Exhibit
      4.2

     

    


     

    THIS
      NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE
      NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
      SECURITIES LAWS. NEITHER THIS NOTE NOR SUCH SHARES OF COMMON STOCK MAY BE SOLD,
      OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
      REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND ANY APPLICABLE STATE
      SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUING
      CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.

     

    


    
      	Principal Amount $[  
               ] 	
              Issue
                Date: March 7,
                2007

            


    

         

    


    8%
      SENIOR SECURED PROMISSORY NOTE DUE MARCH 7, 2009

    


     

    FOR
      VALUE
      RECEIVED, NaturalNano, Inc., a Nevada corporation (“NaturalNano”), and
      NaturalNano Research, Inc., a Delaware corporation and wholly owned subsidiary
      of NaturalNano (“NN Research” and, together with NaturalNano, the “Borrowers”),
      hereby jointly and severally promise to pay to the order of [ ] (the “Holder”),
      the sum of [ ], on March 7, 2009 (the “Maturity Date”). 

     

    This
      Note
      is one of the Notes issued pursuant to the terms of a loan and security
      agreement between the Borrowers and the Holder, dated the date of this Note
      (the
“Loan Agreement”).

     

    Interest
      on the outstanding principal balance shall be paid at the rate of eight percent
      (8%) per annum, payable quarterly on the first day of June, September, December
      and March of each year; provided, however, that the first interest payment
      shall
      be due on June 1, 2007 and a final interest payment due on the Maturity Date.
      Interest shall be payable to the holder of this Debenture of record on the
      fifteenth day of the preceding month. Interest shall be computed on the basis
      of
      a 360-day year, using the number of days actually elapsed. Interest may be
      paid
      in cash or in shares of NaturalNano’s common stock, par value $.001 per share
      (“Common Stock”); provided, that any payment in shares of Common Stock shall be
      subject to the provisions of Section 1.2 of this Note. Interest shall be payable
      at the default interest rate of the lesser of (x) eighteen percent (18%) per
      annum or (y) the maximum rate of interest which may legally be charged, (a)
      if
      the Borrowers fail to make any monetary payment due on this Note within ten
      (10)
      days after the date such payment is due and continuing at such rate until the
      payment default is cured, and (b) during the pendency of any Event of Default,
      as hereinafter defined, other than a failure to make any monetary
      payment.

     

    Payment
      of this Note is secured by a security interest in the Collateral, as defined
      in
      the Loan Agreement, and the Holder of this Note shall have all rights granted
      to
      the Investors, as defined in the Loan Agreement, pursuant the Loan Agreement.
      This Note is one of the Notes of like tenor issued pursuant to the Loan
      Agreement in the aggregate initial principal amount of $3,347,500, such Notes
      being collectively referred to as the “Notes.”


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    Section
      1. 

     

    Interest
      Payments

     

    1.1. Payment
      of Interest in Cash.
      Except
      as provided in Section 1.2 of this Note, interest shall be paid in cash on
      the
      interest payment date.

     

    1.2. Payment
      of Interest in Stock.
      The
      Borrowers may pay interest on this Note in shares of Common Stock provided
      that
      the following conditions are met:

     

    1.2.1. The
      shares of Common Stock issuable in payment of interest shall be subject to
      a
      current and effective registration statement and NaturalNano shall deliver
      to
      the Holder an unlegended stock certificate or, if the Holder shall have provided
      NaturalNano with account information, NaturalNano shall have caused the shares
      to be electronically delivered to Holder’s brokerage account.

     

    1.2.2. NaturalNano
      shall be current in its filings with the Securities and Exchange Commission
      pursuant to the Securities Exchange Act of 1934, as amended.

     

    1.2.3. The
      Common Stock shall be traded on the OTC Bulletin Board, the Nasdaq Stock Market
      or the New York or American Stock Exchange, NaturalNano shall not have received
      notice from any such market or exchange to the effect that the Common Stock
      may
      be subject to delisting from such market or exchange, and no event shall have
      occurred which would result in the delisting of the Common Stock from such
      market.

     

    1.2.4. The
      number of shares of Common Stock to be issued shall be determined by dividing
      the amount of the interest payment by eighty five percent (85%) of the daily
      volume weighted average price (“VWAP”) of the Common Stock for the 20 trading
      days immediately preceding (but not including) the day that is one trading
      day
      prior to the interest payment date. 

     

    1.2.5. VWAP
      means the daily volume weighted average price of the Common Stock for such
      date
      (or the nearest preceding date) on the primary trading market on which the
      Common Stock is then listed or quoted as reported by Bloomberg Financial L.P.
      (based on a trading day from 9:30 a.m. EST to 4:02 p.m. Eastern Time) using
      the
      VAP function.

     

    Section
      2. Conversion

     

    2.1. Conversion
      Right.
      The
      Holder shall have the right at any time and from time to time until the
      principal and interest on this Note shall have been paid in full, to convert
      the
      principal and any interest due under this Note into shares of Common Stock
      as
      provided in this Section 2.

     

    2.2. Conversion
      Procedure.
      If the
      Holder exercises its right of conversion, the Holder shall give NaturalNano
      a
      Notice of Conversion in the form annexed to this Note, setting forth the amount
      of principal and interest which the Holder is converting into Common Stock
      at
      the Conversion Price in effect on the date of such notice. The date of such
      notice is referred to as the Conversion Date. Upon delivery to NaturalNano
      of a
      completed Notice of Conversion, NaturalNano shall issue and deliver to the
      Holder within three (3) business days after the Conversion Date (such third
      day
      being the “Delivery Date”) that number of shares of Common Stock for the amount
      of principal and interest on the Note which is being converted, as set forth
      in
      Section 2.9 of this Note. To the extent that the Holder does not elect to
      convert interest, the Borrowers shall pay accrued interest to the Conversion
      Date on that portion of the principal of the Note with respect to which accrued
      interest is not being converted, such payment to be made not later than the
      Delivery Date. Except to the extent that the unpaid principal balance of this
      Note is being presented for conversion, the Holder shall not be required to
      present this Note in order to effect conversion, and the Holder shall maintain
      a
      ledger setting forth each conversion of principal and interest on this Note
      and
      such ledger shall, absent manifest error, be deemed to be binding and conclusive
      on the Borrowers.


    
      
         

      

      
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    2.3. Conversion
      Price.
      The
      Conversion Price shall be $0.22 per share of Common Stock, subject to adjustment
      as set forth in Section 2.4 of this Note and in the Loan Agreement. The number
      of shares of Common Stock to be issued upon each conversion of this Note shall
      be determined by dividing that portion of the principal and interest of the
      Note
      to be converted by the Conversion Price in effect on the Conversion
      Date.

     

    2.4. Adjustment
      to the Conversion Price.
      The
      Conversion Price and number and kind of shares or other securities to be issued
      upon conversion shall be subject to adjustment from time to time upon the
      happening of certain events while this conversion right remains outstanding,
      as
      follows:

     

    2.4.1. Merger
      or Sale of Assets.
      If
      NaturalNano shall at any time consolidate with or merge into or sell or convey
      all or substantially all its assets to any other Person, as defined in the
      Loan
      Agreement, this Note, as to the unpaid principal portion thereof and accrued
      interest thereon, shall thereafter be deemed to be convertible into such number
      and kind of shares of capital stock or other securities and property as would
      have been issuable or distributable on account of such consolidation, merger,
      sale or conveyance, upon or with respect to the securities subject to the
      conversion or purchase right immediately prior to such consolidation, merger,
      sale or conveyance. The foregoing provision shall similarly apply to successive
      transactions of a similar nature by any such successor or purchaser. Without
      limiting the generality of the foregoing, the anti-dilution provisions of this
      Section shall apply to such securities of such successor or purchaser after
      any
      such consolidation, merger, sale or conveyance.

     

    2.4.2. Reclassification.
      If
      NaturalNano at any time shall, by reclassification or otherwise, change the
      Common Stock into the same or a different number of securities of any class
      or
      classes that may be issued or outstanding, this Note, as to the unpaid principal
      portion thereof and accrued interest thereon, shall thereafter be convertible
      into an adjusted number of such securities and kind of securities as would
      have
      been issuable as the result of such change with respect to the Common Stock
      immediately prior to such reclassification or other change.

     

    2.4.3. Stock
      Splits, Combinations and Dividends.
      If the
      shares of Common Stock are subdivided or combined into a greater or smaller
      number of shares of Common Stock, or if a dividend is paid on the Common Stock
      in shares of Common Stock, the Conversion Price shall be proportionately reduced
      in case of subdivision of shares or stock dividend or proportionately increased
      in the case of combination of shares, in each such case by the ratio which
      the
      total number of shares of Common Stock outstanding immediately after such event
      bears to the total number of shares of Common Stock outstanding immediately
      prior to such event.

     

    2.4.4. Stock
      Issuance.
      If,
      while
      this Note is outstanding, the Company sells or otherwise issues any Convertible
      Securities, shares of Common Stock, or shares of any class of capital stock
      at a
      price per share of Common Stock, or with a conversion right or Conversion Price
      to acquire Common Stock at a price per share of Common Stock (other than (x)
      an
      Exempt Issuance, as defined in the Loan Agreement, or (y) an issuance covered
      by
      Sections 2.4.1, 2.4.2 or 2.4.3 of this Note), that is less than the Conversion
      Price in
      effect
      at the time of such sale (such lower price being referred to as the “Lower
      Price”), the Conversion Price shall be reduced to an adjusted Conversion Price
      which is equal to the Lower Price. Such
      adjustment shall be made successively whenever any such sale or other issuance
      at a Lower Price is made. The term “Convertible Security” shall mean any debt or
      equity security or instrument upon the conversion or exercise of which shares
      of
      Common Stock may be issued.


    
      
         

      

      
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    (a) For
      purposes of this Section 2.4.4, the price at which such shares of Common Stock
      are issued shall be the consideration paid for the Common Stock or the price
      at
      which the Company agrees to issue shares of Common Stock. The price at which
      any
      Convertible Security is issued shall be the amount received for the issuance
      of
      the Convertible Security plus the minimum amount of additional consideration
      which is payable upon exercise or conversion of the Convertible Security. If
      the
      Company issues securities as a unit, regardless of whether such issuance is
      defined as a unit, a separate computation shall be made with respect to (x)
      shares of Common Stock and convertible securities (based on the maximum number
      of shares of Common Stock which may be issued upon conversion, including
      conversion of interest or dividends, but excluding warrants, rights and options)
      and (y) warrants, options or rights, with a separate computation being made
      as
      to each warrant, option or right which is issued. If warrants, options or rights
      are issued, the Company shall not be deemed to have received any consideration
      for the issuance of the shares upon exercise of the warrant, option or right
      other than the lowest exercise price provided therein. If the Company has an
      agreement which provides for the issuance of shares at a fixed price or a
      formula price with a maximum price, the Company shall be deemed to have issued
      securities at such maximum price regardless of whether any securities are
      actually sold, and any issuance of securities below such maximum price shall,
      if
      such price is a Lower Price, be a sale which results in an adjustment pursuant
      to this Section 2.4.4.

     

    (b) By
      way of
      example, if the Company issues for $1,000,000 securities consisting of 500,000
      shares of Common Stock and a convertible note for $1,000,000 with a conversion
      price of $.40 and warrants to purchase 1,000,000 shares of Common Stock at
      $.40,
      the Lower Price would be determined by dividing the total consideration paid
      for
      the Common Stock and the note ($1,000,000) by the number of shares of Common
      Stock issued (3,000,000 shares, representing the 500,000 shares issued at
      closing plus the 2,500,000 shares issuable upon conversion of the note), which
      would result in Lower Price of $.333, which would become the adjusted Conversion
      Price. If, in the same example, the exercise price of the warrant were $.30
      per
      share, the Lower Price would be $.30, which would become the adjusted Conversion
      Price. If, in either case, the conversion price of all or any part of the
      convertible security or the exercise price of all or any of the warrants were
      subsequently reduced, a further adjustment would be made.

     

    (c) Any
      stock
      or convertible securities (other than warrants or options which shall be valued
      at the lowest stated Conversion Price thereof) issued for services that are
      not
      Exempt Issuances shall, for purposes of this Warrant, be valued at the par
      value
      thereof unless such issuance is made with the prior written approved of the
      Investors, as defined in the Loan Agreement, in which event the securities
      shall
      be valued in the manner as set forth in the Investors’ approval.

     

    2.5. Notice
      of Adjustment.
      Whenever the Conversion Price is adjusted pursuant to Section 2.4 of this Note,
      NaturalNano shall promptly mail to the Holder a notice setting forth the
      Conversion Price after such adjustment and setting forth a statement of the
      facts requiring such adjustment.

     

    2.6. Reservation
      of Shares.
      During
      the period that the conversion right exists, NaturalNano will reserve from
      its
      authorized and unissued Common Stock a sufficient number of shares to provide
      for the issuance of Common Stock issuable upon the full conversion of this
      Note
      and as described in the Loan Agreement. NaturalNano represents that upon
      issuance, such shares will be duly and validly issued, fully paid and
      non-assessable. NaturalNano agrees that its issuance of this Note shall
      constitute full authority to its officers, agents, and transfer agents who
      are
      charged with the duty of executing and issuing stock certificates to execute
      and
      issue the necessary certificates for shares of Common Stock upon the conversion
      of this Note.

     

    2.7. Right
      to Require Conversion.
      Provided an Event of Default or an event which with the passage of time or
      the
      giving of notice could become an Event of Default has not occurred, whether
      or
      not such Event of Default has been cured, and provided that all of the shares
      of
      Common Stock issuable upon conversion of the Note, have been registered pursuant
      to the Securities Act of 1933, as amended (the “Securities Act”) the Borrowers
      shall have the right to require the Holder of this Note to covert all or any
      portion of this Note into shares of Common Stock at the Conversion Price on
      the
      date that the Borrowers give notice of such required conversion, subject to
      the
      following terms and conditions.


    
      
         

      

      
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    2.7.1. The
      Borrowers may only exercise such right if a registration statement covering
      the
      sale by the Holder of the shares of Common Stock issuable upon conversion of
      this Note (the “Registration Statement”) is current and effective and, based on
      the date of the prospectus forming a part of the registration statement and
      the
      age of the financial statements contained in the registration statement, the
      registration statement can be used by the Holder in connection with the sale
      of
      the Common Stock for at least three months without the need to file a
      post-effective amendment to update the registration statement, and there shall
      not have occurred any material event concerning either of the Borrowers for
      which disclosure would be necessary in order that the information contained
      in
      the registration statement is true and correct in all material respects and
      does
      not omit any information necessary to make the information contained therein
      not
      misleading. The notice of required conversion shall include the certificate
      of
      the Borrowers’ respective chief executive officers as to the matters set forth
      in this Section 2.7.1.

     

    2.7.2. The
      Common Stock shall be traded on the OTC Bulletin Board, the Nasdaq Stock Market
      or the New York or American Stock Exchange and shall be eligible for transfer
      using the facilities of the Depository Trust Company (the “DTC Program”);
      NaturalNano shall not have received notice from any such market or exchange
      to
      the effect that the Common Stock may be subject to delisting from such market
      or
      exchange, and no event shall have occurred which would result in the delisting
      of the Common Stock from such market.

     

    2.7.3. The
      closing price of the Common Stock on the principal market or exchange on which
      the stock is traded is not less than $1.00 for not less than 20 consecutive
      trading days ending on the date prior to the date on which NaturalNano gives
      notice to the Holder exercising its rights under this Section 2.7.

     

    2.7.4. NaturalNano
      will tender to the Holder such number of shares of Common Stock as are issuable
      upon conversion of the principal amount of this Note being converted, but not
      such number of shares as would result in a violation of the 4.99% Limitation,
      as
      hereinafter defined.

     

    2.7.5. Any
      partial exercise of the rights under this Section 2.7 shall be made
      proportionately as to the Holder and all other holders of the
      Notes.

     

    2.8. Limitation
      on Right to Convert or Exercise Securities.

     

    2.8.1. Notwithstanding
      any other provision of this Note, except as expressly provided in this Note,
      the
      Holder shall not be entitled to convert this Note into
      shares of Common Stock to the extent that such conversion would result in
      beneficial ownership by the Holder and its Affiliates, as defined in the Loan
      Agreement, of more than 4.99% of the then outstanding number of shares of Common
      Stock on such date. For the purposes of this Agreement beneficial ownership
      shall be determined in accordance with Section 13(d) of the 1934 Act, and
      Regulation 13d-3 thereunder. The limitation set forth in this Section 2.4 is
      referred to as the “4.99%
      Limitation.”
The
      4.99% Limitation may not be waived by the Holder or by the Borrowers, and any
      attempted wavier or modification of the 4.99% Limitation shall be void;
      provided, however, that to the extent provided in the Loan Agreement and Section
      2.7.4 of the Note, the references in this Section 2.8 to 4.99% shall be deemed
      to be 9.99%.


    
      
         

      

      
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    2.8.2. The
      4.99%
      Limitation shall terminate upon the close of business on the business day
      immediately preceding the date fixed for consummation of any transaction
      resulting in a Change of Control of the Company. A “Change in Control” means a
      consolidation or merger of the Company with or into another company or entity
      in
      which the Company is not the surviving entity or the sale of all or
      substantially all of the assets of the Company to another company or entity
      not
      controlled by the then existing stockholders of the Company in a transaction
      or
      series of transactions. Upon the occurrence of a Change of Control, the Company
      shall promptly send written notice thereof, by hand delivery or by overnight
      delivery, to the Holder.

     

    2.9. Mechanics
      of Conversion.

     

    2.9.1. Delivery
      of Certificate Upon Conversion.
      Except
      as otherwise set forth herein, not later than the Delivery Date, NaturalNano
      shall deliver to the Holder (a) a certificate or certificates which, after
      the
      effective date of a registration statement covering the shares of Common Stock
      issuable upon conversion of this Note (the “Effective Date”), shall be free of
      restrictive legends and trading restrictions (other than those required by
      the
      Securities Act) representing the number of shares of Common Stock being acquired
      upon the conversion of the Note, and (b) a bank check in the amount of accrued
      and unpaid interest on the portion of the Note being converted unless the Holder
      converts such interest into Common Stock. After the Effective Date, NaturalNano
      shall, upon request of the Holder, deliver any certificate or certificates
      required to be delivered by NaturalNano under this Section 2.9 electronically
      through the Depository Trust Company or another established clearing company
      performing similar functions if NaturalNano’s transfer agent has the ability to
      deliver shares of Common Stock in such manner. If in the case of any Notice
      of
      Conversion such certificate or certificates are not delivered to or as directed
      by the applicable Holder by the Delivery Date, the Holder shall be entitled
      to
      elect by written notice to the Borrowers at any time on or before its receipt
      of
      such certificate or certificates thereafter, to rescind such conversion, in
      which event the conversion shall be deemed void ab initio.

     

    2.9.2. Obligation
      Absolute; Partial Liquidated Damages.
      NaturalNano’s obligations to issue and deliver the Common Stock upon conversion
      of this Note in accordance with the terms hereof are absolute and unconditional,
      irrespective of any action or inaction by the Holder to enforce the same, any
      waiver or consent with respect to any provision hereof, the recovery of any
      judgment against any Person or any action to enforce the same, or any setoff,
      counterclaim, recoupment, limitation or termination, or any breach or alleged
      breach by the Holder or any other Person of any obligation to the Borrowers
      or
      either of them or any violation or alleged violation of law by the Holder or
      any
      other Person, and irrespective of any other circumstance which might otherwise
      limit such obligation of the Borrowers to the Holder in connection with the
      issuance of such shares. In the event the Holder shall elect to convert any
      or
      all of this Note, NaturalNano may not refuse conversion based on any claim
      that
      such Holder or any one associated or affiliated with the Holder of has been
      engaged in any violation of law, agreement or for any other reason unless an
      injunction from a court, on notice, restraining and or enjoining conversion
      of
      all or part of this Note shall have been sought and obtained and NaturalNano
      posts a surety bond for the benefit of the Holder in the amount of 150% of
      the
      Conversion Value of Note outstanding, which is subject to the injunction, which
      bond shall remain in effect until the completion of arbitration or litigation
      of
      the dispute and the proceeds of which shall be payable to the Holder to the
      extent it obtains judgment. In the absence of an injunction precluding the
      same,
      NaturalNano shall issue the Common Stock or, if applicable, cash, upon a
      properly noticed conversion. If NaturalNano fails to deliver to the Holder
      such
      certificate or certificates pursuant to this Section 2.9 within two trading
      days
      of the Delivery Date applicable to such conversion, the Borrowers shall pay
      to
      the Holder, in cash, as liquidated damages and not as a penalty, for each $5,000
      of Conversion Value of Note being converted, $50 per trading day (increasing
      to
      $100 per trading day three (3) trading days after such damages begin to accrue
      and increasing to $200 per trading day six (6) trading days after such damages
      begin to accrue) for each trading day after the Delivery Date until such
      certificates are delivered. Nothing herein shall limit a Holder’s right to
      pursue actual damages for the Company’s failure to deliver certificates
      representing shares of Common Stock upon conversion within the period specified
      herein and such Holder shall have the right to pursue all remedies available
      to
      it hereunder, at law or in equity including, without limitation, a decree of
      specific performance and/or injunctive relief.


    
      
         

      

      
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    2.9.3. Compensation
      for Buy-In on Failure to Timely Deliver Certificates Upon
      Conversion.
      If
      NaturalNano fails to deliver to the Holder such certificate or certificates
      pursuant to this Section 2.9 by the Delivery Date, and if after such Delivery
      Date the Holder purchases (in an open market transaction or otherwise) Common
      Stock to deliver in satisfaction of a sale by such Holder of the Common Stock
      which the Holder was entitled to receive upon the conversion relating to such
      Delivery Date (a “Buy-In”),
      then
      the Borrowers shall pay in cash to the Holder the amount by which (a) the
      Holder’s total purchase price (including brokerage commissions, if any) for the
      Common Stock so purchased exceeds (i) the product of (x) the aggregate number
      of
      shares of Common Stock that such Holder was entitled to receive from the
      conversion at issue multiplied by (y) the price at which the sell order giving
      rise to such purchase obligation was executed. For example, if the Holder
      purchases Common Stock having a total purchase price of $11,000 to cover a
      Buy-In with respect to an attempted conversion of this Note with respect to
      which the aggregate sale price giving rise to such purchase obligation is
      $10,000, under the immediately preceding sentence the Borrowers shall be
      required to pay the Holder $1,000. The Holder shall provide the Borrowers
      written notice indicating the amounts payable to the Holder in respect of the
      Buy-In, together with applicable confirmations and other evidence reasonably
      requested by the Borrowers. Nothing in this Section 2.9 shall limit a Holder’s
      right to pursue any other remedies available to it hereunder, at law or in
      equity including, without limitation, a decree of specific performance and/or
      injunctive relief with respect to NaturalNano’s failure to timely deliver
      certificates representing shares of Common Stock upon conversion of the shares
      of this Note pursuant to its terms.

     

    2.9.4. Fractional
      Shares.
      Upon a
      conversion hereunder, NaturalNano shall not be required to issue stock
      certificates representing fractions of shares of the Common Stock. All
      fractional shares shall be carried forward and any fractional shares which
      remain after a Holder converts all of this Note shall be rounded up to the
      next
      whole number of shares.

     

    2.9.5. Transfer
      Taxes.
      The
      issuance of certificates for shares of the Common Stock on conversion of this
      Note shall be made without charge to the Holder thereof for any documentary
      stamp or similar taxes that may be payable in respect of the issue or delivery
      of such certificate, provided that the Borrowers shall not be required to pay
      any tax that may be payable in respect of any transfer involved in the issuance
      and delivery of any such certificate upon conversion in a name other than that
      of the Holder of this Note and the Borrowers shall not be required to issue
      or
      deliver such certificates unless or until the person or persons requesting
      the
      issuance thereof shall have paid to the Borrower the amount of such tax or
      shall
      have established to the satisfaction of the Borrowers that such tax has been
      paid.

     

    Section
      3. Events
      of Default.

     

    3.1. The
      entire unpaid principal amount of this Note, together with interest thereon
      shall, on written notice from the Holders of a majority of the outstanding
      principal amount of the Notes or by the Agent, as defined in the Loan Agreement,
      upon the request of the holders of a majority of the outstanding principal
      amount of the Notes, forthwith become and be due and payable if any one or
      more
      Events of Default shall have occurred (for any reason whatsoever and whether
      such happening shall be voluntary or involuntary or be affected or come about
      by
      operation of law pursuant to or in compliance with any judgment, decree or
      order
      of any court or any order, rule or regulation of any administrative or
      governmental body) and be continuing.


    
      
         

      

      
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    3.2. The
      occurrence of any one or more of the following events or conditions shall
      constitute an “Event
      of Default”
under
      this Agreement:

     

    3.2.1. Borrowers’
      failure to make any payment of principal or interest or any other sums within
      fifteen (15) days of the date when due on this Note or on any of the
      Obligations, as defined in the Loan Agreement.

     

    3.2.2. Any
      representation or warranty or other statement made or furnished to the Holder
      by
      or on behalf of the Borrowers in the Loan Agreement or in any document or
      instrument furnished in connection with the Loan Agreement proves to have been
      false or misleading in any material respect when made or furnished.

     

    3.2.3. Breach
      of
      or failure in the due observance or performance in any material respect of
      any
      covenant, condition or agreement on the part of the Borrower to be observed
      or
      performed pursuant to the Loan Agreement or any of the other Transaction
      Documents and the failure to cure (if curable) any such breach or failure within
      fifteen (15) days after receipt of written notice thereof from the holder of
      any
      Note issued pursuant to the Loan Agreement to the Borrower; provided, however,
      that the obligations of NaturalNano with respect to its failure to file the
      Registration Statement (as defined in the Registration Rights Agreement, or
      the
      failure of the registration statement to be declared effective shall be subject
      to the provisions of the Registration Rights Agreement and not this Section
      3.

     

    3.2.4. Failure
      of the Common Stock to be listed or quoted on the OTC Bulletin Board, the Nasdaq
      Stock Market or the American or New York Stock Exchange for any
      reason.

     

    3.2.5. Failure
      of the Common Stock, at any time after the Registration Statement becomes
      effective, to be eligible for transfer pursuant to the DTC Program for any
      reason.

     

    3.2.6. Breach
      of
      or failure in the due observance or performance of any covenant, condition
      or
      agreement on the part of the Borrowers to be observed or performed pursuant
      to
      any Transaction Documents or breach by Borrower of any other agreement with
      Investors beyond the expiration of any grace or cure periods provided
      therein.

     

    3.2.7. A
      judgment or judgments for the payment of money in excess of $25,000 shall be
      rendered against either Borrower, and any such judgment shall remain unsatisfied
      and in effect for any period of 30 consecutive days without a stay of execution;
      or

     

    3.2.8. Either
      Borrower shall (a) apply for or consent to the appointment of a receiver,
      trustee or liquidator of all or a substantial part of any of its assets; (b)
      be
      unable, or admit in writing its inability, to pay its debts as they mature;
      (c)
      file or permit the filing of any petition, case arrangement, reorganization,
      or
      the like under any insolvency or bankruptcy law, or the adjudication of it
      as a
      bankrupt, or the making of an assignment for the benefit of creditors or the
      consenting to any form or arrangement for the satisfaction, settlement or delay
      of debt or the appointment of a receiver for all or any part of its properties;
      or (d) any action shall be taken by the Borrower for the purpose of effecting
      any of the foregoing; or

     

    3.2.9. An
      order,
      judgment or decree shall be entered, or a case shall be commenced, against
      either Borrower, without its application, approval or consent by any court
      of
      competent jurisdiction, approving a petition or permitting the commencement
      of a
      case seeking reorganization or liquidation of such Borrower or appointing a
      receiver, trustee or liquidator of the Borrower, or of all or a substantial
      part
      of the assets of the Borrower, and the Borrower, by any act, indicate its
      approval thereof, consent thereto, or acquiescence therein, or such order,
      judgment, decree or case shall continue unstayed and in effect for any period
      of
      90 consecutive days or an order for relief in connection therewith shall be
      entered; or


    
      
         

      

      
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    3.2.10. If
      the
      Borrower shall dissolve or liquidate, or be dissolved or liquidated, or cease
      to
      legally exist, or merge or consolidate, or be merged or consolidated with or
      into any other corporation; or

     

    3.2.11. Failure
      by the Borrower to pay any other indebtedness or obligation in excess of
      $25,000, or if any such other indebtedness or obligation which is not subject
      to
      a bonafide dispute shall be accelerated, or if there exists any event of default
      under any instrument, document or agreement governing, evidencing or securing
      such other indebtedness or obligation which is not subject to a bonafide
      dispute; or

     

    3.2.12. Failure
      by the Borrower to take all steps necessary to grant Investors a perfected
      first
      priority security interest in any intellectual property acquired subsequent
      to
      the Closing Date; or 

     

    3.2.13. Substantial
      loss, theft, damage, or destruction of the Collateral provided to the Investors
      pursuant to this Agreement, and not covered by insurance in any material
      respect.

     

    Section
      4. Miscellaneous

     

    4.1. Usury
      Saving Provision.
      All
      payment obligations arising under this Note are subject to the express condition
      that at no time shall the Borrowers be obligated or required to pay interest
      at
      a rate which could subject the Holder to either civil or criminal liability
      as a
      result of being in excess of the maximum rate which the Borrowers are permitted
      by law to contract or agree to pay. If by the terms of this Note, the Borrowers
      are at any time required or obligated to pay interest at a rate in excess of
      such maximum rate, the applicable rate of interest shall be deemed to be
      immediately reduced to such maximum rate, and interest thus payable shall be
      computed at such maximum rate, and the portion of all prior interest payments
      in
      excess of such maximum rate shall be applied and shall be deemed to have been
      payments in reduction of principal.

     

    4.2. Failure
      or Indulgence Not Waiver.
      No
      failure or delay on the part of Holder hereof in the exercise of any power,
      right or privilege hereunder shall operate as a waiver thereof, nor shall any
      single or partial exercise of any such power, right or privilege preclude other
      or further exercise thereof or of any other right, power or privilege. All
      rights and remedies existing hereunder are cumulative to, and not exclusive
      of,
      any rights or remedies otherwise available.

     

    4.3. Governing
      Law.
      This
      Agreement and the rights of the parties shall be construed and enforced in
      accordance with the laws of the State of New
      York
      applicable to agreements executed and to be performed wholly within such state
      and without regard to
      principles of conflicts of law.
      Each
      party irrevocably (a) consents to the jurisdiction of the federal and state
      courts situated
      in New
      York County, New York in
      any
      action that may be brought pursuant to this Agreement, and (b)
      submits to and accepts, with respect to its properties and assets, generally
      and
      unconditionally, the in personam jurisdiction of the aforesaid courts, waiving
      any defense that such court is not a convenient forum. In any such litigation
      to
      the extent permitted by applicable law, each party waives personal service
      of
      any summons, complaint or other process, and agrees that the service thereof
      may
      be made either (i) in the manner for giving of notices provided in Section
      4.5
      of this Note (other than by telecopier) or (ii) in any other manner permitted
      by
      law. 


    
      
         

      

      
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    4.4. Waiver
      of Right to Trial by Jury.
      BORROWERS
      HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL
      BY
      JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN
      CONNECTION WITH THIS NOTE AND WAIVE ANY RIGHT TO BRING A COUNTERCLAIM AGAINST
      THE HOLDER IN ANY ACTION TO ENFORCE THIS NOTE. THIS WAIVER CONSTITUTES A
      MATERIAL INDUCEMENT FOR HOLDER TO ACCEPT THIS NOTE.

     

    4.5. Notice.
      All
      notices, requests or other communications required or permitted to be given
      under this Agreement to any party shall be in writing and shall be deemed to
      have been sufficiently given when delivered by personal service or sent by
      registered mail, overnight
      courier services with provided evidence of delivery or attempted
      delivery,
      or
      facsimile, to the Borrowers c/o NaturalNano, Inc., 15 Schoen Place, Pittsford,
      New York 14534-2025,
      telecopier (585) 267-4825, to the attention of the person who executed this
      Note
      on behalf of NaturalNano of this Agreement or to the Holder at its address
      set
      forth on the Borrower’s records.
      Either
      party may, be like notice, change the address or telecopy number or the person
      to whom notice is to be given.
      Notice
      shall be deemed given when received or when attempted delivery is made (based
      on
      evidence of attempted delivery by the United States Postal Service or an
      overnight courier or a messenger service), provided that notice by telecopier
      shall be deemed given when receipt is acknowledged by the
      recipient.

     

    4.6. Amendment
      Provision.
      The
      term “Note” and all reference thereto, as used throughout this instrument, shall
      mean this instrument as originally executed, or if later amended or
      supplemented, then as so amended or supplemented; provided, however, that the
      terms of the 4.99% Limitation may not be modified, amended or
      waived.

     

    4.7. Assignability.
      This
      Note shall be binding upon the Borrowers and their respective successors and
      assigns, and shall inure to the benefit of the Holder and its successors and
      assigns. The Borrowers may not assign any of its obligations under this Note
      without the consent of the Holder.

     

    4.8. Cost
      of Collection.
      If
      default is made in the payment of this Note, Borrowers shall pay the Holder
      hereof reasonable costs of collection, including reasonable attorneys’ fees,
      regardless of whether the Holder commenced litigation in order to enforce its
      rights under this Note.

     

    4.9. Stockholder
      Status.
      The
      Holder shall not have rights as a stockholder of NaturalNano with respect to
      unconverted portions of this Note. However, from and after the Conversion Date,
      the Holder will have all the rights of a shareholder of NaturalNano with respect
      to the shares of Common Stock to be received by Holder after delivery by the
      Holder of a Conversion Notice to the Borrower regardless of whether physical
      certificates shall have been delivered.

     

     

    [Signature
      on following page]


    
      
         

      

      
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    IN
      WITNESS WHEREOF, the
      parties have caused this Agreement to be duly executed and delivered by the
      proper and duly authorized officers as of the date and year first above
      written.

     

    
      	 	 	 
	 	NATURALNANO,
              INC.
	 
 	 
 	 
 
	 	By:  	 
	 	
              
Name:

	 	Title:
              


    

     

    
      	 	 	 
	 	NATURALNANO
              RESEARCH, INC.
	 
 	 
 	 
 
	 	By:  	 
	 	
              
Name:

	 	Title:


    

    


    
      
         

      

      
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          11 -

        
          

        

      

      
         

      

    


    


    NOTICE
      OF CONVERSION

    


    (To
      be
      executed by the Holder in order to convert the Note)

    


    


    The
      undersigned hereby elects to convert $_________ of the principal and $_________
      of the interest due on the Note issued by NaturalNano, Inc. and NaturalNano
      Research, Inc. on March ___, 2007 into shares of Common Stock of NaturalNano,
      Inc. according to the conditions set forth in such Note, as of the date written
      below.

    


    Date
      of
      Conversion:__________________________________________

    


    Conversion
      Price:____________________________________________

    


    Number
      of
      Shares To Be Delivered:_______________________________

    


    Signature:__________________________________________________

    


    Print
      Name and
      Title:_____________________________________________________________________________________________________________________

    


    Address:______________________________________________________________________________________________________________________________

    


    ______________________________________________________________________________________________________________________________


    
      
         

      

      
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