signatories had signed the same page of the
same original. In making proof of this Agreement, a party shall not be required
to account for all executed copies of this Agreement.

 

(e)         Each party has been represented by counsel in the negotiation and
execution of this Agreement, and shall be responsible for its respective costs
and attorney's fees incurred in connection with this Agreement and its
preparation.

 

(f)         In the event of the bringing of any action, suit or proceeding by
any party hereto against any other party hereto by reason of a breach of this
Agreement or any portion thereof, then the prevailing party in such action or
suit shall be entitled to have and recover all costs and expenses of suit,
including reasonable attorney's fees.

 

 

 

 

(g)        The invalidity of any portion of this Agreement shall not affect the
remaining portions of this Agreement.

 

(h)        The headings in this Agreement are for the convenience of the reader
only and are not to be considered in any construction of the Agreement.

 

(i)         There are no third party beneficiaries of this Agreement, other than
the individuals and entities released by the parties hereto in Section 4(a).

 

(j)         This Agreement was prepared as a result of discussions between the
parties hereto and shall be interpreted fairly and in accordance with its plain
meaning and not construed as if prepared exclusively or primarily on behalf of
or by either of the parties hereto.

 

(k)        As used in this Agreement, masculine, feminine or neuter gender and
the singular or plural number shall each be deemed to include the others
wherever and whenever the context or construction so dictates.

 

(l)           This Agreement may be executed in one or more counterparts, all of
which, when taken together shall constitute one original.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date set forth above.

 

SBI BRIGHTLINE XIII LLC

 

By: /s/Shelly Singhal                          

 

Name: Shelly Singhal

 

Title:

Manager

 

 

NATURALNANO, INC.

 

By: /s/Cathy A. Fleischer                  

 

Name: Cathy A. Fleischer

 

 

Title:

President and CTO